Claire Dubois, who is French, settled in Sitges in 2023. From her previous life she keeps three contracts. The first is a savings life insurance policy taken out with an insurer in Lyon, which lets her surrender the capital whenever she wants and which had a surrender value of 71,000 € on 31 December 2025. The second is a policy that pays out only if she dies or becomes disabled. The third is the retirement plan of the company she worked for over fifteen years, from which she cannot take anything until she is 62. Claire thought all three were "retirement savings" and were declared together. On Modelo 720, the Spanish return on assets held abroad, only the first goes in today. The third will go in one day. The second, probably never.
Why the product's name does not decide
The 720 has no box for "pension plans". What article 42 ter.3 of the Reglamento General de Gestión e Inspección (Royal Decree 1065/2007, the regulations on tax management and inspection) governs are two specific things:
- life or disability insurance policies of which you are the policyholder, taken out with an insurer located abroad, at their surrender value on 31 December;
- temporary or life annuities of which you are the beneficiary as a result of handing over capital to a foreign entity, at their capitalised value.
The Agencia Tributaria, the Spanish tax agency, explains in its frequently asked questions that the vested rights in a pension plan set up abroad are not included in any of the 720 categories until the event giving rise to payment occurs. But it adds two provisos that change everything: if the plan allows the member to exercise a right of surrender on the terms typical of life insurance, it is declared as insurance; and once the event has occurred (retirement, disability), the beneficiary must report it.
So what matters is not what the contract is called in its home country, but how it works.
Three questions to classify any product
- Can you surrender the capital today, in full or in part, whenever you want? If the answer is yes, the product behaves like life insurance with a surrender value and goes into the securities and insurance block (code S).
- Are you already drawing an income from the product? If retirement, disability or another qualifying event has occurred and you receive an income, the product is reported, at its surrender value or at the capitalised value of the income.
- Does the product cover risk only, with no savings behind it? Term policies that include only benefits for death, disability or other risk cover are expressly excluded from article 42 ter.3.
If all three answers are no (you cannot surrender, you draw nothing, and there are accumulated savings), we are dealing with rights under a plan which, according to the Agency's criteria, are not declared yet.
| Claire's product | Deciding question | Declared today? | Value |
|---|---|---|---|
| Savings policy with unrestricted surrender | No. 1: surrenderable | Yes | 71,000 €, surrender value |
| Death and disability cover only | No. 3: risk only | No | — |
| Company plan until age 62 | None yet | No, until the qualifying event | — |
The threshold with Claire's figures
The savings policy is not declared merely because it exists: it forms part of the block for securities, funds and insurance, which has a joint threshold of 50,000 €. Claire also holds shares in a French company with a broker in Paris, worth 12,000 €.
- savings policy: surrender value of 71,000 €;
- shares: 12,000 €;
- block: 83,000 €, above the limit;
- both items are declared.
If the policy were worth 36,000 €, the block would total 48,000 € and there would be no obligation that year. The company plan, even if it is worth 150,000 €, does not count while the qualifying event has not occurred.
What value to use when surrender is not total
The Regulations provide a rule for policies where the policyholder cannot exercise full surrender on 31 December: in that case the value of the mathematical provision on that date is declared, that is, the technical reserve the insurer holds for that contract. The insurer is the one who can provide that figure; it is wise to ask for it in writing together with the annual certificate.
And a practical point: the Agency considers that unit-linked policies, in which the policyholder bears the investment risk, are also declared. The fact that the value depends on underlying funds does not change their nature as insurance.
To decide whether a product can be surrendered we need to read the contract and the plan rules. How that product is taxed in its country of origin, or what happens there if it is surrendered, has to be confirmed by an adviser in that country appointed by the client. We coordinate with that adviser, but we do not endorse any conclusion on foreign law.
If you have retirement savings contracts outside Spain and do not know which group each one falls into, in the Modelo 720 form you can attach the general terms and conditions or the latest annual certificate; with those, the three questions can be answered.
The year of retirement changes the 720
The product that is not declared today does not disappear from view. When Claire turns 62 and starts drawing her company plan, she will have to report it:
- if she can take it as a lump sum, at its surrender value;
- if she draws an income, at the capitalised value of that income, calculated with the rules of the Impuesto sobre el Patrimonio (Spanish wealth tax) to which the Regulations refer.
That year, Claire's block may also jump well above 20,000 €, which obliges her to file again even if nothing else has changed. And the Agency adds that, if the plan is surrendered, the income obtained is also reported, whatever the form of the surrender.
What the 720 does not decide
Whether or not a product is declared on the 720 says nothing about how its benefits are taxed in income tax (IRPF) or about whether they form part of your net worth for wealth tax purposes. Those are different questions governed by different rules. The wealth tax exemption for pension plans, for example, is worded with the instruments mentioned in Spanish law in mind, and applying it to a foreign plan requires an analysis of whether it is comparable.
For a review by type of plan (company, personal, public schemes) and how each fits into block S, read on in do foreign pension plans go in the 720?. The guide to the three blocks of the 720 explains why an insurance policy is added to your shares and not to your account.
At Salama Tax we review residents' foreign retirement savings contracts before preparing their 720; that page explains how we work and what documents we usually ask for.