We have recently become aware about the Opinion given by the European Commission to Spain in February 2017, in relation to the obligation of declaring assets and rights abroad (“Form 720”). This urges the Spanish Tax Authorities to abide by a two month fixed period, to take the necessary measures of adapting these internal regulations, which impose this obligation, to the principles and freedoms that govern the European Union (EU).
The first thing that draws our attention is the fact that the aforementioned Opinion was published almost two years after the date it was issued, and with that, since then, the slightest modification of our internal regulations has not occurred in compliance with its content within the fixed period of two months. Quite the contrary, the Spanish Tax Authorities have been applying said legislation even though it is aware that the European Commission considers this a conflict with EU freedoms. Fortunately, the Opinion has been published, since the Spanish Tax Authorities are obliged to provide it after a request from the Supreme Court in a judicial proceeding concerning a taxpayer being sanctioned for submitting the 720 form extemporaneously.
At the end of 2015, the European Commission had already proposed possible incompatibility of tax consequences with EU law, arising from non-compliance or incorrect compliance of the obligation to inform of assets or rights located abroad to the Spanish Tax Authorities. The Commission did not question the right of Spain to impose obligation of information, but the specific sanctioning regime and the regime applicable to unjustified capital gains in estimating they could be disproportionate and, therefore, violate EU law.
Therefore, in the Opinion published, the European Commission considers that the obligation to declare assets and rights abroad violates certain EU freedoms: free movement of people, free movement of workers, freedom of establishment, freedom to provide services and free circulation of capital, to the extent that it establishes a discriminatory and disproportionate tax declaration regime, the European Commission considers that the aims pursued by the Spanish Tax Authorities to prevent fraud, tax evasion or abusive practices by imposing the obligation of information, can be achieved through administrative tools of the EU or the European Economic Area either automatically or upon request.
To conclude, it is necessary to point out that the Opinion refers to the obligation to inform of assets and rights located within the EU or in the European Economic Area, however, not those in other jurisdictions.