RSUs in Spain. There is no RSU as such in Spain: there is a delivery of shares that the law treats as payment in kind, with valuation and timing rules that depend on how your plan is drafted. It is the kind of question where one clause changes the final figure.
Income tax on equity pay is dealt with in April, when the Spanish annual return season opens. The reporting obligations are not: they have their own calendar, their own threshold and their own regime, and people breach them without noticing. The question that opens almost all of these files is the same: I have options granted by a US company and shares held with a broker there; do I have to declare anything even though I have sold nothing?
The short answer is that the shares do come into play and, under the approach being applied, unexercised options do not. The long answer has nuances, and there is also a second tax that almost nobody remembers: the Wealth Tax (the IP, as Spain abbreviates it), which does require rights to be valued that the 720 ignores.
Two separate obligations that get confused
| Modelo 720 | Wealth Tax | |
|---|---|---|
| What it is | An information return: nothing is paid with it | A tax: it is assessed and paid |
| What it covers | Only assets and rights abroad | All the resident's wealth, wherever it is |
| When it is measured | At 31 December | At 31 December |
| Threshold | €50,000 per block | Those set by the filing obligation itself |
The usual confusion is to think that if there is no 720 there is no Wealth Tax either, or the other way round. They are independent obligations: you can have to file one and not the other, and that happens often.
The blocks of the 720 and where equity falls
The Modelo 720 is built in blocks governed by articles 42 bis, 42 ter and 54 bis of the General Regulations on tax management and inspection procedures, approved by Royal Decree 1065/2007. Each block has its own €50,000 threshold, and that threshold is not added across blocks: you can exceed it in one and not in another. We go into this in the three blocks of the 720.
- Accounts with financial institutions located abroad, article 42 bis. This is where the cash balance in your broker account goes, if that account is in the nature of a bank account, which depends on how it is set up.
- Securities, rights, insurance and income deposited, managed or obtained abroad, article 42 ter. This is the block where shares that are already yours go.
- Real estate and rights over real estate located abroad, article 54 bis. It does not affect this subject.
There is also the Modelo 721, for virtual currencies held abroad, with its own €50,000 threshold. It only comes into play if what you receive is tokens and not shares, and it has its own guide.
Shares already delivered: inside
If you have exercised options, had RSUs delivered or bought through an ESPP, and the shares are still held abroad at 31 December, they are securities representing a stake in a legal entity and they go into the article 42 ter block. You report the number and class of shares, the issuer and their value on that date.
The threshold is shared across the whole block: if the total you hold in that block does not exceed €50,000, there is no obligation; if it does, you report everything, not just the excess. And one rule that surprises people: the obligation also reaches anyone who held that position at some point in the year and lost it before 31 December, reporting the value on the date they stopped holding it. You sold in October and had nothing at the end of the year: there may still be an obligation.
Once filed, it only has to be filed again when the combined value of a block increases by more than the limit set in the regulations compared with the last one declared, when the declared position is lost, or when new assets appear in a block not declared before. We set this out in when the 720 has to be filed again. Filing it when it is not due is not serious; not filing it when it is due, is.
Unexercised options: outside, with nuances
Article 42 ter refers to securities or rights representing a stake in any kind of legal entity, to securities representing the lending of one's own capital to third parties, and to securities contributed to legal arrangements such as trusts. An unexercised option is none of those three things: it does not make you a member of the company, it is not a loan of capital and it has not been contributed to any arrangement. For that reason the approach being applied, and the one we apply, is that unexercised share options fall outside the Modelo 720.
Now the warning, which is as important as the approach. We do not quote any ruling number here, because we do not want to present as checked something we have not checked one by one, and because this is an area in which the interpretation may be refined. There are two situations in which the conclusion may be different, and they deserve a close look:
- Where the right is set up as a tradable security and not as a strictly personal contractual promise.
- Where what you hold is units already delivered and deposited in a broker account, even if they are subject to sale restrictions. Delivered means delivered.
And one point about RSUs: while there is no delivery there is no security, and therefore nothing to declare in the securities block. That is consistent with there being no income either, and it is one of the few times the two obligations walk together.
The Wealth Tax, which does not overlook rights
Here the analysis changes. The Wealth Tax is charged on the net wealth of the resident at 31 December, wherever it is, and its Act 19/1991 contains a catch-all rule in article 24: other assets and rights with economic content are valued at their market price on the accrual date. In other words, a right that the 720 does not pick up may have to be valued here if, on that date, it has economic content of its own.
For shares, the rules are these:
| What you hold | How it is valued |
|---|---|
| Listed shares | Article 15: average trading value for the fourth quarter of the year |
| Unlisted shares, with an audited balance sheet and a clean report | Article 16: book value per share from the last approved balance sheet |
| Unlisted shares, unaudited or with a qualified report | Article 16: the highest of three: nominal value, book value from the last approved balance sheet, or capitalising at 20 % the average profit of the three financial years closed before the accrual date |
| Other rights with economic content | Article 24: market price on the accrual date |
The third row produces striking results in profitable companies that pay no dividends, because capitalising average profit at 20 % can give a figure far above book value. And the fourth forces an honest reflection on options: if at 31 December your right has vested, can be exercised and the share is clearly worth more than the exercise price, arguing that its market price is zero is hard. It is debatable ground and we treat it as such, but we do not hide it. The general picture of the tax is on the Wealth Tax page and the detail is in the valuation guide.
The two doors to the Wealth Tax filing obligation
A Wealth Tax return is filed if tax is payable, or if the value of the assets and rights exceeds the mandatory filing threshold, even if the tax comes to zero because of exemptions and reductions. The second door is the one that catches more people, because it is measured on the gross value of the wealth. It is explained in this guide.
The broker account, case by case
A recurring question: is the broker account where the shares are held an account in the article 42 bis block, or are they securities in the article 42 ter block? The practical answer is usually both at once, but for different items: the shares, as securities; and the cash waiting to be invested or coming from a sale, as a balance, if that account counts as one opened with an institution engaged in banking or lending business. As each block has its own €50,000 threshold, there may be an obligation for one and not for the other, and they have to be looked at separately before concluding that there is nothing to file.
The sample report, to see how we work
Before commissioning anything it makes sense to see the result: a complete analysis of equity pay, with the reasoned characterisation, the figures for each milestone and the annex of doctrine. Twelve pages from a real case handled by this firm, anonymised and written in Spanish.
If a year has already been missed
It happens often: someone has held shares with a foreign broker for three years and has never filed the 720. The right course is to regularise voluntarily, before any information request, because filing on your own initiative and filing after Hacienda, the Spanish tax authority, has asked do not have the same consequences. The penalty regime for the 720 changed after the ruling of the Court of Justice of the European Union, and we explain it in this guide; the procedure is on the page for voluntary disclosure.
What we do not do is guarantee that there will be no consequences: there are debatable elements, and every file has its own. What we do is say in writing what risk each option carries before you choose. If you hold equity outside Spain and do not know whether you have to declare something, the form for this service is the short route; if yours is only the reporting obligation, there is the service for the Modelo 720.