Spanish regulation regarding assets abroad is contrary to EU law

Víctor de Castro Esteller

The judgement issued by the Court of Justice of the European Union on 27 January 2022 states that Spanish regulation of Form 720 is contrary to European law.

Form 720 is a tax form that Spanish residents should submit to report overseas assets and rights to the Spanish Treasury. There is not quota to be paid, and Form 720 is for reporting purposes only.

The Court of Justice of the EU does not amend the form, but declares the consequences of not submitting it, submitting it incorrectly or after the deadline (31 March) are contrary to EU law. The judgement finds that the following issues raised violate the free movement of capitals and imply disproportionate restrictions:

1. Assets that are not declared, declared incorrectly or declared after the deadline are considered unjustified capital gains without time limitation.

2. The penalty for non-compliance is 150% of the tax liability calculated in accordance with point 1.

3. Additional fines of EUR 5,000 for missing or incorrect data, with a minimum of EUR 10,000.

Although the obligation to provide information on assets abroad remains fully in force, the consequences of not providing it properly should be analysed case-by-case; in any case, they will not never involve an aggravated fine system.

Finally, we would like to point out that taxpayers who paid said disproportionate fines in the past – declared illegal by the European Court – are able to claim the refund based on the commented judgement (adding annual delay interest at 3.75%).


XLNC MAGAZINE | No. 09 | Spring 2022

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