The Court of Justice of the European Union (CJEU) ruled on Thursday 27 January (C-788/19) that legislation requiring Spanish residents to declare their assets or rights abroad was contrary to EU law.
In detail, the CJEU considers that Spain has failed to fulfil its obligations under the principle of free movement of capital by using “disproportionate” provisions for non-declaration - or incomplete or late declaration - of assets and rights located abroad.
These provide for a flat-rate fine of 150% of the amount of tax evaded and specific fixed fines for “failure to comply” or “partial or late compliance” with the information obligation.
The amount of the latter is €5,000 per data or category missing from the declaration form (‘Form 720’) and €100 per data or category declared late.
In addition, the CJEU points out that the non-applicability of the limitation period clause in the Spanish provisions calls into question the potential limitation period already acquired by the taxpayer and that this undermines the fundamental requirement of legal certainty.
These fines, the CJEU points out, can sometimes bring the amount owed by the taxpayer to more than 100% of the value of their assets and rights located abroad. This establishes a “difference in treatment between Spanish residents according to the location of their assets” and “deters, prevents or restricts the opportunities for residents of that Member State to invest in other Member States”, explains the Court.
“By attaching such serious consequences to the failure to comply with a declaratory obligation, the Spanish legislature went beyond what is necessary to guarantee the effectiveness of fiscal supervision and to prevent tax evasion and avoidance”, the CJEU judgment summarises.
See the press release summarising the judgment: https://bit.ly/32Cz8AD (Original version in French by Thomas Mangin)