Form 720 penalties

Not submitting this form, doing so with errors or late can land you with expensive penalties

These high penalties and the controversial legal proceedings are the traits for which Form 720 Spain is best known.

To understand the problem behind Form 720’s penalties we must first look into its history.

2012
Tax Amnesty
In 2012, Spain implemented one of its most famous tax amnesties. The Government in power at the time and in particular the minister Cristóbal Montoro decided it was time to bring to the surface the assets, securities and rights that a long list of Spanish taxpayers had and continue to have abroad. With the firm intention of shedding light on the income and assets that were beyond the Treasury’s control, the Government provided a grace period during which taxpayers were allowed to declare hidden income encouraged by only paying a small percentage of the tax that would otherwise apply. As of that year, the Government also established the obligation to declare all assets located abroad. This represented the beginning of Form 720 Spain, also known as the statement of assets and rights located abroad. The Government also imposed very high penalties to deter its taxpayers from amassing obscure income abroad. These penalties far exceed those provided for any other type of comparable declaration. The reasoning behind Form 720’s exorbitant penalties was none other than to prevent the accumulation of undeclared assets abroad. Conversely, Form 720’s penalty system also gave rise to a serious of unresolved challenging legal battles.
2013
DSM Consulting opened the way by filing legal actions against Form 720 Spain before the European Commission.
In February 2013, this Mallorcan firm lodged its complaint against Form 720 Spain before the European Commission. The reasons for this complaint were obviously the disproportionate penalties imposed through the form and due to considering that they infringe the EU’s fundamental freedoms of free movement of capital and of persons.
2015
This led to the European Commission initiating infringement proceedings against Spain.
On 19 November 2015, the European Commission launched an infringement procedure against Spain under reference 2014/4330. As was to be expected, the European Commission confirmed that Form 720 violates EU law in so far as the disproportionality of its penalties and the allocation of unjustified capital gains from assets that were not declared when they should have been. The EC granted Spain a two-month period to respond, but Spain’s answer was not well received.
2017
Spain was then issued with a Reasoned Opinion from the EC demanding the amendment of the regulation within two months.
It was on 15 February 2017 that Spain received the EC’s Reasoned Opinion requesting that it change its rules on assets held in other EU or EEA member states. This was due to the EC considering that Spain is entitled to demand information regarding its taxpayers’ assets held abroad, but definitely not entitled to impose penalties exceeding those applied within the national framework. The premise is that companies and individuals are deterred from investing and moving within the single market due to these penalties being higher, and in turn this is considered to be discriminatory and contrary to the EU’s fundamental freedoms. Without forgetting that this also goes against the principle of non-discrimination included in the EU’s founding treaties (TEU and TFEU) as it involves greater penalties if the assets are located in a third country rather than in the taxpayer’s country of residence.
2018
Judgement of the High Court of Justice of Valladolid.
It wasn't until 2018 when for the first time a Spanish court found that the penalty system of Form 720 Spain was disproportionate and discriminatory. This judgement (STSJ Nº0208 01073/2018) granted an appeal filed by a Spanish taxpayer against the tax administration for having imposed a penalty for failing to declare Form 720 Spain. This judgement referred to the process opened by the European Commission and to the fact that the EC issued a Reasoned Opinion stating that Spain had failed to fulfil its obligations relating to Articles 21, 45, 59, 56 and 63 of the Treaty on the Functioning of the EU and Articles 28, 31, 36 and 40 of the Agreement on the European Economic Area.
2019
For the very first time, a Form 720 Spain penalty was overturned by the Central Administrative Economic Court.
This was yet another setback for the Treasury and its controversial Form 720. The TEAC, in its Resolution dated 14 February 2019, overturned the 150% penalty that had been imposed on a person who had submitted Form 720 after the deadline for the 2012 financial period. The case was that a taxpayer had submitted Form 720 Spain after the deadline provided and the court overturned the penalty that the Treasury had decided to impose. The Reasoned Opinion that we mentioned above was also cited in this judgement.

Penalties for not submitting Form 720 Spain

First of all, let’s look into the penalties imposed through Form 720 Spain for non- or late-submissions:

Form 720 Spain comes with a series of very serious tax offences for late-submission or for doing so with incomplete, inaccurate or false data. Similarly, taxpayers are exposed to a very serious tax offence penalties for submissions using means other than the standard electronic media accepted.
If you are found to be in breach of the obligation to report on accounts held in foreign credit institutions, you are exposing yourself to a fixed pecuniary penalty of 5,000 euros for each data or series of data, with a minimum amount of 10,000 euros.
If you submit Form 720 Spain after the deadline, the penalty will be 100 euros for each data or series of data, with a minimum amount of 1,500 euros.
If you are found to be in breach of the obligation to report on stocks, assets, securities, rights, insurances and income deposited, managed or earned abroad, you may find you have to pay a 5,000 euro fine for each data or series of data referred to each element, with a minimum amount of 10,000 euros.
When you have not been required by the Tax Agency, but are found to submit this form after the deadline, your fine will be of 100 euros per data with a minimum amount of 1,500 euros.
It is also worth noting that if you are in breach of the obligation to report on real estate owned abroad, in this case the fine will also be 5,000 euros per data, with a minimum amount of 10,000 euros.
Another fine comes in the case of late-submission without being notified to do so by Tax Agency, which will entail 100 euros per data with a minimum of 1,500 euros.

Form 720 Spain		Income Tax
		Does your ownership of property and rights correspond with the income declared, or with income obtained in periods in which you did not have the status of taxpayer for income tax?	Unjustified gains in income tax?	Surcharge of 5%, 10%, 15% or 20% of Article 27 of the General Tax Law?	150% fine of Additional Provision 1 of Law 7/2012
Late submission without prior notice	100 euros/data	YES	NO	NO	NO
Late submission without prior notice	100 euros/data	NO	YES	YES	NO
Late submission without prior notice	5.000 euros/data	YES	NO	NO	NO
Late submission without prior notice	5.000 euros/data	NO	YES	NO	YES

Form D6 Spain penalty system

To find out about the penalty system for failing to submit Form D6 Spain, we must turn to chapter 2 of Law 19/2003, of 4 July, the legal regime of capital movements and statements submitted after the deadline, which classifies these as minor infringements as they don’t exceed 6,000,000 euros.

In the case of voluntary submissions within six months from the offence for non-submission, the fine ranges from 150 to 300 euros. And rises to between 300 and 600 euros if submitted after six months from the deadline.
Greater penalties are applied for not submitting this form, starting off from a quarter of the amount of the operation with a minimum of 3,000 euros and a private reprimand.

Therefore, when submitting the form, the penalty would be between 300 and 600 euros, while if an inspection is carried and you have not submitted the form, the fine rises from a minimum of 3,000 euros to a quarter of the operation amount.