Modelo 720 and Spain's wealth taxes: what Americans in Madrid report and pay

You file a FBAR for Uncle Sam; once you're a Spanish tax resident, Spain wants its own list of what you hold back home. The good news: the brutal penalties are gone, and Madrid residents rarely pay wealth tax.

The short version

• Modelo 720 is Spain's information return for assets held outside Spain. Tax residents file it when a category (accounts, securities and insurance, or real estate) tops EUR 50,000 (about USD 55,800) [1][2].
• It's filed January 1 to March 31 for the previous year. After the first filing, you refile only when a category rises by more than EUR 20,000 (about USD 22,300), an asset is sold or closed, or a new category crosses the line [2].
• In January 2022 the EU Court of Justice (case C-788/19) struck down the old penalty regime. Spain replaced it with ordinary, capped fines through Ley 5/2022 [1][3].
• The Comunidad de Madrid has given a 100% wealth tax credit since 2008, but it shrinks for very large fortunes so that Madrid, not Madrid's taxpayers, collects what the national solidarity tax would take [4][5].
• None of this replaces your FBAR or Form 8938. You report the same accounts twice, in two languages.

USD conversions use the Federal Reserve H.10 rate of October 30, 2026 (EUR 1 = USD 1.1163), rounded.

Who has to file Modelo 720

Modelo 720 (the declaración informativa sobre bienes y derechos situados en el extranjero) applies to Spanish tax residents. Generally, that means you spend more than 183 days a year in Spain or your main base of activity or interests is here. Moving to Madrid on a non-lucrative or digital nomad visa makes most Americans tax residents in their first full year.

You file if you're the owner, an authorized signer, a beneficiary or anyone with power to dispose of the assets, and the total in any one category tops EUR 50,000 [2]. Each category is tested on its own:

Once a category crosses the threshold, you list everything in it, even the dusty USD 300 savings account you forgot about. Crypto held with a foreign exchange goes on a separate form, Modelo 721, with the same EUR 50,000 test and the same filing window [2].

Two groups get a pass. People taxed under the Beckham law (Spain's special regime for incoming workers) are excluded while it applies, and so is anyone who can prove tax residence in another country with a certificate from that country [2].

The 401(k) question

Here's where Americans scratch their heads. Spain's rules exclude foreign employer pension plans where you have no effective right to the money [2]. A 401(k) or IRA you can cash out (with a penalty) doesn't fit neatly into that exclusion, and Spanish advisers don't all agree on how to treat them. Many play it safe and report IRAs, Roths and vested 401(k) balances under the securities category. Annuities and cash-value life insurance clearly go in [2]. Because a wrong call here is cheap to avoid and annoying to fix, have a Spanish tax adviser who knows US accounts look at your mix before your first filing.

The 2022 court ruling: why the old horror stories are out of date

If you Googled Modelo 720 before moving, you probably read about life-ruining fines. Those stories were true once. Under the original 2012 rules, a missed or late 720 could bring:

• fixed fines for every missing piece of data, with no cap
• a 150% penalty on the value of the undeclared assets
• the undeclared assets being treated as unjustified income, with no statute of limitations

The European Commission took Spain to court, and on January 27, 2022 the EU Court of Justice ruled in case C-788/19 that these consequences broke the EU's free movement of capital rules [3]. The ruling hit all three: the unjustified income rule, the fixed-amount fines and the 150% penalty. The filing duty itself survived [3].

Spain responded with Ley 5/2022 of March 9, 2022, which moved Modelo 720 into the general penalty rules of the Ley General Tributaria (articles 198 and 199) [1]. The penalties now look like this, as summarized by a Spanish tax guide [2]:

The fines apply separately to each of the three categories [1]. Income from undeclared assets is still taxable, but now within the normal four-year window [2]. So a late 720 is a nuisance, not a catastrophe. If you've missed one, filing on your own before the Agencia Tributaria writes to you is the cheaper path.

How to file, step by step

1. Get a digital ID. Modelo 720 is online only. You'll need a digital certificate (certificado digital) or Cl@ve PIN, which in turn needs your NIE.
2. Pull December 31 statements for every US account, plus the fourth-quarter average balance for bank accounts.
3. Convert to euros at the December 31 exchange rate, and note which rate you used so next year's comparison is apples to apples.
4. Gather identifiers. For each account, the bank's name and address, account number and opening date. For securities, the ISIN.
5. File between January 1 and March 31 through the Agencia Tributaria's Sede Electrónica. There's no extension [2].
6. Keep a copy. Next year, you'll compare against it to see whether the EUR 20,000 refiling rule kicks in.

Spain's wealth tax and Madrid's 100% credit

Spain also has a wealth tax, the Impuesto sobre el Patrimonio, on your worldwide net assets as a tax resident. The national rules give everyone a EUR 700,000 (about USD 781,000) allowance, plus up to EUR 300,000 (about USD 335,000) for your main home [5]. But the regions set the final bill, and the Comunidad de Madrid has applied a 100% credit (bonificación) since 2008 [4][5].

For most Americans in Madrid, the result is zero wealth tax. You may still have to file the wealth tax return, Modelo 714, if your gross assets top EUR 2 million (about USD 2.23 million), even when the tax due is nothing [5]. For 2026, that return is due in the April-to-June 2027 window alongside your income tax return [5].

The solidarity tax and Madrid's workaround

In late 2022, the national government created the Impuesto Temporal de Solidaridad de las Grandes Fortunas (Ley 38/2022), a "temporary" tax aimed squarely at regions like Madrid that zero out wealth tax [6]. It applies to net taxable wealth above EUR 3 million (about USD 3.35 million) after the EUR 700,000 allowance, at rates of 1.7%, 2.1% and 3.5% as the amount rises [6]. Any regional wealth tax you pay is credited against it.

It hasn't stayed temporary. A royal decree-law at the end of 2023 extended it with no end date, and as of mid-2026 it was still in force [6]. Treat it as current until Madrid's or Spain's official pages say otherwise.

Madrid's answer, passed in late 2023, is clever. Its 100% credit became variable: below the solidarity tax line, Madrid residents still pay zero; above it, the credit shrinks so that you pay Madrid's wealth tax instead, and that payment wipes out the national solidarity tax [4][5][6]. Your total bill is about the same. The money just stays in Madrid. For the few Americans with that much wealth, the takeaway is simple: Madrid isn't a wealth tax haven once you're past EUR 3 million or so.

How this lands on your US return

Uncle Sam doesn't care about Modelo 720, and Spain doesn't care about your FBAR. You do both:

• FBAR (FinCEN Form 114): required when your foreign accounts together top USD 10,000 at any time in the year [7]. Your Spanish bank accounts go here.
• Form 8938: for Americans living abroad, required above USD 200,000 at year-end or USD 300,000 at any time if single, or USD 400,000 and USD 600,000 if married filing jointly [7].

The mirror image is the part that trips people up: your US accounts count as foreign for Spain. A Vanguard account that is nothing special back home goes on your Modelo 720, and so does your 401(k) if your adviser reads the rules that way. Spain's wealth tax isn't an income tax, so it generally won't help you as a foreign tax credit on your US return. A US expat tax preparer and a Spanish adviser working together can check your situation.

Questions about which Madrid advisers actually understand US accounts come up all the time in our community group for Americans in Spain.

Sources

1. Agencia Tributaria: Modelo 720 FAQ, penalties and effects
2. Guía Fiscal: Modelo 720 step by step (updated August 2026)
3. HLC: EU court ends the consequences of Modelo 720 non-compliance (2022)
4. Forbes España: Madrid's PP registers bill to collect the wealth tax from large fortunes (November 2023)
5. Guía Fiscal: Wealth tax in the Comunidad de Madrid, 2026
6. Guía Fiscal: The solidarity tax on large fortunes in 2026
7. IRS: Comparison of Form 8938 and FBAR requirements

Keep reading

• The Beckham law: Spain's special tax regime
• Spain taxes for Americans
• FBAR: reporting your foreign bank accounts
• Your 401(k) and IRA when you live abroad