|Spanish Taxpayer Appeals to ECJ over ‘Excessive’ Late Disclosure Penalty|
A Spanish resident is appealing to the European Court of Justice over a heavy tax penalty imposed for disclosing his overseas assets a year too late.
Spanish residents (other than those subject to tax under the Beckham law) are required to disclose their foreign situs assets annually to the Spanish tax authorities on Form 720 (Sp: Modelo 720). There are three reporting categories – bank accounts, investments and immovable property – a disclosure has to be made where the total value of assets in a category exceeds EUR50,000.
The first year in which offshore assets had to be declared was 2013. However, the taxpayer in question, a pensioner resident in Granada, did not disclose his EUR340,000 of stocks and cash in Switzerland until the following year. When he did, he was ordered to pay more than EUR442,000 in late payment interest, fines and other costs. Spain's tax agency imposed on him 'a fine of EUR253,950 for failing to declare his assets held abroad on time, as well as an extra EUR169,300 to regularise the undeclared amount and another EUR16,060 in late payment interest'.
Spain's tax agency considered his infraction 'very severe', classified it as an unjustified capital gain and applied article 39.2 of the Law on Income Tax which establishes that 'severe infractions will be taxed as income and a penalty of 150 per cent of the tax due may be imposed'.
Several Spanish law firms have protested to the government regarding the harshness of the capital gains penalty, and Spain's tax agency has responded by offering advice on how the penalty can be avoided. However, this has come too late for the Granada taxpayer, who now has to wait for the ECJ's decision. ABC reports that the pensioner's tax advisors will appeal the fine and will ask Spain's Central Economic Administrative Tribunal to appeal Form 720 to the European Court of Justice.
On 19 November the European Commission started an infringement procedure against Spain regarding the legal obligation of taxpayers to declare assets over EUR50,000 that they hold abroad – the government has two months to respond following which the Commission will open a case for breach of EU law.
The opinions expressed do not constitute investment advice and specialist advice should be sought about your specific circumstances.
Published on our website on Dec.08, 2015