By Laura Kemp • 27 January 2022 • 11:20
Yesterday, January 26, The Court of Justice of the European Union declared it “contrary to EU law” for Spanish legislation to force residents to declare assets and rights abroad through the so-called ‘modelo 720.’
The Court of Justice of the European Union has now considered that the sanctions and fines it imposes are “disproportionate” and undermine the free movement of capital in the European Union.
Last July, the General Advocate of the Court of Justice of the European Union also considered the Treasury sanctions system to be a “disproportionate” measure that contravenes EU law.
The case dates back to 2015 when the European Commission decided to fine Spain for requiring resident taxpayers to declare the properties, bank accounts or financial assets they have abroad. The lack of solutions led Brussels to bring the case before the European Justice in June 2019.
The Community Executive considered the sanctions provided by the ‘modelo 720’ discriminatory because the fines for similar offences at a national level are much lower and because in the case of assets abroad, the sanction can even exceed the value of the property – a fact on which the EU Court of Justice has agreed.
Spanish legislation establishes that residents in Spain who do not declare, or declare in an imperfect or extemporaneous manner, the assets and rights they possess abroad are exposed to the regularisation of the tax as well as to a proportional fine.
the TEU has estimated that Spanish law sanctions non-compliance with declaratory obligations “by imposing very high fixed-amount fines since they are applied to each piece of data or set of data; they are accompanied, depending on the case, by a minimum amount of €1,500 or €10,000 and its total amount is not limited.”
The TEU has included in its judgement the “extremely repressive nature” of the high imposition of the fine and has underlined “that its accumulation with the additional fixed-amount fines may give rise, in many cases, to the total amount of the amounts owed by the taxpayer exceed 100 per cent of the value of their assets or rights abroad.”
In the Court of Justice of the EU’s investigation, it has indicated that Spain has failed to comply with the obligations linked to the free movement of capital by allowing the Tax Administration to question in favour of the taxpayer.
According to the TEU, it has been considered that such a practice violates “the fundamental requirement of legal certainty. By attributing consequences of such seriousness to the breach of a declaratory obligation, the Spanish legislator has gone beyond what is necessary to guarantee the effectiveness of fiscal controls and the fight against tax fraud and evasion.”
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Originally from UK, Laura is based in Axarquia and is a writer for the Euro Weekly News covering news and features.
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