The Tax form 720 is an informative tax model and its main purpose is to avoid the money laundering.
By the means of this form that has to be brought from the 1st of January to the 31st of March, residents in Spain must inform about their accounts, estate and investments abroad when valued over 50.000 euro.
Once lodged for the first time, the person subject to this form presentation will only have to bring it again if the value of any of the above mentioned three groups (accounts, estate or investments) have an increase of 20.000 euro or more.
The above seems right, however, what makes this model so controversial is the lack of proportion between its purpose and the fines, huge fines that can be imposed when someone forgets to lodge it or it is not lodged in time.
Fines; If you do not lodge the 720 tax model, the tax authorities will fine you with 5000 euro per block or missing data (remember there are three blocks) with a minimum fine of 10.000 euro. Furthermore, the value of your investments and assets abroad, if not informed by the means of the 720 tax model, will be considered as an unjustified benefit and will be punished with a fine of 150% of the amount that you are supposed to pay for this unjustified benefit in your yearly tax return.
If you lodge the 720 tax model beyond the expiry date (after 31st of March) then, you will be punished with a fine of a 100 euro per missing data or detail, by
example, if you have your money invested in 10 different products then they will be punishing you with 1000 euro, with a minimum fine of 1.500 euro.
The EUROPEAN COMISION has opened a proceeding against Spain for the lack of proportion of these fines- the process is in its very early stage so, at least this year, the obligation to inform by the means of the 720 tax model remains.
Our tax department will be pleased to study your case for free and to help you further if necessary.
Connie Raymundo – Lawyer & Barrister at Alicante Solicitors > Raymundo & Hopman.
At the present time, any person wanting to
maintain their standard of life when retiring must
complement the State Pensions with additional
saving financial products. A Pension Plan can be a
But, what is a Pension Plan? It is a type of retirement plan and in Spain, there
are two different groups; Company Pension Plans wherein an employer makes
contributions toward a pool of funds set aside for an employee’s future benefit.
The pool of funds is then invested on the employee’s behalf, allowing the
employee to receive benefits upon retirement, and, Private Pension Plans that
can be contracted individually by anyone and out of any Company control
wherein the person that has contracted it makes the contributions ‘’upon’’
towards ‘’his’’ their retirement benefit.
There are Pension Plans for each type of investor. The differences lie on the way
the Plan invests. There are fixed rate Plans (they invest in national debt or
companies), Variable rate Plans (they invest in funds, stocks, actions, etc),
Combined Plans (they combine both of the previous Plans criteria) and
Guaranteed Plans (they safeguard the invested capital).
We can contract one or several Pension Plans. However, it is essential that the
set, or “portfolio”, in which the Pension Plan is investing, matches with our
customers risk profile of investment.
The risk profile of an investor is defined by the investors attitude towards risk, in
short words, the investors risk tolerance. Thus, the categories of investors are
Conservative, Balanced and Enterprising.
The money invested in the Pension Plan (called consolidated rights) can be
surrendered at retirement, or before, in case of permanent disability. Also and as
provided in the Spanish Laws, the Pension Plan money can be surrendered
before retirement when the beneficiary has a long term unemployment situation,
suffers a severe disease or if evicted from his first residence or living home.
Also and from January the 1st of 2015, the Pension Plan money can be
surrendered after ten years from the first payment contribution.
What makes the Pension Plan so attractive are its tax benefits; the Pension Plan
is the only financial product that reduces the taxable income in the yearly tax
return. However, the taxable income reduction is limited to 8.000 euro Pension
Plan payment contribution per year.
Spanish Banks have different and many Pension Plan offers but to know if a
Pension Plan suits your needs, or, which Plan better fits with your tolerance to
risk profile, it is highly recommended to seek advice from your Financial and legal
Our Lawyers are specialised in these and other investment related matters;
contact us for further information, we will be pleased to help.
Lawyer and Barrister at Alicante Solicitors > Raymundo & Hopman.