Form 720 Spain, valuation of Real Estate

If so, you should know that in certain cases you must submit Form 720 Spain to inform the Tax Agency and if you don’t, you may be fined. But you will surely have many questions: How are properties valued? What happens if you’re a co-owner of the asset or have bought and paid for it in foreign currency? This article provides all of your answers.

Informative statement: Form 720 Spain

The obligation to report assets and rights abroad is regulated by Additional Provision 18 of the General Tax Law that establishes the obligation to inform the Treasury Department of:

Accounts abroad.

Titles, assets, securities located abroad.

Real estate assets and rights over these when located abroad. In this case, the information to be provided is:

• Identification of the property and type.
• Location (country, city/town, street, number).
• Date on which its was acquired.
• Purchase value. In relation to this, we’ll now look into the main questions taxpayers ask.

Frequently asked questions regarding the valuation of properties in Form 720 Spain

If you own a property let’s say in Paris, you should ask your tax adviser if you are required to submit Form 720 Spain. In relation to the above, some of the most frequently asked questions that arise are:

• Property owned by several people. Going back to the previous example, imagine you and your siblings all own a house in Paris. If at 31 December the acquisition value exceeds 50,000 euros, you must submit Form 720 Spain. As the property belongs to several people, each one must submit the form reporting the total value of the property without apportioning, including each person’s percentage of ownership.
• Property owned on joint marital basis. It may occur that the apartment in Paris is owned by a member of a couple married under a joint marital property basis. In this case, the spouse who is not the owner will have to declare as if he/she were the beneficial owner.
• Value of the property in the event of an inheritance or donation. To find out if you are obliged to submit the form, you must take into account the value of the property at the time of acquisition.
• Acquisition price in foreign currency. If an individual or legal entity has purchased a property abroad and has paid for it in a currency other than the euro, the purchase price will be determined taking into account the exchange rate at 31 December of the year in which it is declared.
• Property consolidation. You may acquire the bare ownership of a property abroad and then the right of use at a later date, thus consolidating full ownership. In these cases, the value of the asset will be calculated taking into account the value of the initial real right and the value at the time of consolidating the ownership. The acquisition date will be that on which the ownership is consolidated.
• Property with several owners and different acquisition dates. In this case, the amount to be declared will be that of the ownership percentage, calculated by grossing up the amount paid for the percentage of the property.
• Purchase costs. You can include the purchase costs and taxes in the acquisition value of the property.
• Amounts paid on account. You may find that before buying a property abroad, you will pay certain amounts (deposit or down payment) on account of the price. In this case you won’t have to submit the Form 720 Spain informative statement.
• Frequency for submission of Form 720 Spain. In the event of having already submitted Form 720 Spain, you’ll only have to submit it again when there has been a 20,000 euro increase in one or more of the reporting obligations compared to the amount recorded on the last statement you submitted.

What happens if you don’t declare property abroad and rights over these?

According to section 2 of Additional Provision 18 of the General Tax Law mentioned above, tax offences include the non-submission of Form 720 on time, the submission using incomplete, inaccurate or false data or submission via means other than the electronic means provided in cases in which you are obliged to use these means.

These tax offences are considered to be very serious and in the event of non-compliance with the obligation to report on assets, properties and rights over these when located abroad, the fine could be as high as 5,000 euros for each data or series of data related to the same property or the same right over a property, with a minimum of 10,000 euros.

If you are obliged to submit the form, and you do it voluntarily but outside the deadline (without an official requirement from the Tax Agency), the fine will be 100 euros for each data or series of data related to the same property, with a minimum of 1,500 euros.

In addition, not declaring property or rights over these can entail consequences in relation to other taxes such as IRPF. In this case, it could be considered as an unreported capital gain and could also lead to a fine.

However, the Spanish courts are beginning to overturn some of the penalties related to Form 720 Spain. If you want more information, feel free to read our post ‘Form 720 Spain, unlawful’.