Do you want to know what the Spanish and European Union Judiciary has to say about this?
We will tell you in this article.
From the outset, the Model 720 was designed to prevent tax fraud and tax evasion by the Spanish themselves. So in 2012, for those who hid their savings far abroad, a moratorium was declared, if a Model was submitted indicating all property in the account. That is why the fines that the tax authorities decided to introduce for failure to submit or late submission of documents were simply frightening.
As a result, according to the decision of the European Commission, the sanctions are contrary to the fundamental principles of the European Union, considering that they imply a restriction on the free movement of people and money, which is regulated by the Fundamental Directive establishing the European Union. After that, the European Commission presented Spain to the Supreme Court of the European Union on the grounds that in the Declaration 720 there are three controversial aspects that contradict the principles of Freedom of an EU citizen:
- Inapplicability of the statute of limitations in the case of filing an Income Declaration (IRPF)
- Fines of 150% of the undeclared amount
The very same judicial practice of the Spanish courts is rather ambiguous. Below are real court cases.
Decision of the Supreme Court of Extremadura dated February 27, 2020 .
Case : a British citizen residing in Spain and owning 4 accounts in the UK, the amount of which did not exceed 50,000 euros, while the balance of the fifth account was 88,000 euros, did not submit the 720 Declaration in 2012, and as a result received a fine of 125,000 euros.
Court decision : The fault of the taxpayer is justified, but the fine was canceled due to its disproportionate to the committed offense.
Decision of the Supreme Court of Catalonia of May 20, 2019 .
Case : the taxpayer filed a Declaration 720 on July 17, 2013, while the filing deadline ended on April 30, 2013, in which he declared a bank account in Gernsey in the amount of 124,968.74 euros, for which he received a tax fine of 1,500 euros.
Court decision : Cancellation of the fine, since the court took into account the fact that the sanction stipulated by the European Commission was disproportionate and considered that due to the lack of justification of the taxpayer’s guilt, the sanction should be canceled.
Ruling of the Central Economic and Administrative Court dated February 14, 2019
Case : A year after the due date for the delivery of the Model 720, the taxpayer declared the amount of 340,000 euros. The Internal Revenue Service considered that this was a property profit that was not declared in due time in the Income Statement (IRPF), therefore imposed a fine of 150%.
Court decision : Cancellation of a fine of 150%, however, the reason for this decision is based only on the fact that the tax authorities have not sufficiently substantiated their position on the fault of the taxpayer.
Thus, the jurisprudence is such that in most cases the court shares the position of disproportionate tax fines imposed on taxpayers. Nevertheless, in order to prove their innocence, taxpayers had to spend at least 5 years of effort, money and nerves to restore justice.
So of course, think twice before you decide to file or not file Model 720, because the Law is still in effect.