Posted on: 22nd April 2021

Modelo 720: A Requirement for UK Expats

The deadline for submitting your Modelo 720 tax form is fast approaching.

UK expats risk costly fines if they fail to submit their forms by 31 March. However, a large number of UK expats living in Spain may be completely unaware of the Modelo 720 form.

As a result of the UK’s withdrawal from the EU, the number of UK nationals applying for Spanish residency has increased. Switching your residency status can have an impact on how you are taxed.

Does it apply to me?

Only tax residents of Spain with assets valued at or over €50,000 overseas need to complete a Modelo 720 form.

So, the question is, when are you considered a resident in Spain for tax purposes?

The Spanish Tax Agency will consider you to be a tax resident if any of the following apply:

1. During a calendar year, you spend more than 183 days in Spain

2. Your primary economic interests are in Spain

3. Your spouse or children live in Spain

There are other considerations, but broadly speaking, these are the three main points to consider.

Remember, being a Spanish tax resident alone doesn’t mean you need to complete a Modelo 720 form. You must also have assets worth €50,000 or more before you are required to complete the form.

Asset value

The asset value only applies to assets held outside of Spain. There are three reporting categories that the Spanish Tax Agency looks at when it comes to assets:

1. Investments

2. Immovable property; for example, a house you own in the UK

3. Bank accounts or other accounts held with a financial institution

You must report all assets worth €50,000 or more in one of these three categories. For joint assets, things are a little more complex.

Even if your share of the asset is less than €50,000, you need to declare the total value and state what percentage of the asset you own.

Be aware that investments held in currencies other than euros need to be converted using the official exchange rate.

Reporting again

All Modelo 720 forms submitted in 2021 as based on assets owned at the end of 2020.

This may be your first time submitting the form. For those who have submitted a form previously, you may not need to report again.

You only need to submit a new form if:

1. You obtained new assets

2. The value of an existing asset increased by more than €20,000

3. You sold an asset or closed an account

If you are unsure whether or not your need to complete another form, contact one of our experts who will advise you based on your situation.

Failure to submit the form

If you meet the criteria required to complete a Modelo 720 form and fail to do so, you could be liable for some steep fines. Even genuine mistakes or inaccuracies on the form can prove costly.

Failing to submit the Modelo 720 or filing information incorrectly can result in a fine of €5,000 per infraction. Minimum fines of €10,000 can also be applied for each category.

On top of the fines, an extra 150% can be applied to unpaid income tax.

You can submit the form late but expect some heavy penalties. Late submissions can cost €100 per item listed and a minimum of €1,500 for each category.

Don’t get caught out

Remember, failing to submit your form could result in severe penalties. If you are a tax resident in Spain, make sure you have yours submitted by 31 March.

Tax rules can be confusing at the best of times. Expats have more to consider when it comes to tax planning and knowing what rules apply based on their situation.

For advice on tax issues, including the Modelo 720 form, contact us. Our team of experts are specialists in financial planning for the expat market.

To find out how we can help you, contact us using the form below.