Carlos Baos: A complete change to tax form 720

The Court of Justice of the European Union issued in January a judgement that has completely changed tax form 720.

As part of the fight against tax fraud, in 2012, the Spanish government passed a law establishing the obligation to report assets located abroad. Tax form 720 made it mandatory for Spanish tax residents to report assets abroad. In what cases? When the value in any of the following three categories: 1. Bank accounts. 2. Real estate. 3. Investment funds, shares, etc. where higher than €50,000. This obligation applied to both legal entities and individuals and had to be filed during the first three months of the year (January 1st – March 31st)

However, the most striking aspect of this new tax form was the very strict penalty regime it established. Filling in the form with incomplete or false information. Doing it incorrectly. Or presenting it on paper (only electronic filing was allowed) were automatically considered very serious offences. The penalties? Fines of up to 150% of the amount that the tax agency considered to have been defrauded. Flat rate fines of €5,000 for missing or incorrect information (with a minimum of €10,000) and €100 for each date declared without notice (with a minimum of €1,500).

Controversial since its inception, these disproportionate sanctions have finally been declared illegal by the European Court.  The main effect of the ruling is that the government has been forced to change the sanctions regime. Not only have the penalties been reduced, but offenders can no longer be prosecuted after four years also. 

What happens now with open cases? What about penalty proceedings that concluded with heavy penalties for taxpayers? Although each case needs to be studied in depth, there are elements that call for optimism. The best example can be found in a recent ruling by the TEAR of Madrid, which has ordered the refund of €500,000 to a citizen who was severely fined for not filling in the 720 tax form a few years ago.

If you have been a victim of the grievous sanctioning regime of model 720, do not hesitate to contact us, we will offer you expert legal advice. Contact our law firm, and visit our website: https://www.white-baos.com

The information provided in this article is not intended to be legal advice, it simply transmits information related to legal issues.

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