EU investigates Spain over the foreign asset declaration form 720

Remember the foreign asset declaration form? The infamous “modelo 720” which obliges residents to declare all major assets outside of Spain, such as bank accounts or a house back in Blighty.

You can be fined a vast amount for not declaring these assets.

• If you don’t file the tax form being obliged to do so, or file it incorrectly, you get fined €5000 per mistake, with a minimum fine of €10.000.
• And if you don’t declare an asset, it is later discovered by the Tax Office (Hacienda) and you can’t prove the asset was purchased with legal money, Hacienda will simply state that you purchased it with undeclared money and fine you for the unpaid income tax, plus charges and interest (which can be up to 50% of the original unpaid income tax). And that charge is back dated to the date of the obtaining of the assets.

Anyway, the European Union has now very quietly launched an investigation into the modelo 720 which could result in the EU ordering Spain to overturn the law. The EU commission says that the fines are “unacceptably excessive” and that the tax form could be contrary to EU legislation. There is no date pending for the result of the investigation to be announced, but Spanish tax experts seem to be quietly confident that the 720 will be either watered down or declared contrary to EU law.

What to do if you have been / or are caught in the modelo 720 trap?

Well, you can either appeal against the Hacienda fine, taking advantage of the slowness of the Spanish judicial system to gain a couple of years and see if the EU reports back; or you can pay the fine (you get a 25% discount if you pay without appealing) and wait for the EU to rule. If the EU throws the form out then will have one year from the EU ruling to ask for your fine back.