As followers of this blog will be aware, the European Court of Justice (ECJ) recently overruled Spain’s collection of fines for non-compliance on taxes for assets owned abroad. This reversal of the 720 Tax Model opens the doors to multi-million-euro refunds to Spanish taxpayers.
However, the procedure for claiming a refund on tax and fines you may have paid as a result of 720 Model obligations is, unsurprisingly, complex. In addition, it varies depending on the individual in question. With this in mind, we’ve put together x tips for reclaiming the 720 Tax Model.
Find why the European Court of Justice overruled the 720 Model
Find out what fines you paid
Your first step to reclaiming the 720 Tax Model lies in ascertaining what sort of fine you paid to the Spanish tax authorities. Non-compliance with the tax involved three types of fines:
- A fixed fine for failure to file the 720 tax return or for late filing.
In this case, fines range from a minimum of €1,500 to €10,000 with no maximum amount.
The ECJ has overruled fixed fines for the 720 Model. - A fine for unjustified capital gains.
This sanction affected tax payers who were attributed capital gains that they failed to justify in their income tax returns.
The ECJ sentence has also overruled this type of fine for the 720 Model. - ‘Self-fines’
In order to avoid falling on the wrong side of the tax authorities, some tax payers voluntarily attributed the capital gains from assets abroad in their income tax returns.
The ECJ sentence considers this type of fine illegal but only to the extent that it does not respect statutory limitations because it made tax payers declare assets after the 4-year limit.
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Find out what you did when you received the fine
Once you are clear about the sort of fine you received for non-compliance with the 720 Tax Model, your next step is to look back and find out what action you took. You may have:
- Kept quiet and paid the fine without contesting it or the unjustified increase in assets in your income tax return.
- Accepted voluntarily the increase in assets but never requested a correction of the income tax return.
- Appealed against the fines or the increase in income attributed to you in your income tax return. In this case, you are still waiting for a resolution to your appeal or within the time limit to take your appeal to the next level.
Believe you’re entitled to a refund for the fines you paid for the 720 Tax Model? Get in touch with our expert team for advice on what to do next.
Start proceedings for a refund
The process you follow will depend on the type of fine you received and how you reacted to it, as follows:
Special process for declaring the action null and void
If you received a fine or paid extra tax because of additional assets and did nothing, or if you appealed and are still awaiting a reply or taking your appeal to the next judiciary level, you should start the special process for declaring the action null and void.
Spanish tax law makes provision for this procedure, known as procedimiento especial de revision de nulidad in Spanish. In this case, you would receive a full refund of all you had paid plus legal interests.
Asset liability process
If you received a fine or paid the extra tax, appealed unsuccessfully at all levels of the Spanish system, the best course of action is to take the asset-liability path. Your chances of a refund, in this case, depend on the final sentence dictated by the ECJ.
Wait for final decision
If you appealed against the fine for the 720 Tax Model or attributed extra assets to your income and you are still waiting for a decision from the tax authorities, you will most likely receive a favourable answer.
Still to take action
And lastly, if you added voluntarily an increase in your assets to your income tax return within the last four years and still have not started any process for a refund, you still have time to claim one. You do, however, have to be in a position to prove the existence of the assets you did not declare.
Next steps
As we have seen in this article, claiming for a refund on the 720 Tax Model is no simple matter. And of course, the Spanish tax authorities will do all they can to avoid paying you a refund.
It’s therefore essential to take professional advice and put the process in the hands of a specialist lawyer. We have a team of expert tax lawyers at Costaluz Lawyers who will be pleased to offer you a no-obligation consultation to discuss how to get your refund for the 720 Tax Model. Get in touch to find out more.
Maria Luisa Castro
