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Tax Residents In Spain: Scope of the Model 720 For Andorran Properties

Elena Redondo's picture
Published: 29/01/20 - Country: Andorra

In 2012, the Spanish state obliged its tax residents to report on foreign assets and rights abroad. This obligation is applicable not only to bank accounts also subject to the Tax Information Exchange Act, but also to all real estate located in Andorra, owned by tax residents in Spain. But it is necessary to determine where the limits and assumptions of this obligation lie. It has already been repeatedly stated that for the obligation to report via model 720, the purchase value of the property must exceed € 50,000, but we will present some examples that have been the subject of study by the Spanish tax authorities and that specify this obligation.

Suppose a home located in Andorra is owned by two people and its acquisition value was 90,000 Euros. We can consider in this case if there is an obligation to present the declaration when the ownership of a property located abroad is shared, whose acquisition value exceeds € 50,000 as of December 31, but whose ownership corresponds to several people. In this case, there is an obligation to inform the property when this limit is exceeded (and none of the other exceptions to the obligation to declare concur), regardless of the number of holders on it. Therefore, the total acquisition value will be reported without apportionment, indicating the percentage of participation. Therefore, even if the acquisition value divided by the owners is not more than € 50,000, model 720 should be submitted if the value of the property is greater than this amount.

A second question is to determine what happens to those promises of sale made on Andorran real estate. Is there a requirement for the Spanish tax residents to file the 720 form for these properties? Is it necessary to report the amounts paid on account for the purchase of a property located abroad before the signing of the public deed? Given the Spanish Tax Agency is clear. In this case no. It will only have to be declared when the ownership or any real ownership is shown on the property or real right on it. In this sense, there is no obligation to report (file form 720) on the amounts paid on account for the purchase of a property located abroad before the signing of the public deed. It will only have to be declared at the moment that the real ownership or ownership is shown on the property or real right on it.

Next, we will analyze the case of a person or entity resident in Spain with real estate abroad consisting, for example, of the property of three parking spaces located in Andorra, valued as a whole at € 45,000 and acquired in 2009. L In 2013 a place was sold for € 17,000. What should I declare for the purpose of the 720 model? And if the valuation of the three places is € 55,000?

In this case, if the joint acquisition value of the real estate units is less than € 50,000, no declaration of property abroad should have been declared in the model declaration 720 of 2012. Consequently, it will not be necessary to declare the place sold in 2013. However, if the joint valuation had been in the year 2012 of € 55,000, the three places in the model 720 of 2012 would have to have been declared and consequently it would also have to be to report the loss of ownership of the parking space sold in 2013.
One last fact in fact leads us to analyze the obligation to declare in the case of transmissions mortis causa or by donation. If a person is the owner of a property that he has acquired as a result of a donation or an inheritance, what is the acquisition value that must be taken into account for the purpose of determining (and in his case declare) if you have an obligation to declare?

Answer: Whether the property was acquired by donation or inheritance, the acquisition value will be stated, meaning the real value of the good at the time of its acquisition. That is, the value at the time of acceptance of the inheritance or donation.

Finally, it should be emphasized that in order to determine the obligation of the Spanish tax resident to file the declaration of goods abroad via form 720, it becomes essential to analyze the acquisition value of real estate at the exchange rate in force on 31 December. December of the corresponding year the information stated. The purchase price of a property must include taxes and additional expenses for the purchase.

Therefore, the obligation of Spanish tax residents to file Form 720 in relation to Andorran real estate may not exist if the acquisition value of the real estate does not reach the legal limit. And in the event that the acquisition value is higher than this limit, often the cost of regularizing these Andorran properties may be lower than initially estimated by the owners. Therefore, one-on-one analysis will need to be done, because without this regularization, the real estate management of these assets, both leasing and transferring, and even own use, will be complicated.

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Elena Redondo's picture

Mrs. Redondo is an specialist in public law especially in real estate, urban planning and construction, with experience advising public and private administrations in the design, negotiation and execution of operations related to real estate and mainly focused on tourism, leisure and sports .

She has extensive experience in advising Andorran companies on their investments in Spain, thanks to his knowledge in the field of Andorran and Spanish law.

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