Spanish Form 720

On Jan. 27 of this year, the European Union Superior Court of Justice (EU SCJ) has dictated a Sentence referred to the complaint against Spanish Form 720 before the European Commission and in which Spain is condemned, on the basis that Spanish regulations that oblige Spanish tax residents declaring their overseas assets and / or rights are against the European Union legislation.

Form 720 has up to now reflected this obligation and was incorporated into the Spanish legislation in 2013, with respect to the 2021 declaration, in a context of financial crisis in which the Spanish Government at the time was searching for the emerge of hidden assets after the general tax amnesty approved by Ministry Montoro.

The EU SCJ now obliges Spain taking a new approach of this obligation that, up to now, was based on disproportionate penalties and the impossibility for the taxpayer to allege the statute of limitations.

✔ This obligation relies on Spanish tax resident individuals whose overseas assets and / or rights exceed the limit of 50,000 euro, for each group of assets consisting in financial and investment accounts, shares insurance and crypto currency or real estate properties. Any increase above 20,000 euro in the value of assets or rights previously reported should also be informed as well as any asset disposal.

Spanish tax residence in COVID times

✔ Failure to declare or a partial / out of term declaration have caused, up to now, the following consequences that are criticised by the EU SCJ:

  • i. Taxation as non-declared income of an amount equivalent to such assets’ value as non-justified capital gains, without the possibility of benefiting from the statute of limitations period.
  • ii. A penalty of 150% of the tax calculated on the assets’ value. And,
  • iii. Lump sum penalties with no reduction, that were disproportionate with respect to penalties imposed on similar infractions in a purely national context

✔ These disproportionate penalties constitute an interference with the principle of free movement of capitals. Besides, the impossibility of alleging the statute of limitations is against the principle of legal security.

✔ Considering this new scenario, the Spanish Government is currently studying the Court Sentence and has expressed its intention of modifying the regulations in force before the end of the term for filing Form 720 of fiscal year 2021, on March 31st of this year.

✔ The conclusion that we can reach now is that the obligation to file Form 720 remains as it has been in past years. However, we will have to wait and see in which particular wording are the new regulations passed before the online filing of the tax Form.

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Publicado el 02-2022 por PBS