Tax residence determines the obligation to file Form 720

The General Directorate of Taxes (DGT) has clarified a fundamental aspect for taxpayers with assets outside of Spain: the determination of the obligation to file Form 720. The key to this reporting duty lies not in the ownership of the assets, but in the individual's tax residence status.

What the DGT has ruled

The binding ruling addresses whether the informative declaration on assets and rights located abroad must be submitted when there is doubt regarding residence. The DGT's criterion is categorical: to determine if the obligation to report exists, it is essential to verify whether the taxpayer is a tax resident in Spain in accordance with Article 9 of the Personal Income Tax Law (LIRPF).

The authority establishes that the regulations regarding the reporting of assets and rights located abroad use residence as the delimiting criterion. Therefore, if as of December 31 the taxpayer has not acquired the status of tax resident in Spain, there is no obligation to file Form 720, regardless of the balances or assets they hold abroad.

What this means for you

This criterion has a direct impact on two specific profiles:

• Resident individuals: Natural persons who maintain tax residence in Spain must comply with the filing of Form 720 as long as they exceed the established balance thresholds and possess assets outside the national territory.
• Expatriates: Professionals returning to Spain must confirm precisely whether they have acquired tax residence in the country. This status is what will or will not trigger the duty to declare their assets located abroad.

What should be done

Given the existence of assets abroad, it is necessary to conduct an analysis of the tax residence situation under the parameters of Article 9 of the LIRPF. The correct determination of residence at the close of the fiscal year is the necessary preliminary step to determine if a reporting duty exists before the Tax Administration. It is recommended to assess each particular situation to ensure compliance with current regulations.