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Modelo 720 (Overseas Asset Declaration) – Legal or Not?

Over the last few years I have come across many expats, not just British but Dutch, Belgian and German, who have said to me “I am not doing the Modelo 720 as the EU has ruled it is illegal and also because the Spanish authorities will never find out if I don’t declare.” Sadly, I have to tell them that they are wrong on both counts.

The current situation – Legality of Modelo 720

On 15 February 2017, the European Commission accepted that Spain has the right to require residents to declare overseas assets. What the Commission disagrees with however is the severity of punishments for late or inaccurate submissions. The requirement to submit a Modelo 720 form is not under challenge. In October 2017, the European Commission confirmed that the Spanish Modelo 720 form and its penalties breach five different EU principles, and it is therefore illegal. However, the Spanish Government announced that it will not modify the law until the Constitutional Court decides on the subject and will, for the time being at least, continue to require its submission.

The current situation – Financial information sharing

From the 31st May 2018, over 100 countries worldwide, including the UK (and all other EU countries) all UK Crown Dependencies and Overseas Territories, have been automatically sharing information on financial assets held in their countries by tax residents of other countries. The information is sent to the country the asset holder is registered as being tax resident in. Under Common Reporting Standards (CRS) individual countries must report the value of all bank accounts, insurance policies, shareholdings, investments, Trusts etc (no matter what the balance) as at 31st December each year. Plus, notification will be made of withdrawals during each calendar year and also if an account has been closed during that year. The goal is to allow tax authorities to obtain a clearer understanding of financial assets held abroad by residents for tax purposes. The information sharing is primarily aimed at preventing tax evasion.

How do I make sure I get my financial reporting right?

There are ways to ease this reporting burden and to ensure you stay on the right side of the taxman, whilst also minimising your tax liabilities. One such way is to use a tax compliant investment bond. If you would like more information on Modelo 720 reporting, or to discuss any other financial advice including tax planning and tax mitigation, please contact Blacktower or visit your local office. With more than 30 years of experience helping expats to manage their wealth, we are certain we can find the right financial solutions to meet your needs.

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