European Justice has dealt the final death blow to Spanish law which obliges residents to declare their overseas assets through the Model Form 720.
Yesterday morning the European Court of Justice concluded that the law overreaches its aim to fight against fraud and tax evasion and finds the conditions and sanctions are “disproportionate” and may discourage the purchase of assets (properties, investments etc) overseas and undermine the circulation of capital within the European Union.
The Spanish Government has announced it will “correct” the two big problems indicated in the judgement ie. the lack of statutory time limits and the excessive sanctions and, if necessary, reimburse the 230 million euros collected in fines to the taxpayers.
The Law, approved in 2012 by the Government of the Partido Popular, affects overseas assets valued at more than 50,000 euros, and which may have affected many residents with second homes overseas. Some of these residents complained to the EU Court that the fines imposed for not presenting a declaration or presenting a late declaration were considered “offences” without any statutory time limits, and that the Tax Office had access to the information required (in the declaration) from other sources.
The EU Court has examined both these components of the law and declared them illegal.
The fines, resulting from a failure to present a declaration or present a late declaration or an incomplete declaration, have no equivalent in respect of assets owned in Spain. According to the Court this establishes “a different treatment of Spanish residents with assets held in Spain” and constitutes a “restriction on the free movement of capital within the EU.”
The Spanish law “foresees a fine proportional to 150% of the tax calculated on the value of overseas assets……which could accumulate fixed fines on every item of data omitted, complete, inexact or false included on the Form 720.”
The “very high” type of fine imposed was “extremely repressive” and its “accumulative character, in many cases, results in debts to the taxpayer of more than 100% of the value of the assets held overseas.”
The sentence also severely criticises the consequences of the lack of statutory time limits on the offences.
“By placing such grave consequences on the failure to comply with an obligatory declaration the Spanish law has exceeded the necessity to guarantee the effectiveness of tax controls and the fight against fraud and tax evasion.”
The law, which has affected many owners of modest properties and assets overseas, must now be reviewed by Spain in line with the findings of the EU Court.
The decision is not appealable.
Editors Note:
If you have been affected by the law and subject to fines for any of the offences mentioned above connected with the declaration of oversea assets you are advised to take expert legal advice regarding your rights to a rebate of fines imposed.
The obligation to fill in the Form 720 still exists for the moment but the fines have been declared «illegal.»
