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Tax advice on 720 sanctions may infringe the free movement of capital protected by EU law

On July 2nd, the Supreme Court issued three new rulings on the sanctioning regime and the failure to comply with the duties of Form 720. More specifically, the proportion or disproportion of the sanction imposed for late compliance with the declaration is analyzed.

The first two orders examine the following issues:

  • Determining whether a sanctioning act may be incompatible with European Union law.
  • To determine which parameter should be considered for comparative purposes, whether that of the amount or economic significance of the assets and rights located abroad or that of the amount or economic significance of the penalties for similar infringements when they affect assets and rights located in Spanish territory.

On the other hand, the third appeal seeks to analyze the following:

  • To determine whether an income tax assessment can be made without being subject to any statute of limitations, when the unjustified capital gains that are adjusted correspond to income constituted by goods and assets abroad.

For its part, the European Commission has already ruled on the disproportionality of the consequences of non-compliance with Form 720. For this body, "the sanctions provided for in Spanish legislation as a result of failure to notify assets held in other EU and EEA Member States (Form 720) are contrary to EU law".

Thus, the following sanctions are those which, alone, constitute a restriction on the fundamental freedoms of the TFEU and the EEA:

  • The classification of assets as capital gains.
  • The non-application of the normal rules of limitation.
  • Fixed pecuniary fines.

In conclusion, the Supreme Court clarifies the parameter to be considered for comparative purposes in order to verify the proportionality of the penalty imposed.

B Law & Tax
International Tax & Legal Advisors.

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B Law & Tax

B Law & Tax está formada por abogados y asesores fiscales, con una amplia experiencia en dar asistencia legal y fiscal a multinacionales y directamente a expatriados, en todas las cuestiones ligadas al desplazamiento de trabajadores a otros países.

Tenemos un gran conocimiento y experiencia en toda la casuística que afecta a los expatriados y a las empresas, tanto en desplazamientos desde España hacia al exterior, como de países extranjeros hacia España.

Facilitamos el diseño y la coordinación de programas de expatriación para las empresas y aseguramos un adecuado cumplimiento de las obligaciones legales y fiscales.

A lo largo de estos años hemos trabajado tanto para empresas multinacionales, como para PYMES, que como consecuencia de la internacionalización de la economía tienen personal desplazado a otros países. Asimismo, trabajamos con numerosos despachos internacionales especializados en servicios legales y fiscales a expatriados lo que nos permite dar una solución global tanto a la empresa, como al expatriado.