Up until January 2022, Spanish tax legislation provided for heavy penalties for failure to file Form 720, filing with erroneous information or late filing of the Form 720.

The amounts of these fines were 5,000 euros for each missing, incomplete, inaccurate or false bit of information or set of information, with a minimum of 10,000 euros, and 100 euros for each bit of information or set of information declared after the deadline when there was an obligation to do so, with a minimum of 1,500 euros. In addition, the Tax Agency could declare the value of the undeclared assets as a capital gain, even if they had been obtained in a tax year that had already expired and impose a penalty of 150% on this gain.

In January 2022, and after a long process, the European Court of Justice  declared the penalty system devised for the 720 to be null and void, stating that taxpayers who had been penalised could recover the amounts they had paid.

On 11 March 2022, the legal reform entered into force, repealing the previous sanctions in line with the decision of the European Court of Justice. The penalties for failure to file, late filing or erroneous filing of Form 720 are the same as those already regulated for other tax forms:

  • In the case of tax returns or declarations, the law provides for the following penalties:
    • 200 euros for each group of assets that should have been reported in the case of not filing form 720.
    • 100 euros for each group of goods due to be submitted and submitted after the deadline
    • If tax returns or declarations are submitted incompletely, inaccurately or with false information, the penalty shall consist of a fixed pecuniary fine of 150 euros.
    • If tax returns, declarations or other documents with tax implications are submitted by means other than electronic, computerised or digital means when there is an obligation to do so by such means, the penalty shall consist of a fixed pecuniary fine of 250 euros.

 

  • In the case of declarations generally required in compliance with the obligation to provide information, the penalties would be as follows:
    • 20 euros for each bit of information or set of information referring to the same person or entity that should have been included in the declaration, with a minimum of 300 euros and a maximum of 20,000 euros.
    • In the event that they are submitted after the deadline without prior request from the tax authorities, the penalty and the minimum and maximum limits shall be half of those set out in the previous paragraph.
    • Where declarations are incomplete, inaccurate or contain false information:
      • For information not expressed in monetary terms:
        • The penalty shall consist of a fixed pecuniary fine of EUR 200 for each omitted, inaccurate or false bit of information or set of information relating to the same person or entity.
        • The penalty shall be 100 euros for each bit of information or set of information referring to the same person or entity when the return has been filed by means other than electronic, computerised and digital means and there is an obligation to do so by such means, with a minimum of 250 euros.
      • In the case of information expressed in monetary scales:
        • the penalty shall consist of a proportional financial penalty of up to 2 per cent of the amount of the undeclared or incorrectly declared transactions, with a minimum of EUR 500.
        • If the amount of undeclared or incorrectly declared transactions exceeds 10, 25, 50 or 75 per cent of the amount of the transactions that should have been declared, the penalty shall be a proportional financial penalty of 0.5, 1, 1.5 or 2 per cent of the amount of the undeclared or incorrectly declared transactions, respectively. If the percentage is less than 10 percent, a fixed financial penalty of 500 euros shall be imposed.
        • The penalty shall be 1 per cent of the amount of the transactions declared by means other than electronic, computerised and digital means when there is an obligation to do so by such means, with a minimum of 250 euros.

 

The Tax Administration will have to determine whether Form 720 for the purposes of the penalties set out above consists of a tax return or declaration, or of declarations generally required in compliance with the obligation to provide information. Depending on the considerations as to whether we are dealing with one or the other, the sanctions will be of one or the other case.

The penalties set out above will not be enforceable for each Form 720 only but will be independent for each of the three reporting obligations to be provided in Form 720, i.e., they apply to each of the groups of assets to be reported: for bank accounts, investments and real estate properties; regardless of whether they are submitted on the same form.

 

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Álvaro Morales Sousa, Partner, TempleCambria Lawyers

(+34) 695262097     amsousa@templecambria.com

 

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