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2Central government taxes

2.13 Reporting obligations relating to assets and rights abroad

The law regulates an obligation to report assets and rights abroad that applies to individuals and legal entities (including pass-through entities) resident in Spain or nonresident with a permanent establishment.

This obligation affects accounts, securities (including insurance and life or temporary annuities) and real estate or rights over real estate, with certain quantitative and qualitative exceptions.

Although this is a purely formal obligation to be met each year in relation to information referring to the preceding year (the first return to be filed being that relating to the fiscal years ending on or after October 29, 2012), the failure to comply with this obligation or the incorrect or late compliance with this obligation was subject to a costly penalty regime pursuant to which penalties were calculated per item or set of data not reported or reported inaccurately or late.

In addition, if this obligation was not fulfilled in a timely manner, the income detected was deemed undisclosed income or an unjustified capital gain for CIT or PIT purposes, respectively, attributable to the last earliest period of those not statute-barred, even if it were proven that the income was generated before that, unless it was evidenced that the income was reported and tax was paid on it or that it was generated when the taxpayer was not resident in Spain. If this undisclosed income or unjustified capital gain were attributed to the taxpayer, it could entail a penalty of 150% of the tax debt derived from that attribution.

These consequences (attribution of undisclosed income or unjustified capital gains, fixed penalties and penalty of 150%) were analyzed by the European Commission through an infringement proceeding brought against Spain (2014/4330 C (2017) 1064) in accordance with article 258 of the Treaty on the Functioning of the EU.

The CJEU finally ruled, in a judgment of January 27, 2022, that Spain had breached its obligations pursuant to the principle of free movement of capital, for the following reasons:

  • Because the breach of, or the incorrect or late compliance with, the obligation entails taxing the undisclosed income without the possibility for the taxpayer to invoke the statute-barring of the tax obligation.
  • Because it penalizes such conduct with a penalty of 150% of the tax payable relating to that attribution of unreported income, which can also be accumulated to fixed fines.
  • Lastly, because it penalizes such breaches with unlimited fixed fines that are not proportional to the penalties established in a purely national context.

Pursuant to that judgment, Law 5/2022, of March 9, 2022, was approved, effective starting on March 11, 2022, eliminating the aforementioned penalty regime, and establishing that the income allocable to assets or rights that was not reported or that was reported late is an unjustified gain. Notwithstanding, the CJEU judgment should have immediate effects following its publication, and the State Tax Agency is already refunding the penalties charged previously.

The Central Economic-Administrative Tribunal ruled, in a recent decision from March 2022, that the effects of the judgment are applicable immediately, but remembering that Spanish legislation still includes a regime of attribution of unreported income or capital gains (that does not depend on the existence of this disclosure of assets and rights abroad through the aforementioned return). Thus if, due to filing that return, there is a disclosure of income not reported previously (and generated when the taxpayer was a resident), the taxpayer must be in a position to prove that it was generated in statute-barred periods, in order to avoid said attribution to the tax base.

For now, after the elimination of the specific penalty regime for the failure to file said return, Spain has not established any penalty regime other than the one established for the rest of informational returns.

The general return period runs from January 1 to March 31 of the year following that for which the return is filed.