The EU Court of Justice ruled in May against some aspects of the Model 720 Treasury that declared assets abroad. He blamed the amount of sanctions and the lack of subscription to these violations. This forced the Ministry to change the norm and change the previous criteria of administrative law. The so-called The Economic-Administrative Court (TEA), which is responsible for appealing tax acts, has already returned the first cases to the tax agency in which it seeks a review of the sentence of European justice and it. Decides whether to impose sanctions on those who conceal assets abroad.
A court decision was issued on January 27 declaring the fundamental aspects of the asset disclosure system known as the Model 720 illegal. There were basically two factors that the Court considered to be incompatible with EU law. The first was the “disproportion” of the fines, which could reach 150% of the taxes to be paid. The second is that the appointment of these violations was not provided for, which exists when it comes to goods that are in Spain. Both issues, according to the court, were contrary to the free movement of capital in the community.
This model was born in 2012, almost at the same time as the tax amnesty was approved by then-Finance Minister Cristobal Montoro. Meanwhile, when taxpayers with assets abroad had the right to repay them with low taxes, a system, Model 720, was set up to display all assets held by Spanish residents outside the country under significant tax penalties. The obligation was not fulfilled or was fulfilled late.
This European decision has already reached the administrative courts. The TEA, known as the Court, is not a jurisdiction but, depending on the Ministry of Finance, issued two resolutions this March in two cases in which Catalan taxpayers were sanctioned for timely display of assets abroad and in tax havens. They have argued and now the court is forced to partially agree to return them to the tax agency’s cases so that it can again decide whether it will benefit from the imposition of an offense in the two cases and therefore avoid a fine.
While these views are public, there is no data that can serve to identify the taxpayer. However, it is possible to draw a general line for each case. The first of these is a citizen who issued an additional statement in 2017 in fiscal year 2012 in which 533,191.58 euros in tax have been recognized, though which has not been identified. This citizen claimed that he owned 25% of the assets, valued at just under 2.2 million, and that they consisted of current accounts and a portfolio of financial assets. As a result of this additional announcement, he received 296,113 euros.
The second case is higher. The taxpayer filed an additional return in 2016, which also covered the 2012 financial year. In this case, € 875,676.87 was declared outside the EU, which is also not specified in the report. The declarant said that this arrival was coming in two ways. First, she was the owner of 50% of the assets worth 787,271, 61 euros with her mother, which she said came from “the income earned by her mother during her active life in the world of hospitality”. The second block of assets, of which he was a 100% owner, was 472,114.85 euros, which, as he explained, “came with donations made by a relative many years ago.” The opinion indicates that no evidence has been provided on these statements made by the owner. As a result, he has to pay more than 467,000 euros to the tax agency.
Both citizens applied to the TEA after the tax agency refused to review the payments made to them. These are the first cases in which the doctrine established by European justice must be incorporated. Among the claims of sanctioned taxpayers are aspects such as their possible non-compliance with the Constitution or EU regulations. The TEA notes to these plaintiffs that the CJEU did not repeal Model 720 and that it supported its existence as a means of controlling the assets of citizens abroad, given that it could not be avoided. They themselves are inside the country.
However, the way the TEA opens up to remedy these sanctions has to do with the prescription aspect. In Spain, tax offenses typically have a statute of limitations of four years. As for the “Model 720”, the statute of limitations was not directly provided for, which was condemned by the European proposal. It is this aspect that drives the TEA to return the cases to the tax authority for re-analysis. This Court understands that when the tax agency indicated the literal meaning of the rule, it did not respond appropriately to those taxpayers.
Consequently, these considerations give partial basis to the claims of sanctioned taxpayers. Of course, this indicates that they need to be duly substantiated by the tax agency with documentation that the purchase operations of these assets comply with the established exercises. In fact, in both cases he complains that the documentation that they have so far provided to his case does not prove that they are years that have not been sanctioned. “This lack of accreditation of the prescription will lead to the confirmation of compliance with the dismissal law complained of here, as this Economic-Administrative Court cannot confirm that the institution, which the plaintiff alleges, occurred. Does not approve “, points to the opinion of one of the cases.
If more evidence is provided to the tax authority, the TEA indicates that it is up to it to decide whether it is appropriate to “fully or partially correct the disputed self-assessment”. That is, if you correct the sanction, either in whole or in part. This opens the door for sanctioned individuals to be able to get their money back even though these violations have occurred. The TEA compares this possible return to the well-known health cent, which corresponded to a tax used on the purchase of fuel and which was later suspended by the European justice system and had to be returned.
In anticipation of this risk, in which the state has to partially cover fines imposed on taxpayers for hiding money abroad, the government has already assessed its potential impact. The finance minister called it a “limited volume” because it would impose 230 million sanctions from the day it was created. For this reason, they believe that this will be the maximum economic cost to the state if all is right.
The executive had to force tax reform to try to adapt this “720 model” to a European solution. To this end, an amendment to the corporate tax law and a consolidated text of the Non-Residents Income Tax Act, which was being debated in the Senate, were used to introduce new restrictions on fines and prescriptions that remain in place for four years as they are. Case related to other tax offenses. Penalties can no longer exceed 50% of the defrauded fee.
Each year, around 60,000 Spanish taxpayers file a Model 720 document to declare their assets abroad. The government has announced 225,000 million euros since its inception in 2012, which appeared outside Spain and belongs to national citizens.
Source: El Diario
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