The Supreme Court of Justice rules in favor of a taxpayer with a property abroad and condemns to the Spanish Tax Office for the sanctions of Form 720
The Supreme Court of Justice of Castilla y León has admitted the appeal of a taxpayer that had been sanctioned a total of 5.800 euros for having presented Form 720 after the deadline and condemns the Tax Office for costs. The full judgement can be read here.
It is important to understand the Form 720 in order to understand the impact on the taxpayer.
What is the Form 720?
Form 720 is an informative form, therefore, it will not require any payment by the taxpayer.
The information offered to the tax office is the one regarding properties and rights situated abroad, divided in the following groups: accounts held at financial institutions; values, rights, insurances and deposited income, managed or earned abroad; fixed assets, and rights belonging to these abroad.
Any taxpayer who has never declared this form before, will be obliged to do so if the value exceeds 50,000 euros in one of these groups. Additionally, in the following exercises it will be necessary to inform if there exists an increase that exceeds 20,000 euros.
What sanctions exist for not presenting the Form 720?
This issue is generating a lot of controversy, on its website the Tax Office informs of what would be the minimum amount of sanctions depending on how many of the groups had not been declared: if “the three obligations of information are breached, it would be € 30,000 […] a single obligation of information, the minimum sanction of € 10,000. “
We are many professionals who believe that these sanctions are disproportionate in a multitude of cases. It is easy for a taxpayer without the appropriate tax advice to acquire a property in a neighboring country or have a professional activity in another country of the European Union and open a bank account there where he deposits more than 50,000 euros, and even if this person pays taxes for his earnings, by not reporting with this specific form by simple ignorance of the same, they would be sanctioned at least 10,000 euros, even if there is no intention to hide the information and in no case avoiding payments as the form does not generate any obligation to pay.
The European Commission argued against Form 720
In February 2017 The European Commission concluded in its Opinion that with “fixed pecuniary fines for breach of the information obligations of the form 720 […] or for the extemporaneous presentation”, “taxation of unjustified capital gains as a consequence of the lack of Information of the Forms 720 “and” proportional pecuniary fine on […] goods and rights that are not communicated in the form “the Kingdom of Spain had breached the obligations of the Treaty on the Functioning of the European Union and those of the Agreement on Space European Economic
Current situation of Form 720
Despite the opinion of the European Commission, the Tax Office has not changed its regulations in these almost two years and now the Supreme Court of Justice has accepted the appeal and has ruled that the penalty of 5,800 euros was not in accordance with the law in addition to imposing procedural costs to The demanded part.
At Del Canto Chambers we have experience both in the presentation of this Form 720 and in all types of tax obligations and we advise our clients to avoid sanctions like the ones in this case and we also appeal if they are sanctioned for what we consider to be unfair.
Del Canto Chambers