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CONFIRMED: How Spain’s foreign asset declaration laws are finally changing for the better

Following the recent EU ruling that Spain’s 'Modelo 720' foreign assets declaration form was “extremely repressive” and breaching community rules, the Spanish government has actually listened and on Thursday voted in favour of more lenient fines and conditions.

Spain's Tax Minister Maria Jesús Montero
Spain's Tax Minister Maria Jesús Montero has admitted that the Modelo 720 fines are "extortionate". Photo: GABRIEL BOUYS/AFP

What is Spain’s Modelo 720?

If you live in Spain and own assets abroad, you’re no doubt familiar with Modelo 720 and the risks you face for not declaring your assets overseas.

If you have bank accounts, assets/private pensions or a property abroad which are worth more than €50,000, you have to declare all this to the Spanish taxman.

READ MORE: Do I really need to declare foreign assets to the Spanish taxman?

Why is Modelo 720 so controversial?

For the past decade, Spain established that income abroad that was not declared, or which was reported after the March 31st deadline, would be treated as an unjustified capital gain and the wrongdoer would receive a penalty of up to 150 percent of the value of the amount.

These fines could exceed the real value of the assets declared after the deadline, since they were set at an amount of €1,500 for each group of goods affected, or €5,000 for undeclared or incorrectly recorded data, with a minimum of €10,000 per group.

One of the most widely reported cases was that of a Spanish national who returned home to Spain from Switzerland and who had €330,000 euros in a Swiss account. He declared after the deadline and was fined €442,000.

In the first couple of years after Spain introduced its foreign assets declaration rule, knowledge about it among the general population was limited, with only 131,000 Modelo 720 forms submitted out of an estimated 2.5 million potential declarants. Upon finding out, many foreigners who were residing in Spain chose to leave the country due to fears they would be heavily fined.

Since the Modelo 720’s implementation in 2012, Spain’s Agencia Tributaria tax agency has added at least €230 million to public coffers through these fines.

What has happened recently?

On Thursday January 27th, the Court of Justice of the European Union (CJEU) ruled that Spain has failed to comply with its obligations under the principle of free movement of capital.

The Luxembourg-based court found that the obligation to present the ‘Modelo 720’ and the penalties derived from non-compliance, late entry or mistakes – with no equivalence for those with assets situated in Spain –  establish a difference in treatment among residents in Spain based on the location of their assets.

“This obligation may dissuade residents of that Member State (Spain) from investing in other Member States, prevent them from doing so or limit their possibilities of doing so,” judges concluded, adding that the system put in place by Spain’s Tax Agency meant they had more information on foreign assets than those in Spain itself.

CJEU judges also spoke out against the 150 percent fines as being “extremely repressive” and again “impairing” the free movement of capital. 

The ruling was a victory for two Spanish tax lawyers who raised the alarm in the European courts back in 2013; one of them being Mallorca-based Alejandro del Campo, who The Local has interviewed on several occasions regarding Spain’s most disproportionate tax laws.

READ MORE:

Has Spain actually changed anything?

Yes, although the Modelo 720 is still in force in Spain. On February 24th the Spanish Parliament voted unanimously in favour of scrapping the imprescriptibility of Modelo 720 fines, which allowed Spain to fine wrongdoers in perpetuity. 

Now any misconduct will only be punishable for four years as is the case with other fiscal crimes. 

Spanish Members of Parliament also voted for the maximum fines to be reduced from 150 percent of the value of the undeclared assets to a maximum of 50 percent of the value.  

Therefore, Tax Minister María Jesús Montero has stuck to her word after announcing last month that her government “respected” the European court ruling and would modify the rules relating to the Modelo 720 “as soon as possible” before the next March 31st deadline.

It remains unclear if the changes include a grace period for delayed and erroneous declarations as promised.

Montero and her ruling Socialists have been quick to distance themselves from the controversial Modelo 720 law, referring to the fines introduced by former Tax Minister Cristobal Montoro of the opposition Popular Party as “extortionate”.

Declaring foreign assets through the Modelo 720 is “still in force”, Montero did stress, so the Spanish government doesn’t seem quite that willing yet to ditch a rule that only applies to those with assets abroad but not for those with assets in Spain, as denounced by the European Court of Justice. 

Crucially however, those who have been fined for breaching Spain’s foreign asset declaration laws can be reimbursed.

The MO varies depending on whether the plaintiff has already appealed or not before the deadline.

According to Alejandro del Campo, who is being championed in the Spanish press as the ‘Don Quijote’ who took on Hacienda and won, “all the people who are fighting in court and who have continued to fight will now see the battle turn in their favour. 

“There are many procedures underway that will be resolved in favour of the taxpayers.

“My advice is that whoever is within the deadline, claims back the fine and whoever is outside the deadline should also do so because Spain can no longer massacre you and ask you for more than what you have.”

Is it the first time Spain gets called out on this?

No. Spain’s asset declaration penalty system was first implemented in 2012 by then Tax Minister Cristóbal Montoro under the right-wing PP government of former Prime Minister Mariano Rajoy, and the legislation has been causing legal problems for Spain’s Tax Agency ever since.

In February 2017, the European Commission already issued a complaint against Spain arguing that the fines were in conflict with EU rules and breached four community freedoms of the European Economic Area: free movement of people and workers, freedom of establishment, free presentation of services and the free movement of capital.

Despite the EC’s damning report, in which it called for the “discriminatory” system to be overhauled within two months, nothing changed and Brussels ended up taking the matter to the Court of Justice of the European Union.

However, Spain’s Hacienda tax agency continued to penalise taxpayers who didn’t get their asset declaration 100 percent right, as the European Commission wasn’t initially able to show enough evidence of irregularities in Spain’s tax system.

A number of Spanish judges have lifted fines for these taxpayers but ongoing sanctions meant the matter was again debated in the EU’s Court of Justice in July 2021 and in January 2022.

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LIFE IN SPAIN

What to do about insects and other pests in your home in Spain?

Bugs and insects can sometimes be a problem in Spanish homes, particularly during the summer months. Here's what to do if you get an infestation and how to prevent them from happening.

What to do about insects and other pests in your home in Spain?

Fruit flies buzzing around the bins, cockroaches in the kitchen and ants invading your food cupboards can be a common sight in your Spanish home, more often than not in summer.

But what can you do when insects invade your home? 

What types of pests are common in Spain?

Bugs and insects that commonly invade homes in Spain include fruit flies, ants, stink bugs, cockroaches, pantry moths, plaster bagworms and mosquitoes.

Those who have pets may also have a problem with your animals bringing fleas and ticks into the home too.

READ ALSO: Ticks are proliferating in Spain: How to avoid them and protect yourself

These can cause a nuisance, not only flying around your home and biting you (in the case of mosquitoes, fleas and ticks), but they can get into your food and lay eggs in your cupboards.

How can I get rid of bugs in my home?

One of the most important ways you can keep insects and other bugs out of your home is to eliminate food sources.

This means always doing the washing up as soon as you’ve finished eating so there are no scraps laying around, sweeping kitchens and dining rooms regularly and putting opened food items in the fridge instead of the cupboards.

You also need to make sure you regularly empty your rubbish bin and that there are no gaps between the lid and the bin that flies can get in through.

Dusting, hoovering and general regular cleaning will also keep other insects at bay such as plaster bagworms and moths that lay larvae on your walls and ceiling.

Those with pets should make sure that animals are treated with flea and tick protection and combed through with special flea combs to make sure bugs are not stuck in their fur.

Summer can of course be very hot in Spain, with temperatures regularly in the high 30°Cs or even low 40°Cs in some parts of Andalusia and other regions, meaning that windows and doors are often left open to ensure a breeze. Unfortunately, this means that your home is more accessible to insects too.

If you can, get a fly screen for your doors and windows, so you can leave them open, but no bugs can get in. These fine mesh screens can be bought from hardware or home stores such as Leroy Merlin and can simply be lifted into place when you need them.

If you can’t get screens installed, then consider planting certain plants on windowsills or balconies. Lavender, basil, lemongrass and mint are all natural insect repellents.

Electric fly swats, ant traps and sticky paper can also all help eliminate pests in your home. 

READ ALSO: What venomous species are there in Spain?

Insecticides

When the situation becomes worse, simple everyday cleaning won’t suffice and you may need to use insecticides to kill the infestation. There are many different brands in Spain. Both Protect Home and Compo have several different products you can use.

If you don’t want to use chemical insecticides, natural ones made from white vinegar, citrus plants, or peppermint oil can also work.

Pest control

If the situation becomes completely out of control and you find that insects are not only entering your home but that they are breeding there too, it’s time to call in the professionals. Pest control services are available across Spain.

The first step is to check your home insurance to see if they will cover this service. If they won’t, they may be able to suggest a company that can help.

Otherwise, a quick Google search for ‘Control de plagas’ (pest control) and then your area should provide you with plenty of options.

According to the home website Habitissimo, pest control services in Spain can range from €80 up to €2,000 depending on the type of infestation you have, how serious the problem is and how big your property is. On average it will cost you around €267.

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