The "Worldwide Income" Principle. Your Obligation to Declare Income and Assets Located in Other Countries in Spain

From our office, we want to clarify the keys to correctly managing your international assets. We will inform you step-by-step and in summary below.

The Obligation to Inform: Form 720

If you are a tax resident in Spain and own assets or rights abroad (such as bank accounts, securities, life insurance, real estate) whose individual or combined value exceeds 50,000 euros in any of the categories, you are obliged to annually file Form 720, the "Informative Declaration on Assets and Rights Located Abroad." This declaration is purely informative; it does not imply the payment of taxes, but it is crucial for the Tax Agency to be aware of your assets outside Spain. The filing period is usually between January 1 and March 31 of the year following the one to which the information refers.

The Worldwide Income Principle: Do I have to declare my foreign income in Spain?

Absolutely yes. If you are considered a tax resident in Spain (generally, if you stay more than 183 days in Spanish territory during the calendar year), the "worldwide income" principle applies to you. This means that you must declare in Spain all the income you obtain, regardless of where it was generated or the currency in which it was received. That is, salaries, rental income from properties, dividends, interest, or capital gains generated abroad must be included in your Income Tax Return (IRPF) in Spain.

Avoiding Double Taxation: Deduction for Taxes Paid Abroad

We know that the idea of paying taxes twice on the same income can be daunting. Fortunately, Spanish regulations include mechanisms to avoid international double taxation. In your Income Tax Return in Spain, you can deduct the amount of taxes paid abroad for that income, up to the limit of what you would have paid for it in Spain if it had been obtained here.

It is fundamental to understand the process: first, you declare the entire worldwide income in Spain, and subsequently, you apply the deduction for the taxes you have already paid in the country of origin of the income. It is not an exemption but a deduction to mitigate the tax burden.

The Importance of Supporting Documents and Sworn Translations

To be able to apply the deduction for double taxation, it is essential that you can prove to the Spanish Tax Agency that you have effectively paid taxes abroad for that income. This means you must carefully keep all payment receipts, withholding certificates, tax returns from the other country, and any document that demonstrates the taxes paid.

Furthermore, keep in mind that if these supporting documents are in a language other than Spanish, the Tax Agency is authorized to request a sworn translation of them. Anticipating this possible request and having the documentation ready and, if necessary, translated, can save you time and possible future requirements.

The Complexity of International Taxation

The taxation of assets and income abroad is a complex field, influenced by double taxation agreements between countries, specific regulations of each jurisdiction, and constant legislative changes. Incorrect declaration or omission of information can lead to significant penalties from the Tax Agency.

Don't take risks. In our office, we have extensive experience in international taxation and are prepared to offer you personalized advice that guarantees compliance with all your tax obligations, both in Spain and in relation to your global assets.

Take advantage of our experience and consult us. We will help you understand your situation, prepare your declarations correctly, and optimize your tax burden legally and safely. Your peace of mind is our priority.

By C.Fabri