European court slams Spain’s overseas assets penalty regime

The European Court of Justice has found that Spain infringed the European principle of free movement of capital, prompting a major reform of its regulations. Residents of Spain, including the hundreds of thousands of expats, have since 2013 been required to fill out an annual declaration reporting the assets they have outside Spain – the Modelo 720. This is in addition to annual income and wealth tax returns. To prevent individuals from not reporting or underreporting, the Modelo 720 regulation imposes very high penalties for failing to file the declaration, filing it late, or including false or inaccurate data. “After several complaints were submitted, the European Commission reviewed its legality and opened an infringement procedure against Spain in 2015. Spain chose to ignore this, so the Commission issued another notice in 2017. Now, 10 years after Modelo 720 was first announced, the European Court of Justice (ECJ) has ruled that Spain infringed the European principle of free movement of capital, and Spain will be required to change its regulations,” reports International Investment. However, expats should note that the court’s decision was purely against just the penalties, and not against Modelo 720. As such, if you’re an expat with assets you must still fill in the form.

What assets do you need to declare on Modelo 720?

  1. Bank accounts abroad and financial institutions opened, when the total balance of all the accounts exceeds €50,000.
  2. Securities, collective investment schemes, life insurances and annuities, that are held abroad and exceed €50,000.
  3. Real estates and interests in real estates with a purchase value that exceeds €50,000.

You’ll need to report even if your share of assets is lower than €50,000 because the joint amount exceeds €50,000. With joint assets, each owner needs to declare the full value and show their percentage. There’s another form expats should be aware of too. The D6 is a mandatory declaration for holders of shares or securities of companies registered on a stock exchange overseas.

Leave a Reply

Your email address will not be published.