BackIn this article, we will discuss the obligation to declare model 720.
According to the binding consultation of the General Directorate of Taxes (DGT) dated November 15, 2023, under reference V2997/2023, an individual owns 46.40% of a company resident in Spain.
This company plans to establish a company in Portugal, where it will hold a majority stake. The Portuguese entity intends to acquire three properties for subsequent rental. The company resident in Spain will report in its accounting as well as in the notes to the annual accounts the details of the bank positions and real estate owned by the Portuguese company individually.
Obligations when declaring Model 720
Normally, the Spanish company must file an informative declaration related to its participation in the Portuguese company. However, this will not be necessary if the securities and rights are recorded in the accounting books or in the notes to the Spanish company’s financial statements, as long as they are consistent with the annual accounts.
Obligations of the Individual and Exemptions
If an individual is the beneficial owner of the participation in the non-resident company, they must file an informative declaration about the assets related to that participation.
However, if the Spanish company is exempt from filing the declaration due to the registration of the assets in its accounting, the individual will also be exempt. This exemption will apply if the non-resident company carries out a real economic activity, i.e., not only acts as an instrument for the indirect control of assets by the beneficial owner. If these conditions are not met, the individual must file the declaration, unless the assets are individually recorded in the accounting of the Spanish company.
In summary:
An individual owns a significant stake in a Spanish company planning to establish a company in Portugal. The Portuguese entity plans to acquire properties for rent.
The Spanish company will report in detail on the assets of the Portuguese entity in its accounting and annual notes.
The Spanish company is obliged to file an informative declaration about foreign assets related to its participation in the Portuguese company unless these are recorded in its accounting books. If an individual is the beneficial owner of the participation in the non-resident company, they must file an informative declaration about the related assets.
However, the individual may be exempt from this obligation if the Spanish company is exempt due to the registration of the assets in its accounting and if the non-resident company carries out a real economic activity. Otherwise, the individual must file the declaration, unless the assets are individually recorded in the accounting of the Spanish company.
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