Latest news regarding Form 720
Form 720 Spain was originally designed to avoid tax fraud and tax evasion, but the penalties imposed for non-filing or filing after the deadline may be excessive.
According to the European Commission, the sanctions imposed for the failure to file Form 720 Spain are contrary to fundamental principles of the European Union since it is considered to be a restriction on the free movement of people and capital regulated by the Treaty of the European Union.
In fact, the European Commission brought Spain before the European Court of Justice to consider three controversial aspects of Form 720 Spain: sanctions, non-taxable personal income tax and the 150% sanction, and arguing that these aspects violate various community freedoms.
Consequently, recent judgements of the Spanish courts studying this matter have included various opinions that it is important to consider if you are thinking of appealing against a sanction:
- Judgement of the Superior Court of Justice of Extremadura of February 27, 2020. The Court studied the following case: a taxpayer with five current accounts in the United Kingdom who did not file Form 720 Spain in 2012 and received a penalty of 125,000 euros. Four of the accounts did not jointly exceed the limit of 50,000 euros, but the fifth had a balance greater than 88,000 euros. The judgement considered that, in this case, the taxpayer is guilty of an infraction, but it cancelled the sanction because it considered it to be completely disproportionate with respect to the infraction committed.
- Judgement of the Superior Court of Justice of Catalonia of May 20, 2019. In this case, the sanction imposed on a taxpayer was annulled because the Court considered that since the European Commission requested Spain to modify the regulations that regulate Form 720 Spain, considering it disproportionate, and Spain did not do so, there was an absence of motivation regarding the taxpayer’s guilt, so the sanction must be annulled.
- Resolution of February 14, 2019, of the Central Economic-Administrative Court. The Court annulled a 150% sanction that was imposed on a person for filing Form 720 Spain after the deadline in 2012. The taxpayer declared 340,000 euros abroad, after the specified deadline, and the Tax Agency considered that it was a capital gain not declared in personal income tax returns, for which it imposed the sanction of 150%. The Court, while it did annul the sanction, did not assess whether or not it violated community law, only ruling that the tax inspection did not sufficiently demonstrate the taxpayer’s guilt.
- Judgement of the Superior Court of Justice of Valladolid (STSJ nº 020801073). The Valladolid TSJ ruled that there was insufficient cause to impose the sanction since the Administration did not consider the allegations made by the appellant. Reference is made in the judgement to the fact that the European Commission sent a letter of formal notice to Spain to modify the Form 720 Spain regime, considering that Spain was breaching the Treaty on the Functioning of the European Union and the European Economic Space Agreement. On the other hand, the judgement of the TSJ speaks of the prescription of the right to initiate a sanctioning procedure and understands that the administration initiated it outside the term of three months.
Ilia Consulting Service regarding Form 720 Spain
For some time we have been dedicated to advising our clients so that they file Form 720 Spain on time and avoid penalties. The service provided by Ilia Consulting regarding the aforementioned form involves the following actions:
- Study of the obligation to submit the form (the specific case is analysed to see if the limit of 50,000 euros is exceeded).
- Comparative analysis of the statement in previous years (both those in which Form 720 Spain was presented and those in which it was not).
- Advice on possible sanctions. We have already seen that they can be very high and reach figures that exceed the amount that has not been declared.
- Sending a draft declaration for the client’s approval (the declaration is not presented until the client’s agreement is received).
- Electronic submission of Form 720 Spain.
- In the event that the Treasury considers that there is an error and imposes a sanction, at Ilia Consulting we prepare the corresponding resources to defend the rights of our clients before the Tax Agency, through both administrative and judicial channels.
In short, the latest news on Form 720 Spain shows us that it is an increasingly controversial statement that is frequently challenged by taxpayers and yet that the Administration continues without modifying the regulations since it considers it to be an effective measure to control tax fraud and tax evasion.