With the "Modelo 720" tax model, foreign residents in Spain previously had to disclose in detail all their assets located abroad. This is an informative tax return in which assets whose value exceeds EUR 50,000 must be declared. These include three groups: Bank accounts, securities and real estate. If one of these accounts exceeds EUR 50,000, one is required to file the Modelo 720.
The model, introduced in 2012, is designed to disclose unknown assets to the Spanish tax authorities under threat of harsh penalties. Naturally, this led to trouble and - as expected - to a lawsuit before the European Court of Justice, largely driven by Mallorcan lawyers.
Now the European Court of Justice has declared the Spanish regulation incompatible with EU law. "The national rule requiring Spanish tax residents to declare their assets abroad is contrary to EU law," the Court ruled Thursday.
What does this mean in concrete terms? Penalties already imposed are null and void and must be repaid. In addition, a speedy modification of the tax model is expected, as affected member states must comply with the ruling of the European Court of Justice without delay. However, this does not mean that the Modelo 720 will be abolished. Only the high penalties for incorrect information have been deemed disproportionate.
