The ownership of assets and rights abroad must be reported through Form 720, where certain quantitative thresholds are exceeded. The breach of this obligation is subject to a very severe penalty regime.

Form 720 has been surrounded by controversy from the very beginning. In a previous post we discussed the opinion in which the European Commission concluded that the consequences of the breach of the obligation to report assets and rights abroad are disproportionate. After issuing that opinion, the European Commission filed an appeal for breach with the Court of Justice of the European Union, published on December 23, 2019, in the Official Journal of the European Union (European Commission / Kingdom of Spain, C-788/19).

Although the CJEU has not yet handed down a judgment, Gipuzkoa has approved a number of provisions in 2021 that substantially modify that information return, in order to provide greater legal certainty to taxpayers.

The main changes are summarized below:

  1. Provincial (“Foral”) Law 3/2021, of April 15, 2021, approving certain tax amendments for 2021

As stated in our Alert of April 22, 2021, Provincial Law 3/2021 amended the regulations in force, differentiating between breaches related to assets situated in the EU and those situated in third countries.

In particular, two new cases were added in which unjustified capital gains are not deemed to exist.

  • Where they involve assets and rights situated in EU countries whose ownership, reporting or acquisition has taken place more than 10 years ago.
  • Where the ownership, reporting or acquisition of the assets or rights has taken place in the last 10 years and it is evidenced that they are situated in EU countries, or that they were acquired out of assets or rights situated in the EU, whose ownership, reporting or acquisition has taken place more than 10 years ago.

The 10-year period must be computed as from the commencement date of the procedure for application of taxes which evidences the existence of the assets or rights not reported.

  1. Provincial (“Foral”) Decree 12/2021, of October 5, 2021, amending certain regulations implementing the Provincial General Taxation Law

In this Provincial Decree, changes were introduced in the manner and periods for filing Form 720, effective now in the returns to be filed in 2021 with respect to fiscal year 2021:

  • The filing period is between April 1 and June 30 (previously, it was between January 1 and March 31), to make it coincide with the wealth tax filing period.
  • The reporting obligation is maintained where the value of the assets situated abroad, considering each category, exceeds 50,000 euros.

Those categories include current accounts and deposits, securities, rights and insurance, immovable properties and rights on them, and, lastly, movable properties and rights on them.

The reporting obligation is also maintained where there is a transfer or derecognition of an asset or right previously reported.

  • Hitherto, it was obligatory to file the form in later fiscal years if there was an increase of 20,000 euros in the value of the asset or right previously reported (bearing in mind the value of the asset or right reported in the last tax return). As of now, the following clarifications must be taken into account:
    • Immovable properties and rights on them: The reporting obligation is maintained in subsequent years where there is an increase in value above 20,000 euros, although the form can be filed voluntarily in other cases.

As an exception, if the taxpayer must file Form 720 and report any other assets or rights, the rules set forth in the following section will apply to all the assets or rights, including immovable properties.

    • Rest of assets: Assuming that the overall value of each category exceeds the threshold of 50,000 euros, the return will be obligatory in subsequent fiscal years.