THE Form 720 tax obligation, a controversial asset declaration procedure which obliges residents to notify the tax authorities of assets worth over €50,000 held in other countries, had its first victim last June.
The Granada-based taxpayer who filed the tax form 14 months late was given a fine of 150% of the tax owed on undeclared cash deposited abroad. This sum, of just over €340,000, was deemed undeclared taxable income and taxed at the applicable tax rate of just over 49%, or €169,000.
In addition, the unfortunate taxpayer was given a staggering fine of €253,950 plus €16,010 in interest.
The Commission’s Taxation and Customs Union Directorate-General has already studied this tax declaration procedure and provided the following opinion, in a letter addressed to Alejandro del Campo, a Palma-based tax expert (DMS Consulting), who filed a formal complaint in 2013, along these lines:
- The fact that this procedure relates only to assets located abroad does not imply restriction of EU-laws as this is a situation not necessarily comparable to Spanish-located assets.
- The obligation to declare is general and founded on objective criteria, appears proportionate and imposed without discrimination on all taxpayers in Spain, whether national or EU.
- The deadline for submission of the declaration appears proportionate as it is in line with deadlines for domestic tax declarations.
- As far as fines are concerned, the Commission proposes the launch of an infringement procedure (against Spain) in respect to fines and penalties so that these are better correlated with similar sanctions applied in purely internal situations regarding tax declarations.
- In contrast to domestic regime, the taxpayer may not prove that assets were acquired in a tax year barred by Statute of Limitations, as those assets will be automatically applied to the last year not barred by the limitation (in essence, the 4-year limitation rule in Spain disappears). This may infringe EU law.
- Form 720 may also infringe EU law as regards assets located with the EU and EEA for these territories should not be considered ‘abroad’, for the purpose of the law, as there already is a certain degree of exchange of information within the EU.
- Finally, there is no EU data-protection violation in the obligation to disclosed ultimate beneficiaries – with a view to remove intermediaries- as this is necessary to combat tax evasion.
With a bit of luck, form 720 could soon be declared contrary to EU law insofar as the fines and statute of limitations is concerned.