Form 720 has been controversial ever since it was first introduced in 2012. This is because despite being nothing more than an informative statement relating to assets and rights abroad, disproportionately high fines have been issued to those who have submitted it late or failed to submit it at all. In this post, we aim to clarify the current situation and explain exactly why Form 720 can be considered unlawful.
What is Form 720?
We’ve previously written several posts on Form 720, as well as an eBook, where we’ve shown in detail how it relates to:
- Accounts held in financial institutions abroad.
- Securities, rights, insurance and income managed, deposited or obtained abroad.
- Real estate and rights thereto located abroad.
It’s important to stress that this form is for information purposes only.
Unlawful Form 720: The complaint to the European Commission
In February 2013, the Mallorcan law firm DMS Consulting brought a complaint against Form 720, or the declaration of information regarding assets and rights held abroad, before the European Commission. It was argued that the obligation to declare was extremely broad and that the system of penalisation was so excessive that it impeded upon the free movement of people and capital as regulated by the Treaty on European Union.
In February 2017, the EC sent Spain a Reasoned Opinion requesting the modification of Form 720. The Mallorcan firm attempted to obtain a copy of the Opinion, but the request was denied. The full text was eventually obtained through Spain’s National Court.
The Spanish tax authorities then issued a consultation through the Directorate-General for Taxation, ruling that the statutory fine would not apply to people who submitted Form 720 after the deadline.
However, no change has yet been made to Form 720, except for an extension with the requirement to declare cryptocurrencies.
Expected fines for Form 720 violations
As we have mentioned previously, the controversy over Form 720 stems from the disproportionately high fines that can be imposed in a number of cases, including:
- Failure to submit the declaration.
- Submitting it after the deadline.
- Submitting the form incorrectly, inaccurately or with false information.
- Not submitting the form using electronic or digital means.
All of the above are considered very serious offences and are penalised as follows:
- If you fail to submit Form 720 or if there are errors or omissions in the declaration, there is a fine of €5,000 per item or set of data, with a minimum fine of €10,000 for each group of assets.
- If the declaration is submitted after the deadline, there is a €100 fine per item of data with a minimum fine of €1,500 per group.
Along with the above fines, there may also be penalties involving personal income tax (IRPF) or corporate income tax (IS).
If you have any doubts about whether or not you need to file Form 720 or if you’ve made any mistakes in doing so, it’s a good idea to seek advice from a tax specialist.