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A Tax Compliance Guide

Miguel González 5 February, 2024

Form 720 Exemption in International Investments

According to the binding consultation of the DGT, dated 15-11-2023, V2997/2023, in situations where a Spanish resident entity holds an interest in a non-resident company, such as when incorporating a company in Portugal, the obligation to submit Form 720, an informative declaration on assets and rights abroad, arises. However, this obligation can be waived if the Spanish resident company properly records the securities or rights in its accounts or annual report, ensuring consistency with them.

In the case where an individual is the actual owner of the securities or rights representing the participation in the non-resident company, they must file the informative declaration. Nonetheless, if the Spanish resident company is exempt from filing due to recording the securities or rights in its accounts, the individual will also be exempted, provided that the non-resident company genuinely engages in economic activities and does not serve as a mere instrument for the indirect control of assets by the beneficial owner.

In summary, the obligation to submit Form 720 may be exempted by accurate accounting of securities or rights by the Spanish resident company and the non-resident company's engagement in legitimate economic activities, thereby excluding mere indirect control of assets by the beneficial owner. This ensures compliance with tax regulations while minimizing administrative burdens.

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