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Frequently asked questions about Form 721 (HTML)

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Who is required to submit Form 721?

Those required to submit form 721, "Informative declaration on virtual currencies located abroad", are those delimited in section 1 of article 42 quater of the General Regulation of the actions and procedures of tax management and inspection and development of the common rules of the procedures for the application of taxes, approved by Royal Decree 1065/2007, of July 27 (RGAT, hereinafter), that is, natural persons and legal entities resident in Spanish territory, permanent establishments in said territory of non-resident persons or entities and the entities referred to in article 35.4 of Law 58/2003, of December 17, General Tax Law, who are holders of virtual currencies abroad, or with respect to which they have the status of beneficiaries, authorized or in some other way hold power of disposal, or of which they are actual owners , held by persons or entities that provide services to safeguard keys cryptographic services on behalf of third parties, to hold, store and transfer virtual currencies, as of December 31 of each year.

This obligation also extends to those who have been holders, authorized persons, or beneficiaries of the aforementioned virtual currencies, or have had powers of disposal over them, or have been actual holders at any time during the year to which the declaration refers and who have lost such status as of December 31 of that year. In these cases, the information to be provided will correspond to the date on which said termination occurred.

For these purposes, the beneficial owner shall be understood to be the person who has such status in accordance with the provisions of section 2 of article 4 of Law 10/2010, of April 28, on the prevention of money laundering and the financing of terrorism, with respect to virtual currencies abroad.

The informative declaration on virtual currencies located abroad extends to all taxpayers delimited in section 1 of article 42 quater of the RGAT, and the corresponding declaration must be submitted by subjects domiciled in the Basque Country and Navarre, in accordance with the respective state or regional regulations to which they are subject.

Unexpired estates are required to provide information to the extent that they are entities under Article 35.4 of Law 58/2003, of December 17, General Tax Law.

The heirs or legatees will be obliged to inform from the moment there is tacit or express acceptance of the inheritance.

In order to be required to declare virtual currencies located abroad by submitting Form 721, two requirements must be met:

  • That such virtual currencies are held by persons or entities that provide services to safeguard private cryptographic keys on behalf of third parties, to maintain, store and transfer virtual currencies.

  • That the persons or entities referred to in the previous paragraph are not residents in Spain or permanent establishments in Spanish territory of persons or entities resident abroad.

Consequently, with regard to the first requirement, only if the virtual currencies are held by persons or entities that provide services to safeguard private cryptographic keys on behalf of third parties or to maintain, store and transfer currencies, would the second requirement be assessed and the rest, whose compliance implies the obligation to submit this information declaration.

In this regard, with regard to the first requirement, it should be noted that in the crypto-asset ecosystem there are different means by which virtual currencies or the means of access to them, that is, private cryptographic keys, can be kept safe.

In general, it is possible to distinguish so-called custodial and non-custodial “wallets”, depending on whether the custody and, therefore, in some way the control, of the cryptoassets or their keys is held by a party or by the user himself. Likewise, a distinction is made between so-called “hot wallets” and “cold wallets”, depending on whether the wallet is connected to the Internet and the keys are kept “online” or not. As seen in practice, and again in general terms, it could be said that “cold wallets” function as non-custodial wallets.

Therefore, regardless of whether it is a “hot wallet” or a “cold wallet”, virtual currencies held in wallets for which the consultant maintains control of the private cryptographic keys and, consequently, are not held by persons or entities that provide services to safeguard private cryptographic keys on behalf of third parties, to maintain, store and transfer virtual currencies, in accordance with Additional Provision Eighteen, letter d), of the LGT and with article 42 quater of the RGAT, would not be taken into account in the calculation of the balances referred to in sections 3.c) and 5.d) of article 42 quater and , consequently, they would not be reported on within the framework of the obligation to report virtual currencies located abroad.