In 2012 the Spanish Tax Authorities introduced a new tax obligation for residents in Spain : model 720. According to this model, Spanish residents must report any asset that they hold abroad worth more than €50.000 , including : bank accounts, stocks, rights and income obtained, deposited or managed abroad, and properties or rights over properties situated overseas.
If Spanish residents fail to comply with this obligation of listing their assets located abroad they can be fined with penalties up to 150%, which has caused a huge amount of stress among residents. However, considering that these fines for lack of declaration or for false or wrong declaration can exceed the value of the assets themselves, this has been regarded by the European Union as absurd and disproportionate.
On the 15 of February 2017 the European Commission sent a “Motivated Opinion” to Spain, requesting the modification of model 720. It was argued that the penalties were disproportionate, and may conflict with the fundamental freedoms in the European Union, such as : freedom of people, workers and capital, freedom of establishment and freedom to provide services.
The European Commission does not challenge the right that the Spanish Tax Authority has to demand model 720 though; they only question the dimensions of the consequences, and considering that the motivated opinion does not have any legal effect, the current situation is still the same. The only change has been a Consultation (V1434-17 of 6/6/2017) made by the General Tax Authority, which establishes that the penalty of 150% applied to those who declare their assets out of the legal deadline should be reduced to 20%, which is the standard penalty, plus interest on arrears.
To sum up, the legislation related to model 720 has not been modified and Spanish residents still have the obligation to report their worldwide assets. We can do nothing but wait and see if the European Commission decides to launch an appeal before the Court of Justice of the European Union, to demand the Spanish Government to reimburse those tax payers who have already paid penalties related to model 720.
We hope that the Court of Justice of the European Union will soon make a decision and injured parties will receive the corresponding indemnities for the damage caused.
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