On 6 June 2017, the Directorate-General for Taxation issued Binding Consultation V1434-17, in which it ruled on the consequences arising from the late filing of the declaration of assets and rights abroad.
In the aforementioned Consultation, the Directorate-General for Taxation clarifies that the issue must be addressed from a comprehensive point of view, in the light of the regulatory standards described below:
The Eighteenth Additional Provision of General Tax Law 58/2003, of 17 December, which establishes the obligation of taxpayers to provide the Tax Administration with information on assets and rights abroad, also regulates the penalty system applicable to the late submission of the declaration, distinguishing between the following cases:
In the first place, when the declaration is submitted outside the deadline, without previous notification from the Tax Administration, the sanction is a fixed monetary fine of 100 euros for each item of data or set of data referred to in each element, with a minimum of 1,500 euros.
On the other hand, if the declaration is submitted outside the deadline upon request from the Tax Administration, the penalty will consist of a fixed monetary fine of 5,000 euros for each item of data or set of data referred to in each element, with a minimum of 10,000 euros.
Article 39.2 of Personal Income Tax Law 35/2006, of 28 November, which governs the system applicable to unjustified capital gains arising from the late submission of Form 720, establishes that these will have the consideration of unjustified capital gains and will be included in general taxable income for the earliest tax period of those that are not statute barred and for which regularization is possible, except in cases where the taxpayer accredits that the ownership of the assets or rights corresponds to declared income or income obtained in tax periods in which he or she did not have personal income taxpayer status.
The First Additional Provision of Law 7/2012, of 29 October, on the amendment of tax and budgetary legislation and the alignment of financial regulations for strengthening actions to prevent and combat fraud, establishes that the application of the provisions of Article 39.2 of the Personal Income Tax Law determine whether a tax violation has been committed. This would be considered a serious offence and will be sanctioned with a monetary fine proportional to 150% of the amount on which the penalty is based.
Article 27 of the General Tax Law, which establishes the general system of surcharges for late submission without previous notification.
In accordance with the criteria expressed by the Directorate-General for Taxation, and in keeping with a homogeneous and joint interpretation of the precepts described above, we may find ourselves in two completely different situations when it comes to submitting Form 720 after the deadline.
In the first place, those cases in which the taxpayer submits a late declaration of assets or rights whose ownership arises from income declared or obtained in periods in which he or she did not have personal income taxpayer status. In this case, the only consequence arising from the late submission of Form 720 will be the application of the penalty system contained in the Eighteenth Additional Provision of the General Tax Law, consisting of a fixed monetary fine of 100 euros for each item of data or set of data referred to in each element, with a minimum of 1,500 euros.
On the other hand, in those cases in which the taxpayer submits Form 720 after the deadline and cannot accredit that the ownership of the assets or rights abroad declared after the filing date originate from income declared or obtained in tax periods in which he or she did not have personal income taxpayer status, in this case, in addition to the consequences arising from the late submission of the declaration envisaged in the Eighteenth Additional Provision of the General Tax Law, it will be necessary to analyze in which cases the fine of 150% set forth in the First Additional Provision of Law 7/2012 applies.
In regard to this issue, the Directorate-General for Taxation has concluded that in those cases in which the late submission of Form 720 is accompanied by the voluntary regularization of the unjustified capital gains by the taxpayer, without prior notification, as provided for in Article 39.2 of the Personal Income Tax Law, the penalty envisaged in the First Additional Provision of Law 7/2012 will not apply, but only the corresponding surcharge in respect of the provisions of Article 27 of the General Tax Law. This regularization will be carried out through the presentation of an out of time declaration of the Personal Income Tax corresponding to the earliest financial year among those not statute barred at the time of the late submission of tax return Form 720, stating the unjustified capital gains.
Therefore, in accordance with the criteria expressed by the Management Body, the application of the penalty consisting of a monetary fine proportional to 150% of the tax payable resulting from the regularization of the unjustified capital gains in the terms provided for in the aforementioned Article 39.2 of the tax law, set forth in the First Additional Provision of Law 7/2012, would be limited to the cases in which the taxpayer is not able to accredit that the assets or rights that are the subject of the declaration originate from income that had been declared or obtained in tax periods in which he or she was not a personal income taxpayer, and that there had been no voluntary regularization, without previous notification, of the unjustified capital gains.
Lastly, it should be noted that tax treatment described can be extrapolated to the provisions of Article 121.6 of Law 27/2014, of 27 November, on Corporate Income Tax.
Arrabe Integra
Tax Department
