Changes to tax laws in Spain | Are you due a refund?

March 10, 2022 3:23 pm Published by

Changes to foreign asset reporting in Spain

The law relating to reporting foreign assets in Spain is changing. While we’re yet to see a change in the way you report your assets, there are important amendments to sanctions for non-compliance.

If you’re a Spanish resident or a company with a Spanish office, and you have assets in the UK (or elsewhere), take note. You may be eligible for a refund.

Read on to see what’s changing and how it might affect you.

How Spanish residents / companies report overseas assets

Currently, if you’re a Spanish resident or a company registered in Spain, you must report your overseas assets and rights every year in an annual declaration (Form 720).  That’s been the law since 2012. You’ll need to declare the following, if these assets are held outside Spain and their collective value exceeds €50,000:

  • Shares / holding in any companies
  • Life or disability insurance
  • Life annuities
  • Overseas real estate (i.e. Land or Buildings)

Failure to comply, or mistakes in your form, can lead to draconian fines. For some offences, the minimum fine is as much as €10,000. Fines can exceed the value of the property held abroad, and can reach up to 150% of the value of the asset.

Further, there’s currently no statutory limitation period by which the Spanish Tax Agency (the Agencia Tributaria) has to bring a claim against you, or your company. That means that you could be liable for an error or omission at any point in your life.

Normally, you’d expect claims to be brought within a certain time period. It’s typically four years in Spain for tax claims. This protects individuals and companies from open-ended liability to historic claims.

What’s changing

The heavy-handed sanctions have now been challenged in a case that ended up in the European Court of Justice (the ECJ). The ECJ found that the fixed penalties were ‘excessively repressive’ to the purpose of the law, which was to enforce tax compliance.

In addition, it was held that leaving claims open in perpetuity by the non-applicability of a limitation period was invalid.

The Spanish government has now announced that it will change the rules to ensure that they are proportionate. We expect that means a reduction in the level of fines and the provision of a statutory limitation period (likely to be four years) to restrict the time the authorities have to bring a claim for non-compliance or mistakes.

What you need to do

If you’re a Spanish resident with relevant assets abroad, then you need to continue to file the Form 720 for now. You may find that it is a shorter form than usual as some provisions are no longer enforceable.

Are you eligible for a refund?

If you’re a taxpayer in Spain and you filed a voluntary regularisation, you may be able to claim a refund if you paid taxes on relevant assets and rights that you acquired in the past four years.

Or, if you’ve received a fine for mistakes in your form, or failure to file a form, then you may now be eligible for a refund.

Please contact us if you’d like to discuss any issue raised.

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This post was written by Marc White