The form 720 after the CJEU sentence

The Tax Office have modified form 720 following the CJEU ruling that declared the obligations contained in it to be contrary to European Law. According to the Court of Justice of the European Union, these obligations were excessive and limited the principle of freedom of movement of capital.

The Tax Office has responded quickly, introducing a package of reforms in the Draft Bill amending the laws on Corporate Income Tax and IRNR. The aim is to bring the declaration of assets and rights located abroad in line with European Law.

Why has the form 720 been modified after the CJEU sentence?

The Court of Justice of the European Union used three arguments to strike down the national regulation on the declaration of assets and rights located abroad:

  1. It prevented the prescription.
  2. The rate of the fine was excessive, exceeding the value of the undeclared assets or rights.
  3. This high penalty was not proportional to other similar national penalties.

In summary, the CJEU (January 27, 2022, Case C-788/19) considered that the obligations contained in form 720 restricted the free movement of capital. Consequently, the Tax Office modified the system, the revenues of which represent around 230 million euros.

What is the result of the form 720 after the CJEU sentence?

The main changes introduced by the Tax Office include:

  • Elimination of the lack of statute of limitations in the Corporate Income Tax Law. From now on, these infractions will prescribe within four years.
  • Repeal of the penalty system established in Law 7/2012. From now on, these infractions are subject to the general sanctions of the tax legislation.
  • Explicit application of the obligation to declare assets and rights abroad to virtual currencies.

What are the consequences of these modifications?

Apart from the new regime of information and liquidation, these modifications may have consequences on the opened sanctioning procedures.

  • Many taxpayers could be exempted from the obligation to pay the penalties, which are now non-existent.
  • On the other hand, those who have made the corresponding payments voluntarily could demand a refund from the Tax Office.
  • In addition, relating to those appeals that have been firmly resolved and rejected, there would be the possibility of claiming the State’s patrimonial responsibility.

This closes a legal battle that began with the entry into force of the regulation. More than two and a half million foreign residents in Spain have seen their assets affected by the excessive penalties, and the same has happened to Spanish savers who had capital abroad.

Now the possibility of claiming for the annulment of penalties or the recovery of the money unduly paid is open. Claims for which it is essential to have the assistance of specialized tax experts. If you need an expert in Tax Law, contact us.