In a historic sentence, the European Court of Justice (ECJ) has overruled the Spanish tax declaration of assets abroad. The ruling calls the tax declaration, known as the 720, “a disproportionate restriction of free movement of capital”.

As a result, the Spanish tax authorities will now have to return millions of euros collected in fines for non-compliance with 720.

Historic ruling

The sentence, issued on 27 January, brings an end to the current model of the 720 tax declaration. It also forces the government to overhaul how it obliges Spanish taxpayers to declare their assets abroad.

The ECJ declared the 720 “disproportionate”, “discriminatory” and in direct “conflict with the fundamental rights of freedom in the EU”. Legal analysts have called the ruling “historic” and a “real blow” to the Spanish tax system.

Previous warning

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The ECJ sentence points out that the European Commission (EC) had already warned Spain in 2017 of the discriminatory nature of the way it processed tax declarations of assets abroad. In particular, the EC highlighted the huge fines inflicted on taxpayers for misinformation in the 720 form or for late filing of the declaration.

In 2017, the EC demanded immediate changes in the 720-tax model and threatened legal action via the European Court of Justice. This action has finally arrived and now Spain faces multi-million-euro refunds.

Read our guide to Spanish tax

Controversial tax declaration

From its very beginning, the 720 faced heavy criticism from fiscal experts. Introduced in 2013 and in force until the ECJ sentence on 27 January this year, the 720 obliges Spanish taxpayers to declare assets they own outside Spain worth over €50,000.

While the 720 did not levy tax on these assets, it did carry high fines for non-compliance. Failing to complete the form correctly, omitting information or presenting it later than the deadline all attracted heavy penalties.

For example, there was a fine of €5,000 per single piece of incomplete data with a minimum sanction of €10,000. Taxpayers who presented the form late were also liable to pay €100 per single piece of data included in the 720.

In some cases, the amount payable in fines exceeded the values of the assets declared. For this reason, the ECJ sentence called the Spanish tax declaration of assets abroad, “disproportionate”.

Opportunity to claim back fines

Spain is now obliged to comply with the ECJ ruling as soon as possible and the government has already announced changes to the 720 declaration. We will be informing you of this as soon as we have the information.

Meanwhile, the sentence opens the window wide to taxpayers who were fined for non-compliance of the 720 to reclaim the full amounts they paid. If you are one of the victims of this “disproportionate” tax declaration and wish to claim back a refund of your fine, get in touch with our expert legal team as soon as possible

Maria Luisa Castro

Director and Founder
María founded CostaLuz Lawyers in 2006 and is the Firm’s Director. María is registered Lawyer number 2745 of the Cadiz Bar Association and is licensed to practice in all areas of law throughout Spain. Working closely with her team, María has developed the firm into one of the most highly regarded and trusted Spanish Law Firms acting for English-speaking clients with legal problems in Spain. We’re here to help. Contact us today for a free no-obligation consultation.
María Luisa De Castro - Costaluz Lawyers
 

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