The collapse of Modelo 720 declaration requirements in Spain was hastened last month when Spain’s Supreme Court declared that fines issued for failing to report foreign-held assets were null and void. The ruling was retrospective, meaning any fines already issued may be reclaimed.
Such a ruling had been long expected, after the European Court of Justice declared that the penalties “violated obligations incumbent on the Kingdom of Spain” and “infringed free movement of capital” given that they were disproportionate to equivalent fines for non-declaration of domestic assets.
In fact, after the ECJ’s finding in January, the Spanish Ministry of Finance immediately reduced fines and established a four-year statute of limitations where there had previously been none.
The Modelo 720 requirement was introduced in 2013 by Mariano Rajoy’s government, and required the declaration of foreign-held assets worth over €50,000. Over 7,000 residents were fined in the first few years, and the requirement was one of the main reasons for foreign buyers renouncing or deciding not to apply for residency.
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