Tax Agency will require that cryptocurrencies such as bitcoin and others be declared in Form 720 Spain. Spanish Tax Agency expands surveillance on Spaniards living abroad.

For this, the Tax Agency already prepares a form for these specific assets. In other words, the Treasury is preparing a specific Form for taxpayers to declare digital currencies through Form 720 Spain.

Taxpayers increasingly tend to use digital money, and to reduce cash, with more than 6,500 cryptocurrencies in circulation by the end of 2020. Most of the world’s central banks already use or develop their digital currencies, including the European Central Bank, creating the Digital Euro, in which Spain participates.

How will the Treasury oblige to declare virtual currencies abroad through the Model 720?

The 2021 Annual Tax and Customs Control Plan, published yesterday in the spanish BOE, requires “obtaining information from various sources on operations carried out with cryptocurrencies”, the Tax Agency providing for the “incorporation into the form to declare assets and rights abroad”. In other words, the Tax Agency has taken an unequivocal step in wanting to force the inclusion of assets in the form of digital currencies in Form 720 Spain. This Form 720 Spain is currently under the study of Brussels, since Spain imposes very high fines on taxpayers who do not comply with the declaration obligation.

The Tax Agency prepares a model to force the declaration of cryptocurrencies, such as bitcoin and others, abroad, through Form 720 Spain.

In this sense, the Tax Agency prepares an “autonomous information obligation” on cryptocurrencies. The reason is that, more and more, taxpayers carry out operations in virtual asset markets and, specifically, we use digital currencies to carry out transactions and businesses using cryptocurrencies, which for the Tax Agency generates fiscal risks that the voluntary compliance with the tax obligations derived from said operations, escaping their control.

How can the Tax Agency know that we have virtual currencies such as bitcoin abroad, to force us to declare them in the Form 720 Spain?

To control cryptocurrency-based operations and ensure that taxpayers comply with our tax obligations, the Spanish Tax Agency is already controlling our transactions through the use of new technologies, such as Big Data, Artificial Intelligence, and data mining, thus able to trace the origin of the funds that we use to acquire cryptocurrencies. For this, in addition, the Tax Agency is promoting international cooperation to obtain more information about our operations with virtual assets and cryptocurrencies.

An example of the continuous modernization of the Spanish Tax Agency is that this year it will have a new tool that will predict errors based on our returns from previous years and notify the taxpayer to modify the draft before confirming it. Likewise, it will investigate the people “linked” to a citizen to look for signs of patrimonial or corporate fraud, analyzing, for example, companies linked to a person or a family group, to jointly evaluate the economic operations that are carried out.

If you need to declare your assets and rights abroad, using Form 720 Spain, at Pérez Parras Economists & Lawyers we are experts in international tax law. Contact us so that we can help you and make your declaration of assets abroad correctly, avoiding the great penalties that any type of error in Form 720 Spain carries.