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Important notes on model 720

Important notes on model 720


After some delay, the European Commission has finally decided this past month of June 2019 to sue Spain before the EU Court of Justice for considering that the regulations associated with Model 720 is contrary to community law. Specifically, according to the opinion that the Commission transferred to Spain in February 2017, these rules would violate five fundamental community freedoms (free movement of capital, people and workers, freedom of establishment and freedom to provide services).


As recalled, Model 720 was approved in 2012 by the government of MARIANO RAJOY in return for the so-called tax amnesty to punish with greater severity the undeclared possession of property and rights abroad by natural persons resident in Spain. The omission of the mandatory declaration in the corresponding model entails, among other effects, the lien as an imprescriptible income of the assets discovered and the imposition of a 150% fine.


For this reason, from the moment of its birth, the consequences of these norms were considered openly contrary to not just a few constitutional principles but were considered incompatible with community freedoms. Despite the well-founded suspicions about its legality, the Tax Administration has not hesitated since 2015 in practicing very hard regularizations with basis and support in 720.


As on many other occasions, reality has shown us that what was advertised as a specific instrument to combat fraud has ended up being applied indiscriminately on all taxpayers, for whom forgetting or simply delaying an informative declaration has been a punishment with the greatest severity as if they were fraudsters. The rigor of these regularizations and their lack of legal meaning has been such that it has been the Treasury courts themselves (TEAC) that have begun to question their validity and to clarify their application.


 Now, as it seems predictable, the legal arguments of the Commission prevail, the simple statistics of the CJEU (the European Commission earns the majority of the resources that it interposes) or the pure common sense, in little more than a year, that is to say in the first quarter of 2020, the regulatory norms of Model 720 will be formally annulled and will be retroactive effects from 2012. As a result, the Administration will be obliged to pay back with interest and expenses the large regularizations carried out in these years and not only those affecting the EU or the European Economic Area but also those related to third countries (Andorra, Switzerland ...).


Along with this negligible material cost, which will be assumed by all taxpayers as a whole, the Tax Administration will be exposed in addition to the effects that in its institutional image implies having participated in the promotion and application, with all its rigor, of a norm that from its beginnings was guessed unconstitutional and contrary to Community Law. It is hoped that, from now on, with support in the Common Administrative Procedure Law, the AEAT will suspend the ongoing procedures as long as it does not fall into resolution and thus avoids aggravating the negative consequences mentioned. However, it is not certain that this will be the case.


Even then, perhaps the most difficult effect to ignore is the damage produced in the democratic quality of our institutional system. 


The approval and mass application of the rules are manifestly incompatible with fundamental rights and freedoms, it does not seem that it should find a place in our system as easy and desirable as a given collective purpose.


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