When people move to Spain, they often expect challenges around property or residency, but one of the biggest surprises comes from the tax office. After settling in, most people become accustomed to the Spanish tax system; however, one common pitfall that British expats encounter is the requirement for a single tax reporting form, known as Modelo 720.
Modelo 720 Spanish Tax Form
By Jett Parker-Holland
This article is published on: 13th October 2025
Importantly, this is not a tax bill; it is a declaration, but failing to address it correctly can still result in hefty penalties and unnecessary stress.
The Modelo 720 is an annual information return that Spanish tax residents must file if they hold certain assets abroad worth more than €50,000 in any of three categories: bank accounts, investments, and property. Once filed, it does not need to be submitted again unless your foreign-held assets increase by more than €20,000, or your wealth in another category exceeds the €50,000 threshold. It aims to give the Spanish tax authorities a clear picture of your worldwide wealth.
Importantly, the form itself does not create a tax liability, but it can leave you open to scrutiny, which is where the risk lies. Failure to declare or even minor errors can lead to fines, backdated tax assessments, and interest charges. Once you’re on Hacienda’s radar, future scrutiny tends to increase, which is a headache nobody wants when settling into life in Spain.
Many expats worry that the cash and investments they have held in the UK may pose a potential issue with the Modelo 720, and that failing to declare in previous years may prevent them from doing so now. The good news is that by structuring your finances in advance, you can avoid this problem altogether. Certain Spanish-compliant investment bonds are not classed as foreign assets for Modelo 720 purposes, meaning you don’t need to declare them. For those anxious about declaring, this can be a great opportunity to structure your wealth so that it does not need to be declared, thereby avoiding ongoing scrutiny.
Beyond avoiding declaration, a bond allows for tax-deferred growth within the bond, meaning that your wealth can continue to collect interest and benefit from favourable tax treatment on withdrawals. Spanish-compliant bonds are not just about avoiding taxes or declarations; they are about ensuring compliance with Spanish regulations. For many of my clients, transferring assets into a compliant bond is the single most significant step they take to streamline their financial life in Spain.
Modelo 720 may seem like a minor formality, but mishandling it can turn into an expensive problem. By structuring your wealth effectively, you can reduce the risk of fines while also gaining ongoing tax efficiency and estate planning benefits. If you are already living in Spain or planning a move, now is a good time to review your arrangements.
A Spanish-compliant product is (almost) a prerequisite for an expat investor in Spain; it is the cleanest way to stay on the right side of Hacienda while keeping your money working hard for you.
As a Chartered Wealth Manager with a master’s degree in Investment Management, I specialise in helping British expats in Spain manage pensions, investments, and tax-efficient structures. With years of experience advising across both the UK and Spain, I focus on making cross-border finances simple, compliant, and effective for the long term.
If you would like a confidential review of your situation or would like to explore your options, please don’t hesitate to contact me. Proper planning today can save you a great deal of time, money, and stress tomorrow.