The European Commission lodges an appeal against Spain before the EU Court over “Form 720”


3 Jan 2020

On 23 October 2019 the European Commission claimed that the Court should state that Spain has failed to fulfill its obligations for imposing disproportionate penalties on Spanish taxpayers for the failure to report assets held in other EU and EEA States, as released last 23 December in the Official Journal (Case C-788/19).

Spain requires resident taxpayers to submit information on the assets they hold abroad. This includes properties, bank accounts and financial assets. Failure in submitting this information on time and in full is subject to sanctions that are higher than those for similar infringements in a purely domestic situation, and which may even exceed the value of assets held abroad. The Commission considers that such sanctions for incorrect or belated compliance with this legitimate information obligation are disproportionate and discriminatory. They may deter businesses and private individuals from investing or moving across borders in the Single Market. Such provisions are consequently in conflict with the fundamental freedoms in the EU, such as the free movement of persons, free movement of workers, freedom of establishment, the freedom to provide services and the free movement of capital.

The European Commission started the EU infringement proceedings in November 2015 with a letter of formal notice, followed by a reasoned opinion on 15 February 2017. Since Spain did not comply, the Commission decided on 6 June 2019 to bring the matter to the EU Court of Justice.

In particular, the Commission claims that by establishing consequences of the failure to fulfill the obligation to provide this information, or the late submission, like the classification of those assets as unjustified capital gains which are nor subject to statute of limitation (tax subject to top marginal tax rate; 45% in year 2012) plus a fixed penalty of 150% on said tax, and fixed penalty for failure higher than the general rules on similar infringements, Spain has breached EU law and must take actions to comply and pay the costs.

In similar circumstances, the European Commission referred Spain to the Court in 2011 over discriminatory inheritance and gift tax rules ending whit a Court resolution in 2014 that leaded to the amendment of the Spanish legislation and opened the door for tax reclaims over the last 4 previous years.

JC&A Abogados has a large and trusted experience, acting for many taxpayers on the disclosure and report of foreign assets since 2012, when “Form 720” was approved, and has dealt with several tax audits being the most remarkable one the case of a taxpayer who hold more than 1,5 million euros abroad and filed the declaration out of time for whom we won the penalty procedure saving him more than 1,3 million euros in penalties back in April 2016, even before the Commission sent the reasoned opinion to Spain.

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