Form 720 is an informative declaration by which taxpayers residing in Spain notify the tax authorities of assets and rights located abroad, such as real estate, bank accounts and other financial assets.
On January 27, 2022, with the publication of the judgment in case C-788/19, the fight initiated by the AEDAF in 2013 against this informative statement ends, by declaring it contrary to Union law.
The CJEU begins by arguing that the changes introduced by Law 7/2012, of October 29, in the LGT, Personal Income Tax and Corporate Tax represent a restriction on the free movement of capital since it discourages Spanish investors from making investments. in other States or prevents or limits their ability to do so, and also considers the system established regarding the consequences of non-compliance or imperfect or untimely compliance with the obligation to report assets and rights located abroad to be abusive, disproportionate, qualifying these goods located abroad as "unjustified". capital gains”, without the possibility, in practice, of invoking the prescription.
The CJEU maintains that a rule such as the one analysed, which presumed the existence of fraudulent conduct for the simple fact of meeting certain requirements without allowing the taxpayer to destroy said presumption, would go beyond what is necessary to achieve the objective of combating tax evasion. and circumvention, and does not justify the existence of a restriction on the movement of capital.
And it adds that by authorizing the Spanish regulations of the tax administration to proceed, without a time limit, to the regularization of the tax owed for goods or rights abroad that have not been declared or that have been declared imperfectly or untimely in the model 720, produces not only an imprescriptible effect, but also allows the tax authority to question a prescription already acquired by the taxpayer, which opposes a fundamental requirement such as legal certainty.
Regarding the proportionality of the fine of 150% of the tax calculated on the amounts corresponding to the value of the goods or rights owned abroad, the CJEU considers this fine to be exorbitant, noting that - although Spain alleges that said fine sanctions an obligation subject to tax, it is indisputable that its imposition is directly linked to the breach of a purely declaratory obligation, and concludes that said 150% fine constitutes a disproportionate interference in the free movement of capital, to the point that 'it can lead to nonsense which supposes the fact that even with 100% of the value of the assets and rights abroad, the tax debt cannot be met.
And, finally, the CJEU addresses the proportionality of the fixed fines linked to non-compliance or imperfect or untimely compliance with model 720, fines that can be 15, 50 or 66 times higher than those applicable to similar infractions in purely judicial proceedings. and whose total amount is not limited, concluding that said fines establish a disproportionate restriction on the free movement of capital.
From this judgment it follows that there is an unquestionable patrimonial responsibility of the Administration, a right that taxpayers have even in the event that the sanction has become final.
Article 32.5 of Law 40/2015, of October 1, establishes the requirements to demand financial responsibility for damages caused as a result of the application of a rule declared contrary to European Union law. This is a very limited procedure: that the taxpayer has appealed in a timely manner against the administrative act causing the damage, and that he has obtained a dismissal ruling, provided that he has alleged in said procedure the infringement of European Union law. .
In relation to this precept, the Commission took legal action in June 2020, pending a decision from the CJEU, regarding the procedure for patrimonial responsibility, alleging that it is contrary to the principle of effectiveness by converting the patrimonial responsibility of the state legislator into as consequence of the violation of Union law for the injured party to previously file an action against an administrative act, even when the damage results directly from the law.
For all these reasons, a new CJEU ruling is foreseeable, which would either force the State to rethink the system of patrimonial responsibility from the ground up when there is a violation of community law, or, at least in this particular case, of model 720 ( and all those that have been lifted and will be lifted), relax the restrictions.
In addition, this sentence opens the way for the filing of complaints by any natural or legal person sanctioned for not having complied or for having complied imperfectly or untimely with the information obligation implied by model 720 to claim reimbursement of the paid out.
And as for the adjustments made, it will be necessary to analyze case by case, depending on whether the adjustments were voluntary or imposed.
Thus, in voluntary regularizations, it will be necessary to attend to the declaration made regarding the year in which the assets or rights were born, invoking the institution of prescription regarding unjustified regularized capital gains, even if they come from prescribed tax periods.
And in the regulations that are imposed, it will be necessary to distinguish the situations in which an act of compliance has been made public or not, among other details. In any case, from now on, all taxpayers residing in Spain with undeclared assets and/or rights abroad may voluntarily regularize their situation without fearing the dissuasive sanctions regime that equates voluntary regularizations with those resulting from the actions of the inspectors
