720 Form: Am I obliged to inform about all pension plans outside Spain?
From January 1st to March 31st of each year you must fulfil, if accomplish certain requirements, the 720 Form about the Information return on assets and rights held abroad.
We have published several articles in our blog treating different aspects about this Form, but in today’s article we want to talk about the obligation to inform of the different types of pension plans that exist in several countries such as the IRA (Individual Retirement Account) or the 401 (K) from United States, the British ISA (Individual Savings Account) or QROPS (Qualifying Recognised Overseas Pension Scheme), the NISA (Nippon Individual Savings Account) from Japan, the Australian Superannuation or the RRSP (Registered Retirement Savings Plan) from Canada, among others.
What is the 720 Form?
Natural and legal persons resident on Spanish territory, Permanent Establishments in Spanish territory of non-resident persons or entities, and unaccepted inheritances (herencias yacentes), joint-ownership (comunidad de bienes), together with other entities lacking legal personality, have the obligation to present the 720 Form always when they exceed the minimum threshold to be bound to it.
The content to be reported in it is divided into three groups:
a) Information on accounts in financial entities located abroad.
b) Information on securities, rights, insurances and income deposited, managed and obtained abroad.
c) Information about real estate and rights over real estate located abroad.
You will be obliged to report the amount of the value of each independent group when:
- The first time, provided that the amount of 50.000 Euros is reached.
- The successive years with an increase of more than 20.000 Euros with respect to the amounts reported in the presentation of the las declaration.
The breach of the obligation to report about this content is considered a very serious violation, establishing a sanctioning system that entails a penalty of 5.000 Euros for each data or data set omitted or provided incomplete, inaccurate or false, with a minimum of 10.000 Euros, reducing these amounts to 100 Euros for each data item or set of data with a minimum of 1.500 Euros, in the event that the submission is late without prior request, in addition to possible regulations in the Personal Income Tax (IRPF) or Corporate Tax (IS).
You can expand your information in this article that we published in our blog about the 720 Form.
Inclusion of pension schemes in the 720 Form
Pension plans, a name that often refers to other types of foreign products, have generated some confusion and debate about their inclusion or not in the 720 Form.
The definition in the field of Spanish Law of pension plans is that it concerns the rights of individuals, in whose favour they are constituted to receive income or capital for retirement, survival, widowhood orphanage or disability. Therefore, and in accordance with this definition, such rights are not included in any of the categories of goods and rights located abroad referred to in articles 42bis, 42ter and 54bis of the General Regulations of the actions and procedures of management and tax inspection and development of the common rules of tax application procedures, which are the three categories of information of 720 Form discussed above.
However, at an international level, the term pension plan is used for other types of financial products with very similar characteristics, but which, in certain cases, have characteristics that do not comply with the definition under Spanish law of a pension plan, mainly because they can be rescued in different cases from these foreseen in it, therefore, we must monitor and analyze each financial product in question.
In summary, in order to qualify a foreign financial product as a pension plan, for the purposes of its non-inclusion in the 720 Form, the requirement that the contingency must be exclusively for retirement, survival, widowhood, orphanage or disability must be met, the contributions can’t be available without any of these circumstances occurring. It is worth mentioning that at the time when the pension plan is rescued due to the occurrence of any of the aforementioned circumstances, the existing rights in the same will have to be declared, as well as the rent or capital recued, and if this is intended, for example, to deposit in foreign accounts or acquisition of foreign securities, they will also be taken into account at the time of the 720 Form fulfilment.
If you are a tax resident in Spanish territory and have accounts, securities, rights, insurance or real estate abroad, and you are not clear if you must present the Informative Declaration on assets and rights located abroad, do not hesitate to contact us, we will analyze your case in detail and professionally.