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M720 FAQs

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FAQs – M720 annual declaration of foreign assets. Beware, some of the answers to the questions are truly mad.

FAQ Sections

Who has to file, what to declare, when and how

Who has to file this tax declaration?
Anyone who owns or controls foreign assets and who is tax resident in Spain, including physical persons, companies and other legal entities. Non residents do not file this declaration. Non residents include persons who have elected for the application of the special tax regime commonly known as the “Beckham Scheme”.

What has to be declared?
Foreign assets only. There are 3 categories of assets – property, cash and investments. If foreign assets in any of the 3 categories is worth more than 50,000€ in total then the declaration has to be filed.

What tax do I have to pay when filing the M720?
Nothing. The declaration is for information only and no tax is payable. Obviously, you need to make sure that any income from the assets is declared in your income tax declarations over the last four years and that the assets are contained in your wealth tax declaration, if you have this tax filing obligation.

What if one of the assets is jointly owned with someone else?
You declare the whole asset and state the percentage of ownership of the asset.

I filed a M720 last year. Do I have to file again?
There are several situations that require to file an M720 again, or indeed, every year. Essentially this is required if you acquire new assets or dispose of previously declared assets or if the value of one of the categories of assets increases by more than 20,000 € or more compared to the previous declaration filed. More details here.

When do I have to file the tax declaration?
Between 1 January and 31 March each year.

How do I file the M720?
You can only file using the tax office’s online filing system. To have access to this system you have previously register and obtain an electronic certificate which is stored on your computer. See this article.

Category 1 assets – Properties and rights over properties owned outside Spain

What information has to be declared for properties?
You will have to declare the type of property (urban or rural) and percentage of ownership, full property address, date of purchase and total purchase price (ignoring the percentage of ownership)

What if I have a half share of a house in the UK that is worth £75,000 in total?
It doesn’t matter, you have to declare this even if your share is less than 50,000€. The fact that the asset is worth more than 50,000€ is what counts.

What is the value I have to declare in the M720 for my UK property?
For properties, you need to declare its cost value, not its current market value.

I own blocks of apartments in the UK, can I just declare the block of apartments?
No, you have to declare each apartment that belongs to the whole block of apartments, separately. This means, in effect, that you have to declare each separate legal property title.

I bought my UK property in 1984. What currency exchange rate do I use?
Assets have to be valued at the exchange rate applicable on 31 December of the year of the declaration. In effect the value has to be reconsidered each year in case a revised M720 filing has to be made.

I only own a UK property that has a market value just over 50.000 €, do I have to declare this?
Not necessarily. You only have to declare if its cost value exceeds 50.000 €, regardless of its market value.

I purchased a property in the UK for £60,000, and it has a mortgage of £30, 000. Do I have to declare it even if the net value is below the 50.000 € limit?
Because the cost was over 50,000 €, you must declare this. The mortgage is not relevant.

I bought my house in France for exactly 50.000 €, do I have to declare it?
If it is your only non Spanish property, you will not have to declare it because its cost value does not exceed 50.000 €.

I bought a property in Germany in 1994. The purchase price was in German Marks which disappeared when the Euro was brought in. Which currency exchange rate do I need to apply?
As the German Mark no longer applies, you will need to apply the Euro value at the exchange rate applicable at 31 December 2001 when the Euro came into being.

Category 2 assets – Bank accounts outside Spain

What information has to be declared for bank accounts?
You will have to declare the bank name, its full address, the type of bank account, the type of ownership and the percentage of ownership, the full bank account details including IBAN, date when the bank account was opened, and finally its bank balance at 31 December and the average bank balance during the fourth quarter ignoring the percentage of ownership.

My Spanish company has several bank accounts in the UK and they exceed 50.000 € in value. Do I have to declare them?
No declaration is needed as the accounts (presumably) are disclosed in the company’s accounting records.

I have a Santander bank account in the UK. Do I need to declare it?
If the Santander account has a UK IBAN number then it is a UK bank axcount and neds to be declared.

I have several bank accounts in the UK. The total balances at 31 December do not exceed 50.000 € but the average bank balances during the fourth quarter exceed 50.000 €. Do I have to declare them?
Yes, you will need to declare all the UK bank accounts.

I have several bank accounts with a total value exceeding 50.000 €. Some of the bank accounts have negative bank balances. Do I have to declare them?
Yes, you also need to declare the bank accounts with negative bank balances, or even zero bank balances, assuming of course that the total value exceeds 50.000 €.

I transferred 60.000 € to my lawyer’s account in Dubai to purchase a property. Do I have to declare this in the M720?
No, this is not considered to be a bank account or a property until the transaction completes. In effect it is as though the asset does not exist!

On 15 January last year I closed a US dollar bank account that I had in Switzerland and I declared in my last M720. I realise that I have to declare the account closure in this years M720 but what € value should I use?

This may seem difficult to believe but you have to use the exchange rate on 31 December of the the M720 year you originally declared even though it has nothing to do with any kind of current reality. It is a sad fact of life that tax law often departs from any semblance of common sense and the M720 rules are more insane than usual. I would say that it was designed for a different universe!

My daughter, who is under 18 years of age, has a bank account outside Spain with more than 50,000€ which her grandmother gave her many years ago. She does not file an income tax declaration in Spain as she receives no income. Does she need to declare this account?
Yes she does, even if she is a minor.

I am a beneficiary of a trust that has bank accounts worth more than 50,000€, do I have to declare it?
This is a tricky one as Spain does not recognise trust law in its legislation. What this means in practice is that each case has to be analysed separately.

The rules state explicitly that the filing of the M720 is required for all those persons who are the beneficial owners of trusts or persons who directly or indirectly, and by whatever means, are able to exercise 25% control over foreign assets. The filing is also required for persons who are the actual or potential beneficiaries or settlors (asset donors) of trusts, foundations or similar asset owning structures. For all these reasons it is often the case that original declaration of trust and subsequent formal resolutions of the trustees need to be analysed to see who has to declare what.

Category 3 assets – Investments

What information has to be declared for investments?
It depends on the type of investments, but generally you will need to declare the name of the product, the date of purchase, type of ownership, percentage of ownership, ISIN number (in case of quoted shares) and the value at 31 December.

I have a UK state pension. Do I have to declare this?
No.

I lent 80.000 € to a friend in the UK so that he could start a business. Do I have to declare this loan in the M720?
Personal loans granted to third parties do not need to be declared in this declaration. Odd but true.

Do I have to declare my QROPS?
It will depend on the terms and conditions of the scheme, but generally yes, as long as its value, including the rest of assets under that category (investments) exceed 50.000 €.

Do I have to declare my SIPP – my UK private pension scheme?
It will depend on the terms and conditions of the scheme, but generally yes, as long as its value, including the rest of assets under that category (investments) exceed 50.000 €.

I sold shares during the year. Do not have to declare this event?
If the shares were declared in a previous M720 then you must report the sale in the latest M720 declaration.

I am the settlor of a trust that has investment assets of over 50,000€, but I am not the beneficiary, do I need to declare the trust?
See above.

I own an investment portfolio with a bank, which comprises bank accounts and shares. Can I just declare the portfolio as if it were a single asset or do I have to declare all the underlying assets, i.e. all the bank accounts and all the shares?
Unfortunately you are obliged to declare each individual asset.

I own a Luxembourg based insurance bond which complies with Spanish tax regulations. The bond has a market value in excess of 50.000 €. Do I have to declare it?
In this case you do not need to declare it as it is an investment product that has been designed to be compliant with Spanish regulations. In this case the insurance company makes reports and deducts tax where necessary through its representative in Spain.

I specialise in day trading and as a result I never actually own shares or investments. Do I have to declare anything?
Probably not but you will have an account with the platform provider that is linked to your day trading and this is considered a bank account which does have to be declared under Category 2.

Other questions

I have heard that because I am a signatory to a bank account in the UK that belongs to my mother and balance is more than 50,000 € then I have to declare this, even though the bank account is not my property?
Absolutely, just having control of a foreign assets is reason enough to have to declare the asset. Having declared it, the tax office may want to ask you questions about why you are involved with the account.

I am a director of a large company based in Holland. The company has many bank accounts that certainly exceed 50.000 € in value. As I am a director I am included as one of the bank account signatories, although I almost never deal with the banks. Is this something I have to declare?
As insane as this might seem, yes you do have to declare this fact. In reality you have to declare each individual company non-Spanish bank account in your M720 declaration.

I have a car in Switzerland, where I have a holiday home, and it cost me more than 50.000 €, do I need to declare the car?
No, this type of assets does not have to be declared in this declaration. The same applies to foreign registered boats, antiques, works of art, wine collections and jewels. Quite amazingly, there is no need to declare gold bars or even cash stored in a foreign bank vault!

What would happen if I did not declare a foreign asset in my M720 and this was discovered by the Spanish tax office?
The short story is that fines start with a minimum of 10.000 € per category! Therefore if you had a bank account, a property and shares you would be suffer a minimum fine of 30.000 €.

But this is not all. Through the inspection process, the tax office would regard the assets as undeclared taxable income generated in the oldest non prescribed year (e.g four years ago). Taking account of tax rates that vary between 24% and 56% and fines of 150% plus interest of the unpaid tax, the total assessment would, in some cases, exceed the value of the hidden asset. The fines can be negotiated with a maximum of 30% discount being conceded in the case of total cooperation but this still leaves a minimum fine of 105% of the tax.

The tax assessment can be avoided if you were able to demonstrate that the assets were acquired using declared income or if the asset was acquired in a year you were not tax resident in Spain.

I have been resident in Spain for years but I did not realise that I had to file an M720. What would happen if I voluntarily filed late?
Each year that you have not filed would constitute an offence. The minimum fine would be 1,500 € per category each year for the last four years. Therefore if you had a bank account, a property and shares you would be suffering a minimum fine of 4,500 €. The fines would not apply to each year although any changes in the assets would constitute offences.

But this is not all. Through the inspection process, the tax office would regard the assets as undeclared taxable income generated in the oldest non prescribed year (e.g four years ago). Taking account of tax rates that vary between 24% and 56% and fines of 150% plus interest of the unpaid tax, the total assessment would, in some cases, exceed the value of the hidden asset. The fines can be negotiated with a maximum of 30% discount being conceded in the case of total cooperation but this still leaves a minimum fine of 105% of the tax.

The tax assessment can be avoided if you were able to demonstrate that the assets were acquired using declared income or if the asset was acquired in a year you were not tax resident in Spain.

I made some small mistakes (small error in the balance and wrong investment reference) in my M720 filing and the tax office have found this out. Will they fine me?
Yes. The fine is a minimum of 5,000€ per category in which you made an error so from what you say, the potential fine in your case would be 10,000€.

I have a bitcoin account. Is this declarable?
Currently no, but we hear that this will be added to the M720 in future.

I have heard that the EU is prosecuting Spain because the M720 is illegal. Is this true? Happily I can confirm that this is indeed true. Even the EU, with its myriad of rules aand obsession of regulating everything we do, recognises that Spain has gone too far with the M720. The problem is that, despite all the very considerable efforts of Spanish professional bodies, since well before 2016, to get the EU Commission to put an end to the abuse of the M720, over 5 years later we are no nearer to the Spanish tax office and Government being held to account. The problem with good ideas is that they are worth nothing without the effort to put them into effect. Please take note Ursula von der Leyen. Its time you earned your exorbitant salary.

Spence Clarke & Co specialises in the provision of Spanish tax, legal, audit and accountancy services, mainly to foreigners with interests in Spain. Our cross-border knowledge helps clients adapt to the Spanish system with the minimum of doubt and disruption. If you have any questions about this article or any other matter contact us, with no obligation, to see how we can help you.