On February 16, 2022, the Spanish Senate approved the new sanctioning regime of the Spanish Form 720 for declaration of assets abroad, motivated by the Judgment of the Court of Justice of the European Union (CJEU).

Ultimately, it will be the Congress of Deputies in Spain that will have to decide whether to accept the changes introduced by the Senate.

The Spanish Senate has introduced amendments to the Form 720 Spain that respond to the fact that “the judgment of the Court of Justice of the European Union (First Chamber), of January 27, 2022 in case C-788/19 has determined that certain aspects of the legal regime associated with the obligation to declare assets and rights abroad (Spanish Form 720) are in breach of European regulations. Consequently, it is necessary to modify said legal regime to adapt it to European law.”

In this way, an attempt has been made to adapt the Spanish Form 720 for the declaration of assets abroad to the Judgment of the CJEU.

Repeal of the first and second additional provisions of Law 7/2012 of the previous Spanish Form 720 for declaration of assets abroad

The wording of the sole repealing provision is modified, leaving the following literal:

“«Single repealing provision. Regulatory repeal. 1. Any rules of equal or lower rank that oppose the provisions of this law and, in particular, article 15.j) of Law 27/2014, of November 27, on Corporation Tax, are hereby repealed. 2. The first and second additional provisions of Law 7/2012, of October 29, amending the tax and budget regulations and adapting the financial regulations for the intensification of actions in the prevention and fight against the fraud.””

Elimination of section 6 of article 121 of Law 27/2014, on corporation tax

The lack of prescription is eliminated because legal entities do not present the Form 720 Spain for the declaration of assets abroad. Section 6 of article 121 of the Corporation Tax Law is worded with this amendment as follows:

“«6. The value of the assets referred to in section 1, as soon as it has been incorporated into the tax base, will be valid for all tax purposes.»”

The sanctioning regime of Model 720 for declaration of assets abroad has been modified, in adaptation to the ruling of the Court of Justice of the European Union, eliminating the existing lack of prescription in the sanctions imposed in Spain.

Entry into force

The fourth final provision is modified, being worded as follows:

“«Fourth final provision. Entry into force. This Law shall enter into force on the day following its publication in the “Official State Gazette”. Sections one and two of the first article and the second article will have effect for the tax periods that begin on or after January 1, 2020 and that have not ended upon their entry into force.»”

Information obligation to the Tax Administration

The main effect of this adaptation is in the modification of the sanctioning regime provided for the breach of the obligation of information on goods and rights located abroad, which has led to the modification of the eighteenth additional provision of the General Tax Law, being as follows:

“«Eighteenth additional provision. Obligation to provide information on assets and rights located abroad.

The taxpayers must provide the Tax Administration, in accordance with the provisions of articles 29 and 93 of this Law and in the terms established by regulation, the following information:

a) Information on the accounts located abroad opened in entities that are dedicated to banking or credit traffic of which they are owners or beneficiaries or in which they appear as authorized or in some other way have power of disposal.

b) Information on any titles, assets, securities or rights representing the share capital, own funds or assets of all types of entities, or the transfer to third parties of their own capital, of which they are owners and that are deposited or located in abroad, as well as the life or disability insurance of which they are policyholders and the life or temporary annuities of which they are beneficiaries as a result of the delivery of capital in money, movable or immovable property, contracted with entities established in abroad.

c) Information on real estate and rights over real estate owned by them located abroad.

d) Information about the virtual currencies located abroad of which you are the owner, or in respect of which you have the status of beneficiary or authorized or in some other way have power of disposal, guarded by persons or entities that provide services to safeguard private cryptographic keys on behalf of third parties, to hold, store and transfer virtual currencies.

The obligations set forth in the preceding paragraphs will be extended to those who are considered beneficial owners in accordance with the provisions of section 2 of article 4 of Law 10/2010, of April 28, on the prevention of money laundering and financing of terrorism.”

The lack of prescription is eliminated due to the non-presentation of the Spanish Form 720 for the declaration of assets abroad by a natural person

Article 39 of Law 35/2006, of November 28, on Personal Income Tax has been modified, and partially the laws on Corporation Tax, on Non-Resident Income and on Wealth, referring to unjustified capital gains, which is worded as follows:

“«Article 39. Unjustified capital gains. Assets or rights whose possession, declaration or acquisition do not correspond to the income or assets declared by the taxpayer, as well as the inclusion of non-existent debts in any declaration for this tax or for the Tax on the Estate, or its registration in the official books or records. Unjustified capital gains will be integrated into the general taxable base of the tax period in respect of which they are discovered, unless the taxpayer proves sufficiently that he has been the owner of the corresponding assets or rights from a date prior to that of the prescription period.”

If you want to know what your rights are before the declaration contrary to EU law that the Court of Justice of the European Union has declared of the Spanish management of the Form 720 Spain for the declaration of assets abroad, contact the Pérez Parras Economists and Lawyers Firm. If you need help with your tax return as a tax resident or non-resident, do not hesitate to contact us. Our team of lawyers and economists specialized in Tax Law helps you with your situation, no matter how complex it may be.