MADRID – More than 120 taxpayers are demanding a refund of €70 million from the Spanish tax authorities. This is money they have paid in taxes and fines for not declaring their foreign assets promptly via model 720.
The ‘model 720’ tax return form was introduced in 2012. It required anyone with tax residence in Spain to declare their foreign assets, without exception, if they had a value of more than €50,000. In the event of an incorrect declaration or no declaration, a fine could be imposed. This could be up to 150% of the IRPF levy.
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In January last year, the Court of Justice of the European Union ruled that this declaration was “contrary to EU law” and that the restrictions and fines imposed were “disproportionate”. Following this decision, the Spanish Supreme Court declared the fines retroactive in 2022.
How to recover the money paid?
There are two ways for taxpayers to recover the money paid. Firstly, by filing an appeal with the Ministry of Finance or through ongoing legal proceedings. However, Hacienda is refusing to provide any information about the money that has already been repaid by the courts, according to Newtral.
According to the Tax Authorities, on June 27, 2023, there were a total of 126 requests for refunds of taxes and fines worth €70,426,190.57. However, these requests are still pending, and the refund has not yet been issued.
‘Tip of the iceberg’
Alejandro del Campo, a lawyer involved in the case against Spain regarding model 720, emphasises that the figures provided by Hacienda are only the tip of the iceberg. He claims that there are thousands of pending procedures in Spanish courts where money is already being recovered.
In addition, 55 persons demand a refund of €81,525 in fines from the Tax and Customs Administration for not declaring their foreign assets on time.
Repayment including default interest
Although the Tax and Customs Administration does not confirm this in its answer, the tax lawyer points out that the courts are already ruling in favour of taxpayers. Following these judgments, Hacienda then sends notifications regarding the repayment of the income, including default interest. The Ministry reminds the taxpayer that this interest is taxable. This interest is considerable, up to 4% per annum, as in the case of a client who received back €300,000 plus €85,000 in interest.
Experts are critical of this practice and advise people to include late interest on their tax returns, as they then have four years to recover these amounts.