Form 720 Spain and shared matrimonial property

If you are married with shared matrimonial property and have assets or rights abroad (for example, a bank account in France or an apartment in Portugal), it is important that you know of the obligation to submit the Declaration of Assets and Rights Abroad, or Form 720 Spain.

What matrimonial property laws exist in Spain?

To better understand the Declaration of Assets and Rights Abroad in cases of shared matrimonial property, it is necessary to know the different matrimonial property laws that exist in Spain (in the common law):

• Shared matrimonial property. This is the most common situation unless the spouses expressly choose another. Its most notable characteristic is that the assets that are acquired during the marriage, and those that are contributed to the marriage in a concrete way, are the property of both spouses without distinction of individual shares. This means that one of the spouses cannot exercise rights over the assets individually. Excluded assets include inheritance, assets acquired with private money, compensation received for personal injury and property used to carry out a professional activity.
• Separation of property. In this case, each spouse maintains ownership of their assets individually. There may be common property, but individual shares of this are assigned to each spouse.
• Participation. In this case, each spouse has their own assets, but if the marriage is dissolved, it is possible to claim a right to participate in the profits obtained by the other spouse.

Cases involving shared matrimonial property in which Form 720 Spain must be submitted

There are several cases in which married spouses with shared matrimonial property must file Form 720 Spain. Here are some examples:

• There is a shared property or right, but only one of the spouses is the formal owner. Should Form 720 be filed by the other spouse?
  The Tax Agency determines that even when the formal ownership of a shared asset or right is assigned to one of the spouses, both spouses must present the Declaration of Assets and Rights Abroad. The spouse who is not the formal owner must declare themselves to be a beneficial owner.
• A series of dividends are obtained from some shares of a company where one of the spouses (with shared matrimonial property) works, and these are deposited in an account abroad in their name. Does the other spouse have to file Form 720 Spain?
  According to a binding decision by the General Directorate of Taxes of November 18, 2018, both spouses are obliged to file the informative return. In this case, too, the spouse who is not the formal owner must declare themselves to be a beneficial owner.
• A married couple with the shared matrimonial property has several bank accounts abroad, and their children have the power of disposal of these assets. Do the children have to file Form 720 Spain?
  According to a binding decision by the General Directorate of Taxes of May 21, 3013, they must submit the informative return when the bank accounts have a balance greater than 50,000 euros. Additionally, the total balances must be reported in this declaration, and the percentage of participation must be indicated.
• A married couple has shared matrimonial property. One of the spouses has an account abroad for an amount of 45,000 euros and the other has an account for an amount of 40,000 euros. Do they need to submit Form 720 Spain?
  In this case, we consider that, although separately the spouses do not exceed the threshold above which there is an obligation to declare (50,000 euros), the two spouses must submit the declaration because their matrimonial property is shared.
• A married couple with the shared matrimonial property has residential property, which they acquired when they were already married, in Italy. Must they submit Form 720 Spain?
  The answer is that if the legally established limits are exceeded, the declaration of assets and rights abroad must be submitted.

What happens if Form 720 Spain is not submitted, is filed incorrectly or is late?

If you have an obligation to submit Form 720 Spain for a common property that you have with your spouse and you do not do so, three types of sanctions could be imposed on you:

• If you file the return incorrectly or inaccurately, the penalty can be 5,000 euros for each piece of information, with a minimum of 10,000 euros if there has been a prior request from the Treasury, or 100 euros per piece of information with a minimum of 1,500 euros if not.
• Another sanction consists of the imputation of an increase of patrimony in the taxable base of the oldest fiscal year of the non-prescribed ones for the value of the assets and rights not declared.
• Finally, they can impose a 150% penalty on the increase in the undeclared assets.

Is Form 720 Spain illegal?

Since Form 720 Spain was approved in 2013, its legality has been challenged due to the high penalties that non-submission entails, especially considering that it is an informative statement.

The European Commission considers that the sanctions that are imposed for the non-submission of the declaration are contrary to some principles of the Treaty of the European Union such as the free movement of people and capital. For this reason, the Commission filed an appeal with the Superior Court of Justice of the European Union, which will probably issue a ruling later this year or early 2021.

However, numerous Spanish courts have resolved cases on Form 720 and annulled various sanctions imposed by the Tax Agency due to non-submission. For example, the Central Economic-Administrative Court, in a resolution of February 14, 2019, annulled a sanction that was imposed on a taxpayer for filing Form 720 after the deadline in 2012.