Court of Justice of the European Union (CJEU) has ruled that the Spanish sanction regime of the foreign asset declaration (Modelo 720) is contrary to European law.

In a judgement dated on January 27th, 2022, the Court has considered that this sanction regime is null and void since it goes beyond the statute of limitations, and also because the fines imposed on taxpayers who do not declare or declare incorrectly or extemporaneously are disproportionate.

This judgement opens the door to recover all fines imposed in Spain for application of this sanction regime.

Likewise the judgement may contribute to regularize the situation of those foreigners who – due to lack of knowledge- did not declare, in due time, the assets they have in their respective countries of origin.

As summary, we remind you since 2012 it has been established in Spain the obligation to inform about the assets and rights that a Spanish tax resident has abroad. This informative tax form is known as “Modelo 720”. And the obligation to declare this model remains intact, despite the elimination of the special sanction regime.

This tax form report is the same that is already mandatory in other countries. For example in the US there is a mandatory obligation to report assets and rights hold abroad when the value exceed $10,000.

The reporting established in Spain incorporated the necessity to report about three blocks of assets located abroad (bank accounts, securities, and real estate), when any of these blocks exceeded the amount of €50,000.

Besides, the recent Law 11/2021 about measures to prevent fraud has established a fourth block of information. Since 2021 it is necessary to report about cryptocurrencies located abroad of which a Spanish tax resident is the holder, or in respect of which she is the beneficiary or authorized.

Foreigners arriving in Spain for the first time will have the obligation to file Tax Form 720 before March 31th of the first year in which they are qualified as tax residents in Spain. In other words, they must file this Modelo 720 even before filing their first Personal Income Tax return.

Once the Modelo 720 has been filed with respect to one or more of the blocks of information, this Modelo 720 must only be filed again when in relation to each declared block there is an increase of more than €20,000 with respect to the one that determined the filing of the last declaration.

Spanish Lawyer NYC is able to assist you with this reporting obligation. Please contact us through our email fgs@SpanishLawyerNYC.com