Monday, July 13, 2015

Modulo 720, Wealth Tax and IRAs, 401k in Spain

Spain has three asset-related filings that you are supposed to do every year. The ETE (which is only for people with > 1 million euros abroad), the modulo 720 and wealth tax.

The wealth tax and Modulo 720 are filed annually: the 720 is just informational, but with huge penalties, and the wealth tax might actually make you pay something. The 720 is designed to be a superset of the wealth tax, so if you file a 720 and later file wealth tax with smaller numbers, you will probably get a letter from the tax department.

Pensions are generally not included on these statements as long as the following hold true:

  1. That contributions are unavailable until a contingency covered by the plan occurs.
  2. The contingencies covered can only be: age, extreme poverty, being widowed or orphaned and disability.
  3. Once the contingency has happened and the contributions are withdrawn, the income is taxable
The consensus seems to be that Traditional IRA and 401ks qualify under these assumptions (although technically IRAs and 401ks can be redeemed with a tax penalty, this gets glossed over).

Roth 401ks would be trickier since they are not taxable when withdrawn. There might be other valid arguments about why they might not be declarable (eg during the first five years), but I don't know if there is a consensus on this.

Always talk to an tax expert before filling out a 720 form (especially filing an amended 720, which is really just an invitation to get slapped with a huge fine).

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