Form 720 Spain, outside legal term

Since its approval in 2012, Form 720 Spain has had it’s share of controversy, especially as regards its penalties for submission after the deadline. This is an informative statement of assets and rights abroad that aims to avoid tax fraud, but it is seen to go against some of the EU’s principles, namely the free movement of persons and capital. We have written this post to tell you about the penalties you could face for submitting Form 720 Spain outside the legal term.

There have been many people who have seen how the Treasury has made them pay extortionate penalties for submitting Form 720 Spain after the deadline. In fact, in June 2015 we saw the case of an Andalusian pensioner who voluntarily submitted Form 720 Spain after the deadline. He stated he had about 340,000 euros in Switzerland and the Treasury fined him 440,000 euros.

That year the period for submissions ran from 1 January to 1 April 2019. If you cannot submit the statement over the internet within the deadline provided, you can do so during the four calendar days following the end of the period.

What penalties could you face for submitting Form 720 Spain outside the legal term?

The penalty system for Form 720 Spain is provided in Additional Provision 18 of the General Tax Law which regulates the following:

Tax offences include:

• Not submitting Form 720 Spain within the legal deadline.
• Submitting it using incomplete, inaccurate or false data.
• Submitting it via any means other than electronic means, in the cases in which said means should be used.

All of these offences are considered to be very serious and are punishable as follows:

• If you fail to report your accounts in foreign credit institutions, titles, assets or securities deposited abroad or real estate located abroad, you could face a fixed fine of 5,000 euros for each data or series of data of the same account, with a minimum of 10,000 euros.
• If you submit Form 720 Spain voluntarily but after the deadline (without an official requirement from the Tax Agency), the fine will be 100 euros for each data or series of data, with a minimum of 1,500 euros.

Additionally, we mustn’t forget that the Treasury Department may impose additional fines arising from other taxes, i.e. if it detects the existence of capital gains not declared in your personal income tax return. In this case, you could be facing a fine of 150% of the amount to be paid for said capital gain.

What does the Central Administrative Economic Court (TEAC) have to say about the Form 720 Spain penalties?

In May 2019, the TEAC overturned a 150% fine which was imposed on a taxpayer due to the capital gain arising from declaring assets abroad.

However, the TEAC considers that the obligation to declare assets and rights abroad does not violate the free movement of capital within the European Union.

In this case, it overturned the fine, but not on the grounds of being unfair, it did so because there is insufficient reasoning in the penalty agreement and because it considers that the taxpayer had no intent to defraud.

Therefore the TEAC notes special circumstances, which are:

• The submission was voluntary, despite it being outside the legal term.
• That the declaration was a novelty in the Spanish legal system.
• That it involved a pensioner who was not required to submit a personal income tax return and probably didn’t have any help from a tax consultant.
• That his actions proved he was unaware of the consequences arising from a late submission.
• That the taxpayer provided the supporting documents stating that he had owned these assets in previous periods.

Other Spanish courts have also overturned fines for submitting Form 720 Spain after the deadline, but all of these cases involve taxpayers who have submitted the form on a voluntary basis and, therefore, the fines are lower. In particular, we want to mention the following judgements:

• The judgement of the High Court of Justice of Castilla y León, of 28 November 2018. This judgement conveys that the penalties for late submission of Form 720 Spain are null and void due to its disproportionality.
• The judgement of the High Court of Justice of Catalonia, of 20 May 2019. In this case, the judgement also involves a case of submission of Form 720 Spain after the deadline relating to a bank account abroad and argues that there is no guilt and that there was already an EC proceeding filed against Spain for the disproportionality of the penalties of From 720 Spain.
• The judgement of the Economic-Administrative Court of Valencia (resolutions dated 29 September and 30 November 2017). In these cases, the Court also saw a lack of guilt on the taxpayer’s part since there was an obvious difficulty in submitting Form 720 Spain due to a lack of knowledge beyond their control.

In short, if you haven’t submitted Form 720 Spain within the legal term and you are thinking of submitting it, you must speak to an expert tax adviser who can:

• Look into your specific case.
• Advise you regarding the potential penalties you may face.
• Analyse the court judgements that deal with cases similar to yours.
• Prepare and submit the declaration free of errors.
• Support you in case a penalty proceeding is filed against you.