The EU Court forces the Treasury to lower the penalties for not declaring assets abroad


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It has been waiting for months and it has finally arrived. The Court of Justice of the European Union (CJEU) has ratified this Thursday the criterion that the European Commission had previously established and has considered disproportionate and contrary to European regulations on the free movement of capital the sanctioning regime of the controversial model 720, the device devised in his day by Cristóbal Montoro to force Spanish taxpayers to declare their assets abroad to the Tax Agency.

The CJEU resolution does not overthrow the model itself, but it will force the Ministry of Finance to reconfigure the severe sanctioning regime that was originally established to dissuade taxpayers from any temptation to hide their assets outside of Spain but which has subsequently become a juicy source of income for the public coffers.

So much so that despite the fact that Brussels already warned Spain in 2015 of its illegality, neither the Government of Mariano Rajoy nor later that of Pedro Sánchez have lifted a finger to modify it. In fact, already with María Jesús Montero as Finance Minister, the same argument was made in Brussels to defend the model that Cristóbal Montoro had developed in his day to avoid any modification in the device.

The delaying strategies of the Government of Spain have reached a dead end. The resolution issued this Thursday by the Court of Luxembourg declares that Spain “has failed to comply with the obligations incumbent on it by virtue of the principle of free movement of capital” and concludes that the sanctions derived from non-compliance or imperfect or late compliance with the presentation of model 720 “establish a difference in treatment between residents in Spain based on the location of their assets, which may dissuade residents of that Member State from investing in other Member States, prevent them from doing so or limit their possibilities of doing so , and constitutes, therefore, a restriction on the free movement of capital”.

The ruling annuls three key provisions of the model for declaration of assets abroad with which the controversial tax amnesty was complemented in its day to ensure that the hidden assets that surfaced by taxpayers as a result of it did not leave the Treasury’s radar again: the regulation of the principle of imprescriptibility on the fiscal irregularities committed -something unprecedented in fiscal regulation and that only operates in the harshest part of the Penal Code (crimes of terrorism or genocide); the severe sanctioning system established for not submitting the information return, which sought to ‘tear’ that information from taxpayers at all costs by sanctioning each omitted or forgotten item of information with 5,000 euros; and the penalties provided for concealing the existence of assets or rights from the Treasury, which can reach up to 150% of the amount defrauded and which in some cases have caused the tax penalty to exceed the value of the hidden assets.

According Esau Alarcon, partner of Gibernau Asesores, member of the Spanish Association of Tax Advisors and one of the tax experts who has promoted this procedure in Brussels, together with Alejandro del Campo (DMS Consulting), the resolution of the European Court opens the door to an avalanche of claims judicial, whose cost for the public coffers is difficult to estimate but that could be counted for hundreds of millions of euros, in the best of cases.

To begin with, according to Alarcón, the sentence will deactivate all the judicial claims already opened against the harshness of the sanctioning regime of the 720 model and will force the Public Treasury to repay the sanctions collected and now declared illegal by the Court of Justice of the European Union. But it is that, according to his opinion, it will also allow appealing against already firm sanctions, since by mediating a prior warning about the illegality of the sanctioning regime by the European Commission, it could appeal to the patrimonial responsibility of the State.

The latest data provided by the Tax Agency indicated that since the model came into force, more than 5,000 penalties had been imposed on taxpayers, which had allowed the emergence of some 2,000 million euros in undeclared tax contributions and that they had managed to put under control more of 156,000 million euros of goods that before 2013, when the model was implemented, were off the radar of the Treasury.

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