With the publication of the judgment in case C-788/19 ends the fight initiated by some taxpayers, through their advisors back in 2013, against the informative obligation of declaration of assets and rights located abroad, by declaring it contrary to Community Law.
The CJEU in its published judgment, declares that in relation to the 720 legislation:
- Spain has failed to comply with its obligations under the principle of free movement of capital by providing that non-compliance or imperfect or late compliance with the information obligation relating to assets and rights located abroad results in the taxation of undeclared income corresponding to the value of those assets as "unjustified capital gains", without the possibility, in practice, of relying on the statute of limitations.
- Spain has also failed to comply with its obligations under the free movement of capital by penalizing non-compliance or imperfect or extemporaneous compliance with the reporting obligation with a proportional fine of 150% of the tax calculated on the amounts corresponding to the value of the assets or rights held abroad. This penalty may be accumulated with fines of a fixed amount applied to each omitted, incomplete, inaccurate or false data or set of data to be included in the "Form 720". The obligation to file the "model 720" and the penalties arising from non-compliance or imperfect or extemporaneous compliance with such obligation, which have no equivalent with respect to assets or rights located in Spain, establish a difference in treatment between residents in Spain depending on the place of location of their assets.
- The Spanish legislator has also failed to comply with its obligations under the free movement of capital by sanctioning non-compliance or imperfect or extemporaneous compliance with the information obligation regarding assets and rights located abroad with fixed-amount fines whose amount is out of all proportion to the penalties provided for similar infringements in a purely domestic context and whose total amount is not limited.
A whole period of claims against the Spanish Administration is now open, with a request for the refund of amounts paid, if applicable, both for unjustified capital gains and for penalties, proportional of 150% or fixed, arising from any proceedings that have become final. In addition, the possibility of claiming via the State's liability for those penalties that are final can be considered.
The ruling puts an end to Form 720 and its serious consequences in case of non-filing or incomplete filing, so that, in pure logic, the one corresponding to the year 2021, whose deadline for filing began on January 1, 2022 and ended on March 31, 2022, will no longer have to be filed.
In any case, we will have to wait for the reaction of the Tax Administration and the Government. In the meantime, Grant Thornton will be pleased to offer you our best advice.