Form 720 in the Common Inland Revenue and in the Regional Inland Revenue Offices

1. General issues

Form 720 is the information form by which a tax resident notifies the Administration of his or her assets abroad, in certain categories and provided that they exceed 50,000 euros per category. 

This model, which is controversial and has been appealed before the European High Court of Justice, is in force in the Common Territory and in the regional treasuries (Araba, Gipuzkoa and Bizkaia). 

Today we will analyse: 

• the similarities and differences of this model in the Common Treasury and the Three Foral Territories, 
• the valuation of each of the asset classes and finally, in the second part of the article, 
• whether or not it is compulsory to include movable assets as cryptocurrencies in each of the foral territories and in the AEAT. 

The deadline for filing this form with the 4 tax authorities is from 1 January to 31 March of the year following the year to which the information to be provided refers. In other words, the 720 tax return must be filed in the year following the year in which the individual (whether foreign or domestic) is a tax resident.

According to information received, the Provincial Treasury of Gipuzkoa is considering making the deadline for filing Income Tax the same as that of the Tax Form itself (both from April 2022). However, we cannot confirm this point yet.

Once the initial declaration has been made, it will only be necessary to file it again when the joint limit established for each block of information exceeds 20,000 euros with respect to that which determined the filing of the previous (or last) declaration.

It should be noted that the treatment of those persons covered by the impatriate tax regime (Beckham law) are not subject to reporting their foreign income. Their spouses or family members would be subject to tax if they are tax resident and the minimum thresholds are met.

2. Main difference between the AEAT’s legal text and that of the regional treasuries

The law that regulates model 720 in the AEAT separates three blocks of assets, always greater than 50,000 euros:

• Bank accounts in financial institutions
• Securities, insurance, rights and annuities
• Immovable property and rights thereon

In general there are not many differences in the way assets are valued, the application of exchange rates and other sections of the communication. In all 4 Treasuries the model is presented in a unitary way including all 3 (or 4) asset headings.

However, in the THREE Regional Treasuries, the law is clear in that it includes a fourth section on movable goods:

• Assets and rights over movable property which are or have been located abroad or which are registered or recorded in registers located in foreign countries, when the formal or real ownership corresponds to these taxpayers and the unit value of each of them is greater than 50,000 euros (or 20,000 euros with respect to that which determined the submission in a previous financial year of their last tax return).

Real estate includes: jewellery, works of art, bullion, cars, cryptocurrencies and NFT (non fungible tokens).

• In addition, the other major difference is that established by the Provincial Council of Gipuzkoa with regard to non-consolidated Pension Plans. Even if these have not been redeemed, they must be included in the information return (in the Securities, insurance, rights and income section).

3. Specific regulation in the regional treasuries

In Bizkaia:

Order 2282/2013, of 11 November, approving form 720, informative declaration on assets and rights located abroad and its electronic filing is the one that currently regulates this form.

Decree DFB 89/2013, of 25 June, which implements the obligation to provide information on assets and rights located abroad.

In Gipuzkoa:

Foral Order 1094/2013, of 19 December 2013, approving form 720, informative declaration on assets and rights located abroad.

Foral Decree 47/2013, of 17 December, approving the Regulation implementing certain formal tax obligations.

In Alava:

Regional Order 98, of 17 February 2014, approving Form 720, Information return on assets and rights located abroad, and its electronic filing. 

Foral Decree 32 of 6 October 2020 of the Council of the Foral Government of 6 October. Approving the regulation of the general conditions and requirements for the filing of returns and self-assessments by telematic means with the Provincial Treasury of Álava.

4. Valuation of bank accounts held abroad in the tax authorities of the Autonomous Communities

Bank accounts, whether interest-bearing or not, bank deposits and similar products must be reported whenever their aggregate value (whether in one or more accounts) exceeds 50,000 euros (i) in the last quarter of the year, or (ii) on 31 December 2021.

Let us look at some examples of the valuation of bank accounts, deposits and similar items in the tax authorities:

1. A person has two bank accounts whose sum total exceeds 50,000 euros (one amounting to 30,000 euros on 31 December 2021 and the other amounting to 20,000 euros on 31 December 2021). 

Is there a reporting obligation? YES

If the ownership of the accounts is shared by the married couple 50/50, is there a reporting obligation? YES, indicating the percentage of ownership of each of them.

2. An account holder of the same foreign account had a maximum balance of €67,000 on 4 April 2021. The balance on 31 December is €45,000 and the average balance for the last quarter is €46,000. 0

Is there a reporting obligation? NO, although €50,000 has been exceeded during the year, neither the average balance for the last quarter nor the balance at 31 December exceeds this amount. 

3. An account holder of the same foreign account has had a maximum balance of €67,000 on 4 April 2021. The balance on 31 December is4 €5,000 and the average balance for the last quarter is €5,00055. 

Is there a reporting obligation? YES, as the average balance for the last quarter is more than 50,000 euros. 

4. A holder of several bank accounts in excess of 100,000 euros cancels them on 1 August by transferring the entire amount to an account located in Spain. 

Is there a reporting obligation? NO, as there is no average balance or amount abroad on the last day of the year.

5. Valuation of shares, rights, insurance and the like in the regional treasuries

Shares, units, units in investment funds, ETFs, must be reported whenever their value as a whole established by the means of Articles 15, 16 or 17 of the Wealth Tax Act, or by their listed value on 31 December, exceeds 50,000 euros in the year. 

Rights, life insurance and other income deposited abroad, the balance at 31 December of each year must be reported in accordance with the rules established in the provincial wealth tax laws.

In this section, it should be noted that vested rights in a pension plan located and constituted abroad, it should be taken into account that such rights are not included in any of the categories of assets and rights located abroad referred to in the eighteenth additional provision of the General Tax Law and Articles 42 bis, 42 ter and 54 bis of the General Tax Regulations.

In Gipuzkoa, however, there is an obligation to report on non-consolidated pension plans since, as they are considered a collection right, they must be reported.

Let us look at some examples of the valuation of values and the like in the Haciendas Forales:

1. The holder has securities (shares) of several foreign companies deposited in a Spanish entity for 80,000 euros at 31 December. These shares had a value of 40,000 euros in the last quarter of the year.

Is there a reporting obligation? YES, as the threshold for reporting as a whole was exceeded as at 31 December.

2. The holder has two pension plans with a value of 60,000 euros as at 31 December.

Is there an obligation to provide information? NO, as long as the incident that gives rise to the collection of the pension in the form of a temporary or life annuity does not occur, I leave in Gipuzkoa, where I will have to report it, regardless of the redemption of the pension.

3. A person has stock options that could be worth more than 50,000 euros.

Is there a reporting obligation? NO. There is no obligation to declare stock options in Form 720. However, if the minimum threshold is exceeded, there will be an obligation to report the shares acquired as a result of the exercise of the aforementioned options.

6. Valuation of real estate and similar items in the Regional Treasuries

The properties (flats, houses, garage plots) will be valued jointly as long as they together exceed 50,000 euros. 

For valuation purposes, taxes and expenses inherent to the purchase will have to be taken into account.

Let us take a look at some examples of the valuation of real estate assets in the Haciendas Forales:

1. A person has three parking spaces in France worth 60,000 euros. He sells one in the second quarter of the year for 10,000 euros, leaving 50,000 euros in 2 parking spaces at the end of the year.

Is there a reporting obligation? YES

2. A person has three parking spaces in France worth 60,000 euros. He sells one in the second quarter of the year, leaving €40,000 in 2 parking spaces at the end of the year.

Is there a reporting obligation? NO

3. The members of a family own a property located abroad on 31 December whose acquisition value was more than 50,000 euros, must each of them file form 720, even if the value attributable to each of them according to their percentage share in it does not exceed 50,000 euros?

Is there a reporting obligation? YES, as it is the acquisition value of the property without prorating that must be taken into account for the purposes of information in form 720. Each of the co-owners of the property must report on it, indicating the total acquisition value and the percentage of their share in it.

4. An individual resident in Bizkaia acquired 50 per cent of a property located in France in 2010 for 100,000 euros. In 2013, he acquired the other 50% of the property for 120,000 euros.

Is there a reporting obligation? YES, as the taxpayer must declare, on the one hand, the acquisition in 2010 of 50 percent of the property valued at that time at 200,000 euros, indicating his percentage of ownership of it, and the acquisition in 2013 of the other 50 percent of the property valued at 240,000 euros, specifying the percentage acquired at that time.

In the second part of this article, we will look at how to value movable assets in the Treasury and the three foral territories of the Basque Country, and in particular digital assets.