Receiving a request from the Spanish Tax Agency regarding assets held abroad does not automatically mean that fraud has taken place or that we will receive a penalty. It does, however, mean that we must carefully review what information the Tax Agency holds, which tax years it is reviewing and what documentation we need to provide.
Bank accounts, investments, property, foreign companies, inheritances received outside Spain or international financial assets may give rise to different tax obligations for an individual resident in Spain.
At Barcelona Tributario, we are tax lawyers specialising in domestic and international tax law in Barcelona. We advise private individuals, business owners, investors and holders of international assets in connection with requests, reviews and inspections by the Spanish Tax Agency.
Quick answer: if you have received a request from the Spanish Tax Agency regarding assets held abroad, we must first read exactly which tax, years, assets and documentation the AEAT is reviewing. We then reconstruct ownership and the origin of the assets, review the returns filed in Spain and abroad, and prepare a consistent documentary response. We do not recommend responding hastily or submitting documents without first assessing how they fit into the case as a whole.
I have received a tax authority request about assets held abroad: what should I do first?
The first step is not to start sending bank statements.
Have you received a request from the Tax Agency concerning assets or accounts held abroad? Our tax lawyers in Barcelona will analyse your case and help you prepare the documentation required to address the inspection with the necessary safeguards.
We must understand the notice.
1. Check which procedure the Tax Agency has initiated
It is not the same to receive:
- A request for information.
- A limited review.
- A notice initiating an inspection.
- A proposed assessment.
- Penalty proceedings.
Each procedure has a different scope and offers different options for action.
2. Review the deadline for responding
The notice itself will state the deadline granted.
We must note it immediately and organise the documentation with sufficient time.
3. Identify which tax years are being reviewed
We check which tax periods are listed in the notice and which taxes are affected.
We should not assume that the Tax Agency is reviewing all our assets if the scope communicated is more specific.
4. Identify what information the AEAT appears to already hold
In many cases, the Tax Agency has information from financial institutions, information returns or international exchanges.
Our response must be consistent with the data the authorities can verify.
How does the Tax Agency know that I have money or assets outside Spain?
There is now extensive international exchange of financial information.
CRS and DAC2
Spain participates in the international CRS system and European automatic information exchange mechanisms.
This allows certain financial institutions to report information on accounts whose holders or controlling persons are tax resident in another jurisdiction.
United States: FATCA
The United States must be distinguished from the CRS system.
Spain and the United States exchange certain financial information under the FATCA agreement.
Spanish information returns
The Tax Agency can also compare international information with returns filed by the taxpayer and with other data available in Spain.
Therefore, a request from the Spanish Tax Agency regarding assets held abroad may arise where there are discrepancies between different sources of information, although the existence of a discrepancy does not in itself prove that an infringement has occurred.
Form 720: what we review when a request arrives
Form 720 remains an information return for certain categories of assets and rights located abroad.
We must review whether there was an obligation to file it and, if so, what was declared.
What types of assets it may include
Among other regulated circumstances, it includes information on:
- Accounts with financial institutions located abroad.
- Certain securities, rights, insurance policies and income.
- Real estate and rights over real estate located outside Spain.
The €50,000 threshold
The initial obligation is assessed separately for the different information categories set out in the regulations.
Where the regulatory thresholds are exceeded, we must assess which specific assets must be declared.
It is not always filed every year
After the first filing, the obligation to file Form 720< again depends, among other circumstances, on the aggregate values in the relevant category increasing by more than €20,000 compared with the last return that triggered the obligation, or on certain events such as transfers or cancellations.
What if I hold cryptocurrencies abroad?
Virtual currencies are not declared in Form 720 as such.
There is a specific return, Form 721, for certain virtual currencies held abroad.
We must also separately assess their taxation for personal income tax, wealth tax or any other applicable taxes.
For this reason, if the request from the Spanish Tax Agency regarding assets held abroad mentions exchanges, wallets, platforms or virtual currencies, we must identify exactly which obligation the authorities are reviewing.
What documentation should we prepare?
The documentation will depend on what the Tax Agency has requested.
We do not recommend indiscriminately sending every document relating to our international assets.
Bank statements and certificates
We may need:
- Statements for the relevant accounts.
- Certificates of ownership.
- Balances on specific dates.
- Specific transactions.
- Information on interest or investment returns.
Investments and brokers
Where there are shares, funds, bonds or other financial instruments, we must reconstruct purchases, sales, dividends and other returns relevant to the tax years under review.
Property in another country
We may need deeds or acquisition documents, land registry documentation, the price paid, financing, local taxes and, if the property is rented out, the income and expenses connected with it.
Inheritances and gifts
If the assets come from an inheritance or gift, we must retain the documentation proving their origin, valuation and taxation.
Foreign companies
Where there are interests in a foreign company, we must assess:
- Percentage holding.
- The company’s activity.
- Financial statements.
- Dividends received.
- Functions performed by the taxpayer.
- Potential controlled foreign company rules.
One of the key points: proving where the money came from
When facing a request from the Spanish Tax Agency regarding assets held abroad, a recurring issue is being able to reconstruct the economic origin of the assets.
Not all funds held abroad come from income earned while the taxpayer was tax resident in Spain.
Savings accumulated before becoming resident in Spain
A person moving to Barcelona may have built up assets in their country of origin over many years.
In that case, we must document when they were acquired and what the taxpayer’s tax residence was at that time.
Inheritance received in another country
We must provide the succession documentation and analyse what obligations arose in Spain according to the circumstances existing on the date of acquisition.
Sale of property or a business
Contracts, deeds, tax returns and bank transactions can help us reconstruct the source of the funds.
Previously declared income
Spanish and foreign tax returns may form part of the evidence.
The key is to reconstruct a consistent, documented asset history.
Does all foreign documentation require a sworn translation?
We should not state this automatically.
The authorities may require the translation of certain documents where necessary for their understanding or evidential value.
Depending on the document, country and procedure, we must also assess whether any additional formalities are required.
For this reason, we recommend first reviewing which document we are going to submit and what we intend to use it for.
What to review before responding to the Tax Agency
Before preparing the response, we compare the information in the request with the taxpayer’s tax returns.
Personal income tax
We check whether interest, dividends, rental income, capital gains or other foreign income were correctly declared when required.
Wealth Tax
We review whether the assets should have been included in the return based on tax residence and the applicable rules.
Temporary Solidarity Tax on Large Fortunes
When dealing with substantial assets, we must also check whether there were obligations relating to this tax.
Information returns
Form 720, Form 721 or other returns may be relevant depending on the type of asset.
Returns in other countries
We also review how the income or assets were declared outside Spain and whether there are mechanisms to avoid double taxation.
Can I file an amended return after receiving the request?
This point must be assessed before taking action.
The Spanish General Tax Law distinguishes between late filing carried out without a prior request and a situation in which the authorities have already formally initiated action aimed at regularising or reviewing the matter.
Therefore, if we have already received a request from the Spanish Tax Agency regarding assets held abroad, we should not assume that we can file an amended return with the same effects as a voluntary regularisation made before the notice.
We must first determine which obligation, tax and period are affected.
What happens if I have not yet received any letter from the Tax Agency?
The situation is different.
Every day that passes without a clear strategy for a tax inspection can prove very costly. Contact Barcelona Tributario today and protect your international assets with the support of tax law experts.
If we identify an error before there is a prior request, we can assess the available options for voluntarily correcting the situation.
The Spanish General Tax Law expressly regulates the surcharges applicable to certain returns or self-assessments filed late without a prior request.
This does not mean that all regularisations have the same outcome. We must analyse the tax, period, amount and potential existence of other information obligations.
How many years can the Tax Agency review?
The general limitation period for the authorities to determine a tax debt by assessment is four years.
But this does not mean that we can automatically respond that “the Tax Agency can only look back four years” in every case.
We must check when the period starts running
The start and possible interruption of the limitation period depend on the rules of the Spanish General Tax Law.
There are review powers that require a different analysis
The law itself distinguishes between the limitation period for making an assessment and certain review and investigation powers.
Therefore, when the Tax Agency requests historical information to verify an item that has effects in a non-time-barred year, we must legally review the specific scope of the request.
What happens if the Tax Agency starts an inspection?
A formal inspection follows its own procedure.
Notice of commencement
The AEAT must notify the commencement and scope of its actions.
Submission of documentation
During the investigation, documents and explanations relating to the matters being reviewed may be requested.
Right to be heard and inspection reports
The procedure may end with an agreed inspection report, a disputed inspection report or, in certain cases, a settlement agreement.
Assessment and possible appeal
Where we disagree with the regularisation, we must assess the submissions and then the available review routes.
The AEAT currently states a general duration of 18 months for inspection proceedings, extendable to 27 months in certain circumstances provided for by the Spanish General Tax Law.
Can there be a penalty?
A tax regularisation and a penalty are related but legally distinct matters.
The existence of an unpaid amount does not in itself mean that we must automatically accept any penalty.
We must assess the conduct, the available documentation and the reasoning used by the authorities.
Could this result in a tax offence?
In certain particularly serious cases, we must also analyse Article 305 of the Spanish Criminal Code.
Offences against the Public Treasury require, among other elements, fraudulent conduct and an evaded tax liability exceeding €120,000, under the terms established by law.
Exceeding that amount does not in itself automatically mean that a tax offence has occurred.
The conduct, tax, period and other elements of the criminal offence must be analysed.
Mistakes to avoid after receiving the request
Responding immediately without reviewing the case file
We must use the available time to understand what the Tax Agency is requesting.
Submitting more documentation than necessary without analysing it
The documentation must address what has been requested and form part of a consistent explanation.
Assuming that failure to file Form 720 means fraud
An information obligation and the taxation of income are different matters that must be assessed separately.
Admitting legal characterisations that we have not verified
We should not ourselves classify a situation as undeclared income, an unjustified gain or fraud before reconstructing the facts.
Waiting until the last day to request foreign documents
Banks, brokers and authorities in other countries may need time to issue certain documentation.
How we work at Barcelona Tributario
When facing a request from the Spanish Tax Agency regarding assets held abroad, at Barcelona Tributario we start with the case file, not with premature conclusions.
1. We review the notice
We identify the procedure, scope, taxes, tax years and deadline.
2. We reconstruct the affected assets
Accounts, investments, property, companies, inheritances, gifts or cryptocurrencies.
3. We review the returns filed
We compare personal income tax, wealth tax, large fortunes tax, Form 720, Form 721 and the relevant foreign documentation.
4. We determine what information is missing
We request only the documentation we need to build the response.
5. We prepare the response
We organise the documentation and legal arguments in line with the scope of the procedure.
6. We represent the client before the AEAT
Where necessary, we act during the tax proceedings and assess subsequent submissions and appeals.
Conclusion: the first response can shape the entire case
Receiving a request from the Spanish Tax Agency regarding assets held abroad requires an orderly approach.
First, we must understand what the AEAT is reviewing. We then reconstruct the origin and history of the assets, review the tax obligations and prepare the documentation that may support our position.
Not all assets held abroad indicate an irregularity, and not every discrepancy means fraud.
But responding without knowing the scope of the procedure can unnecessarily complicate the defence.
At Barcelona Tributario, we are tax lawyers in Barcelona specialising in international taxation, foreign assets and tax proceedings. If you have received a request from the Spanish Tax Agency regarding assets held abroad, we can analyse the case from the first notice and support you throughout the procedure.
Frequently asked questions about Tax Agency requests concerning assets held abroad
Properly preparing the documentation for an inspection concerning assets held abroad can make the difference between a favourable resolution and a multimillion-euro penalty. Request an initial consultation with our team and proceed with confidence.