es de en fr it pt

The restrictions on the free movement of capital imposed by that legislation are disproportionate

On the 15 February 2017, the Commission issued a reasoned opinion in which it found that certain aspects of the requirement for Spanish tax residents to declare overseas assets or rights 1 by means of a form entitled ‘Form 720’ were incompatible with EU law. According to the Commission, the consequences of failure to comply with that obligation are disproportionate in the light of the objectives pursued by the Spanish legislation, namely to guarantee the effectiveness of fiscal supervision and to prevent tax evasion and avoidance. Under the national legislation at issue, Spanish residents who fail to declare or who make a partial or late declaration of assets and rights that they hold abroad are liable for additional assessment of the tax due on the amounts corresponding to the value of those assets or of those rights, including where they have been acquired during a period that is already time-barred, and to the imposition of a proportional fine and specific flat-rate fines. In today’s judgment, the Court declares that Spain has failed to fulfil its obligations under the principle of free movement of capital. The obligation to submit ‘Form 720’ and the penalties for failure to comply with or for partial or late compliance with that obligation, which do not have an equivalent in respect of assets or rights located in Spain, establish a difference in treatment between Spanish residents according to the location of their assets. As that obligation is likely to deter, prevent or restrict the opportunities for residents of that Member State to invest in other Member States, it constitutes a restriction on the free movement of capital. The Court notes that the legislation at issue appears appropriate for ensuring the attainment of the objectives referred to above because, despite the existence of mechanisms for the exchange of information or administrative assistance between the Member States, the level of information available to them concerning assets held by their tax residents abroad is, overall, lower than that available to them concerning assets located on their territory. However, in the Court’s assessment that legislation goes beyond what is necessary to achieve those objectives in three respects: In the first place, the Court considers that Spain has failed to fulfil its obligations under the free movement of capital by providing that the failure to comply with or the partial or late compliance with the obligation to provide information concerning assets and rights located abroad entails the taxation of undeclared income corresponding to the value of those assets as ‘unjustified capital gains’, with no possibility, in practice, of benefiting from limitation. According to the Court, the presumption of acquisition of ‘unjustified capital gains’ established by the Spanish legislature does not appear disproportionate in relation to the objectives of guaranteeing the effectiveness of fiscal supervision and the prevention of tax evasion and avoidance, since, in particular, that presumption can be rebutted by the tax payer. By contrast, the choices made with regard to limitation are disproportionate in the light of those objectives, in so far as they allow the tax authorities to make an additional assessment of the tax due without that assessment being subject to any time limit in respect of amounts corresponding to the value of assets or rights situated abroad and not declared, or declared partially or late, using ‘Form 720’. Thus, the Court notes that the measure adopted by the Spanish legislature, in addition to including an effect of non-applicability of any limitation period, also allows the tax authorities to call into question a limitation period which had already expired vis-à-vis the taxpayer, which undermines the fundamental requirement of legal certainty. By attaching such serious consequences to the failure to comply with a declaratory obligation, the Spanish legislature went beyond what is necessary to guarantee the effectiveness of fiscal supervision and to prevent tax evasion and avoidance.