Modelo 720 about assets abroad is an informative declaration that has a severe sanctioning regime if neglected.
It has just been published in the statement of the Court of Justice of the European Union (CJEU) from January 27th in the issue C-788/19, ‘comisión Europea contra España’ that many of the effects derived from not submitting Modelo 720 or submitting it out of time are against free movement of capital (art. 63 of the Treaty on the Functioning of the European Union). The specific effects contrary to this free movement are:
- The consideration of income as an unjustified gain as well as its non prescription.
- The 150% sanction, which is considered disproportionate.
- Penalty fees are considered disproportionate in respect of other spanish informative obligations.
This statement DOES NOT VOID Modelo 720. The informative obligation is still in force in the first semester of 2022 in relation to assets acquired in 2021. There are immediate effects though:
- The voluntary regulation of foreign assets does not entail a penalty fee anymore, unless it corresponds to a rent generated by said asset.
- The Administración Tributaria cannot penalize owners for assets acquired in prescribed periods, only for rents generated in the last four year.
- Sanctions derived from non-compliance which are not firm must be canceled.
- Sanctions for not submitting Modelo 720 or submitting it out of time cannot be imposed until there is a new sanction system.
Judgment verdict concludes that submitting information to the national fiscal authorities is adequate to avoid fiscal fraud and tax evasion, but in no way should the effects of its neglect be so severe. Tax payers who have received a sanction in previous years may apply for a return of improper taxes or claim patrimonial responsibility to the State.
While we wait for legislative measures all those who are eligible for submitting Modelo 720 should seek advice about the convenience of taking some kind of action.