What is the Modelo 720? A Dummies Guide.

If you’ve just moved to Spain, you might be surprised to learn that, even before filing your first tax return as a Spanish tax resident, you’re expected to tell the Spanish tax authorities about your bank account balances and any shares or properties you own worldwide. Yep, it’s a bit “Big Brother,” isn’t it?

(That said, if you don’t have over €50,000 in assets outside Spain, you’re off the hook—Hacienda has bigger fish to fry!)

Mention the Modelo 720 to long-term expats in Spain, and you’ll probably get a look of pure horror. Why? Because the Spanish government used to slap people with ridiculous penalties for not declaring foreign assets—sometimes even higher than the value of the asset itself. Thankfully, the EU put an end to those extreme penalties. But the Modelo 720 is still a big deal. If what you report on it doesn’t match your other tax returns, you could run into serious trouble. That’s why it’s so important to plan ahead before you become a Spanish tax resident.

What is the Modelo 720 and do I need to fill it out? 

The Modelo 720 is a form that every tax resident in Spain needs to fill out (unless you’re on the Beckham regime).

It’s an informative declaration, meaning you’re simply letting the Spanish tax authorities know what you own overseas —there’s no tax to pay at this stage.

You will need to complete the Modelo if you have any of the following: 

1. Bank accounts in banks located abroad with a combined value of over €50,000.
2. Investments and shares in any entity abroad (including companies you own) valued at over €50,000.
3. Real estate located abroad worth over €50,000.

By 'combined', we mean the total value of all your accounts. So, for example, if you’ve got one account with €20,000 in the UK and another with €40,000 in Belgium, the total is €60,000. And yes, that means you’ll need to fill out the Modelo 720.

If you have over €50,000 in any category, you’re required to do the Modelo 720. But here’s the good news: you only need to declare the categories where you hit that limit. For instance, if you’ve got over €60,000 in bank accounts abroad, you’ll need to declare all of those accounts. But you don’t need to include your €20,000 worth of shares – those can stay off the form.

What are the consequences of NOT filing the Modelo 720?

In the past, the fines for not submitting the form or under-declaring assets were pretty brutal—sometimes even higher than the value of the asset itself.

Take the case of a retired taxi driver from Granada, for example. Back in 2013, he had no idea he needed to file the return, so he didn’t declare the €340,000 he had tucked away in Switzerland.

When it came time to file his 2014 tax return, he realized he needed to declare his Swiss account—and he did the right thing by reporting it. But that’s when things went south. When it was discovered by the tax authorities that he hadn’t filed a return the year before, the unlucky taxi driver ended up with a massive fine: €188,000 for unpaid taxes plus a €254,000 penalty. That’s a staggering €442,000 in total!

His case, like many others in similar situations, caught the eye of the European Commission, prompting them to investigate whether the Modelo 720 regime was actually legal.

By January 2022, the European Court of Justice stepped in and called Spain out. They decided the penalties were totally over the top and went against the EU's principle of free movement of capital.

Since then, Spain has made some big changes to the penalty rules, scaling things back to be more reasonable. They’ve also set a statute of limitations at four years (they cannot fine you for a mistake you made on the Modelo 720 older than this). 

The Modelo 720 now falls under the regular penalty rules in the Spanish General Tax Law. Instead of the old minimum of €10,000, it’s now just €300, and there’s a cap of €20,000 (doubled if the asset is not located in the EU) — before that the fine was unlimited!

Is the Modelo 720 a one-time thing or do I need to fill it out every year? 

You'll need to resubmit the Modelo 720 if:

•  if any assets or sold or accounts are closed, or
•  if the value in any of these three categories increases by €20,000 or more. 

What about if I jointly own an asset?

Every owner has to declare the full value, even if their share is less than €50,000, and include the percentage they own on the form. 

Do I need to declare Spanish assets? 

No, only assets located out of Spain. 

When is the deadline for filing the Modelo 720? 

The deadline is 31^st March each year, covering the assets you owned at the end of the previous year.

Can I file the Modelo 720 myself? 

If you’ve got a NIE and a digital certificate, you can hop onto the Agencia Tributaria website and file your Modelo 720 yourself—no need to hire a pro. But honestly, trying to tackle it on your own, especially in the first year, is asking for trouble. Even tax experts find the Modelo 720 ridiculously complicated!

Tax and Modelo 720 Planning

If you’ve become a Spanish tax resident in 2024, send us an email, and we’ll connect you with a Spanish tax specialist who can help you file the Modelo 720.

If you’re planning to move to Spain and have over €50,000 of wealth, it’s a good idea to get some advice sooner rather than later.

While it's true that the fines for not submitting the Modelo 720 aren’t as harsh as they used to be, but your first declaration is still an important step to let Spain know about your assets abroad.

Here are a few examples to illustrate the importance of planning:

1. Let’s say you’ve got just one bank account in the US with €50,100 and no other assets. Since it’s worth more than €50,000, you’d be required to file the modelo 720. But here’s the kicker—if you had just transferred €101 to your Spanish bank account at the right time, you’d avoid the whole hassle.
2. As the 100% shareholder of a UK limited company valued at €60,000, you’ll need to declare your shareholding on the Modelo 720. This lets the Spanish tax authorities know that you’re potentially running a UK company while living in Spain, but without paying Spanish corporation tax or VAT—something that could open a huge can of worms.
3. If you’ve got a UK Stocks & Shares ISA with 100 different shares, you’ll need to declare every single one of them on the Modelo 720—and redo it every time you buy or sell a share. Sounds like a hassle, right? Switching to an index tracking fund could save you the headache. With that, you’d only need to declare one item instead of 100. Much easier!