Form 720 Spain, latest news on penalties

You didn’t know you had to submit Form 720 Spain and now it’s too late? Have you submitted it after the deadline? If this is your case, you should know that you’ve exposed yourself to significant penalties, even though it is only an informative statement. This article explains the latest news on Form 720 Spain penalties and the opinion of the Spanish courts.

Penalties relating to Form 720 Spain

In the page about Form 720 Spain penalties, we spoke about the offences and penalties relating to Form 720 Spain. To sum it up briefly, the offences include late-submission, submitting incomplete, inaccurate or false data and submissions using non-electronic means, when obliged to use these.

All of the above are considered to be very serious. An example of this would be if you have accounts in credit institutions located abroad and don’t declare them, the penalty will be 5,000 euros for each data or series of data, with a minimum of 10,000 euros.

The controversy regarding the penalties derives from them being deemed excessive and that they impede the free movement of persons and capital, which happens to be one of the EU’s fundamental principles. We will now talk about some cases that have involved hefty penalties and the latest judgements.

Cases involving hefty penalties

Since the Tax Agency began fining for non-compliance with the Form 720 Spain submission rules, we have seen a constant trickle of cases where taxpayers have suffered disproportionate punishments.

One of these cases involves a person who had inherited accounts abroad, with a balance of 200.000 euros. Had failed to submit Form 720 Spain within the legal deadline. This person is now facing a potential penalty that could exceed 500,000 euros, i.e. far greater that the undeclared amount.

Another striking case is that of a lady who had 180,000 euros in Luxembourg, she initially didn’t declare them but in the end, submitted the form after the deadline. The problem is that the Treasury Department discovered yet another three accounts that she hadn’t declared because she didn’t even know they existed. She was fined 75,000 euros for not declaring these accounts, despite their combined balance being less than three euros.

We also have the case of a person who inherited money in accounts abroad. The inherited amount was 178,000 euros. There were hardly any taxes to pay for this inheritance in Spain, but the person was fined with 50,000 euros for not having submitted Form 720 Spain.

As you have seen, these are cases in which a mere oversight or delay can lead to serious consequences.

What do the Spanish courts say about Form 720 Spain penalties?

Before commenting on what the Spanish courts have to say about these penalties, we should first mention that the European Commission has initiated proceedings against Spain due to considering that the penalties infringe the principle of proportionality.

Below are some of the latest judgements relating to Form 720 Spain penalties:

• Judgement of the High Court of Justice of Catalonia, of 20 May 2019. In this judgement, the court considers that if the Tax Agency is aware that the EC requested that it modify the Form 720 Spain submission due to considering that it violates the free movement of capital and that the penalties are excessive, this penalty should consider that notification, and given that it didn’t this penalty should be overturned.
• Judgements of the High Court of Justice of Extremadura. In several judgements passed down in July, the High Court of Justice of Extremadura (11 and 18 July), despite citing the proceeding filed against Spain by the EC regarding Form 720 Spain, the court considers that the penalties imposed are not disproportionate. However, in that same month, the same court overturned a penalty that was imposed on a taxpayer.
• Judgement of the High Court of Justice of Valladolid (STSJ No. 0208 01073/2018). In this judgement, the court takes sides with the taxpayers on which the Tax Agency imposed a penalty for failing to report on assets and rights abroad. The High Court of Justice of Valladolid appreciates, on the one hand, that the Tax Agency does not take into consideration the allegations made by the complainant and, on the other hand, refers to the Community rules and the warning of the European Commission.
• Ruling of the Central Administrative Economic Court, of 14 February 2019. In this ruling, the court considers that being aware of the standard’s existence does not automatically entail guilt. In this sense, it is important to consider that one thing is to hide the ownership of assets abroad and not submit Form 720 Spain, and another very different is not having any intention of hiding assets and submitting the form after the deadline but before being requested to do so by the Treasury Department. The court also concludes that if the subjective factor of the offence cannot be proven and the penalty is imposed based on a generic motivation, this penalty must be overturned since it’s sole basis is a presumption of intent.

As you have seen, although the European Commission is clear as regards its opinion relating to the penalties arising from non-compliance in Form 720 Spain submissions, on the one hand, the Spanish legislation has not yet changed to comply with the EC’s warning and, on the other, the Spanish courts do not have a unanimous opinion to this regard and therefore work on a case-by-case basis.