This new law was passed effective Nov 15th 2012 and is part of a package of anti-fraud legislation.
This is how it was described in the initial press release which was in English.
Accounts with financial institutions and all types of assets, properties and rights to properties, securities, rights, insurance and deposited income managed or obtained abroad must be declared.
The Royal Decree exempts from this obligation the need to declare assets worth less than 50,000 euros per asset type. The presentation of the disclosure in successive years will only be obligatory when this limit has been increased by more than 20,000 euros.
The information to be disclosed will include, in the case of accounts in financial institutions, the balance of these accounts on 31 December and the average balance for the last quarter of the year. This information will refer to current and savings accounts, term deposits, credit accounts and any monetary accounts or deposits of any type or currency, even if not remunerated. In the case of real estate, the purchase date and price must be disclosed, as well as the mortgage start and cancellation dates, and in the case of securities, the rights, insurance and income deposited or managed abroad must be disclosed as at 31 December each year.
Failure to comply with these obligations may have repercussions on personal income tax and corporate income tax, if the tax authority discovers hidden assets linked to this type of assets and rights. In this case they will be included in the last open tax year and the taxpayer risks heavy fines or the possibility of being prosecuted of a tax crime.
WHO HAS TO DECLARE AND WHICH ASSETS?
The law only applies to tax residents of Spain and to assets outside Spain.
There are 3 categories of assets.
1. Accounts held with financial institutions – bank accounts etc
2. All types property and rights over such property
3. Shares and securities
Life insurance policies unless they only pay out on death.
Lifetime or temporary annuities purchased for a monetary consideration.
If the total value, in each asset category exceeds €50000 then each and every account, share or policy etc. in that asset category must be declared.
In the case of joint assets it is the total value that must not exceed €50k. If you had a joint account then you cannot just look at your share – it is the total that applies and in that case both parties would have to make a declaration for the full amount but showing their % participation in the account.
The requirement to declare also applies to people who have rights over or who are authorised to deal with these assets. So for example, if you had power of attorney over your aged fathers bank accounts in the UK you would need to declare these accounts.
WHEN DO YOU HAVE TO DECLARE?
You are obliged to declare all assets held during 2012 even if only held for part of the year. The declaration must be made by 30th April 2013. In subsequent years the date will be 31st March.
In subsequent years you only re-declare an asset if the value of that asset has increased by more than €20000. It is not entirely clear how this is applied but hopefully it will become clearer by the time the next declaration is due.
PENALTIES FOR NON DECLARATION.
The fine for each item not declared is €5000 with a minimum fine of €10000. In addition the value of the asset will be considered as income and taxed at the normal income tax rates of up to 50% or more in some regions. In addition there will be a fine of 150% of the tax due and if the tax due is over €120000 it will be considered a criminal offence.
So, if you fail to declare a bank account with €300k in it you could end up with a bill for €375K and end up in prison!
WHAT INFORMATION IS REQUIRED.
It depends on the asset type.
Bank accounts will require the balance at 31 December 2012 and the average balance during the last quarter, type of account, BIC and IBAN numbers, name, address and company number of the financial institution and the date the account was first opened. For accounts closed during the year, the date of closure and the balance at the time. For accounts without a BIC/IBAN number there is an option to enter the appropriate local codes where applicable.
Stocks and shares require the value at 31 December and details of the shares including their ISIN number.
Annuities need the name and address and company number of the institution providing the annuity and the value at 31 December based on a capitalisation value of the income produced based on the official interest rate (as of 2017) of 3%.
Essentially what this calculation does is work out how much money you would need to invest to get an income equivalent to the money paid from your annuity. This results in a surprisingly large figure but this is discounted depending on your age and the value figure for a 65 year old is 24% of the above figure. This increases by 1% for each year less than 65 and decreases by 1% for each year more than 65, so a 75 year old would declare a value of only 14% of the maximum figure.
For example, if you want to make €1 interest from a 3% investment you would need to invest €33. So if the income from your annuity is €10000 you would have to invest €330000. If you are 65 then you only take 24% of this figure which is €79000 so that is today's value of your annuity so you would need to declare it.
Insurance polices are valued at their current surrender value on 31 December but if they only provide a benefit on death they are not included.
UK Premium Bonds are treated as securities and have to be declared if their value, plus the value of other stocks, share, securities, insurance policies or annuities are greater than €50k.
Occupational final salary pensions, the UK state pension and personal pension pots yet to be converted to a pension do not need to be declared.
The new “defined contribution” scheme, if providing an income, could be construed to be a type of annuity but it is not clear if they have to be declared. They look like an annuity but the key point is whether they were purchased for a monetary consideration. The jury is out on this one.
Property is valued at the original price paid or the value at the time of acquisition ( for example inherited property). Full details of the location of the property and date of acquisition must be given. If disposed of during the year the date and price when sold must be declared.
The exchange rate to be used is the one pertaining on 31 December issued by the Bank of Spain and it is 1.22534 GBP/EUR
Note that it is unclear which company number should be used. They ask for the NIF number which has no obvious corresponding meaning outside Spain. For UK accounts I would use the official company registration number which appears on most company documentation. In some cases there is no company registration number. If there is a FSA number you can use that.
METHOD OF DECLARATION.
There are no forms available to be filled in. It has to be submitted online. It is perfectly possible to do it yourself but it does mean that you must have a digital certificate installed on your computer to identify you. This is covered in one of the FAQs in this section. Most people will get their financial Gestor or accountant to do it for them.
It is surprising easy to complete the online form assuming that you have all the correct information to hand and of course have a digital certificate.
There is an initial page which covers your personal details etc. The seconds section "Declaración complementaria o sustitutiva" should not be filled in if this is your first declaration. This section is only completed when you are sending a second declaration. Then there is a subsequent page where you put in the details of the asset. Once you have identified the type of asset the various entry boxes are either clear for you to enter the relevant data or yellow and inaccessible so you won't enter details that are not required.
Not that the country codes are in alphabetical order and GB is Reino Unido just after Quatar.
You complete one detail page for each asset – which in some cases could be quite a lot if stock and shares are involved. Once completed there is an option to validate all the pages and it will identify any errors and omissions. When you have got it all right you have to option to save it for later or to submit it online.
The AEAT press release http://goo.gl/cthbh
The main anti fraud law http://goo.gl/hybAV
The order relating to the Form 720 http://goo.gl/PGoKT
FAQs about the law issued by AEAT http://goo.gl/cOVhF
Blevins Franks have published their interpretation of the above FAQs here http://goo.gl/RBDxv
Details on how to complete the declaration http://goo.gl/G8ffT
Access to the online form (requires digital certificate) http://goo.gl/hAVmh Select Presentacion 2012
****Edited 23rd Feb 2018 to reflect change to the interest rate used to calculate annuity value.
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