The draconian fines which were imposed under the Modelo 720 Assets Declaration have been declared null and void opening the doors to claiming the money back. This is some welcome news for foreign residents and investors.
Under Spain’s 720 tax model, which was introduced back in 2012, foreign residents had to declare the assets they own in other countries to the Spanish tax authorities. This was, ostensibly, to combat tax evasion, money laundering, and the funding of terrorism, but many people suggested it was simply an attack on expats and appeared to be nothing more than a shameless shakedown.
“Null and Void”
Those with assets outside of Spain totalling 50,000€ or more had to declare this to the tax office but it didn’t work. Many investors simply stayed out of Spain and many that were already there simply left, leaving the country poorer. Ignoring or incorrectly filing under the Modelo 720 opened you up to massive fines sometimes approaching the value of the assets; possibly huge sums.
The judgement from the Spanish court follows an earlier judgement from the European Court of Justice (ECJ) ruling back in January which said that aspects of the 720 tax model declaration were illegal. The Spanish Supreme Court has now declared all related fines given out as null and void.
“Therefore, the punitive measures are recognised as null and void, including those before the sentence of the ECJ on the 27th of January 2022,” explains the ruling.
The court judgement does not completely remove the Modelo 720 although it does declare the disproportionately high fines for non-compliance to be void. Additionally, Spanish tax law did not provide for a limitation period for the tax liability thereby violating the principles of the free movement of capital. A limitation period of 4 years has now been introduced.
In practice this means you still have to declare your assets but failure to do so or errors in your submission will no longer incur huge fines.