Sanciones fiscales desproporcionadas de notificaciones de activos en extranjero

The European Commission considers that the sanctions imposed by Spain (on companies or individuals) for incorrect or late compliance with the obligation to disclose assets held abroad, through form 720, are disproportionate and discriminatory; and therefore, it complains to the Court of Justice of the European Union.

Declaration of assets abroad

Spain requires resident taxpayers to report assets they own abroad,such as property, bank accounts and financial assets.

Failure to submit this information in time and in its entirety, through form 720, is subject to penalties that may exceed even the value of assets held abroad.

The European Commission considers that the sanctions imposed for incorrect or late compliance with this obligation of legitimate information are disproportionate and discriminatory. It also considers that they may deter companies and individuals from investing or moving across borders in the single market.

It also considers that these provisions conflict with the fundamental freedoms of the European Union,such as the free movement of persons, the free movement of workers, the freedom of establishment, the freedom to provide services and the free movement of capital.

For all these reasons, the European Commission has decided to take Spain to the Court of Justice of the European Union.

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Sanciones fiscales desproporcionadas de notificaciones de activos en extranjero

Modelo 720

Taxpayers must provide the Tax Administration with information on the assets and rights located abroad of which they are the holders. In particular, they are obliged to provide:

  • a) Information on accountslocated abroad opened in entities engaged in banking or credit transactions of which they are holders or beneficiaries, or in which they are listed as authorized or otherwise have the power of disposal.
  • b) Information of any securities, assets, securitiesor rights representing the share capital, own funds or assets of all types of entities, or the transfer to third parties of own capital, of which they are holders and which are deposited or located abroad; as well as life or disability insurance for those who are policy-makers and for annuities or temporary incomes of which they are beneficiaries as a result of the delivery of capital in money, movable or immovable property, contracted with entities established abroad.
  • (c) Information on the immovable propertyand rights therein owned by it, located abroad.

These obligations extend to those who are regarded as actual holders. Failure to comply constitutes a serious tax violation and carries a minimum fine of 10,000 thousand euros.

These are three different information obligations that are articulated through the same information model, form 720, which is submitted electronically via the Internet, between 1 January and 31 March of the year following that to which the information to be supplied relates and, in cases where for technical reasons it is not possible to make the presentation via the Internet within the statutory declaration period , such presentation may be made within four calendar days of the end of that period.

Sanciones fiscales desproporcionadas de notificaciones de activos en extranjero

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If you are going to move to Spain… don’t forget the 720 model

Resident as of 2018

If you started residing in Spain in 2018, you should know that you file the personal income tax and wealth tax return, in addition to the obligation to file the Declaration of Assets Abroad (form 720), whose filing period ends on March 31 of the current year (in this case, 2019).

This occurs if as of December 31, 2018, the holder of accounts, securities or real estate abroad have a total value (by type of asset) of more than 50,000 euros.

This obligation does not affect those who begin to reside in Spain and take part in the ” regime ofimpatriates“. Through this regime, during the year of their displacement and the following five, those affected may be taxed according to the rules of the Income Tax of Non-Residents (IRNR), instead of doing so according to those of the Personal Income Tax, so that during that period they will not be obliged to present the aforementioned Model 720.

Resident since before 2018

It may happen that you are already resident in Spain since before 2018 and that, due to ignorance, you have not presented form 720.

In these cases, it is best to present now the form 720 corresponding to the year in which it began to reside in Spain, before the Treasury claims it. Thus, the penalty for late submission will be reduced:

  • No requirement: In case of untimely presentation without prior requirement, the penalty is 100 euros per data or set of data declared after the deadline, with a minimum of 1,500 euros.
  • With requirement: On the other hand, if there is a requirement, the penalty is 5,000 euros per data or set of data omitted, with a minimum of 10,000.

Remedies for sanctions

If you have filed the return after the deadline and you are sanctioned, consider the possibility of appealing. Although this may mean the loss of the 25% reduction(applicable when the penalty is not appealed and paid on time),since it is possible that the courts will agree with you.

For these purposes, you can claim:

  • Firstly, that the European Union has recently opened a case against Spain with the aim of modifying this system of sanctions, because it is disproportionate.
  • In the case of foreigners who begin to reside in Spain, the presentation of this model is an extraordinary novelty and a great technical and interpretative difficulty. Given the significant discrepancies that may have occurred around this model,the lack of presentation would not be enough to consider that there has been guilt.

If more than 4 years have already passed since you started to reside in Spain (for example, if you reside since 2013), the period of time available to the Treasury to sanction has already expired.

Remember that the European Union considers the sanctions imposed in these cases to be disproportionate.

If you have any questions or need any clarification regarding the declaration of assets abroad, you can
any of our advisors to help you resolve it.