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Huge Fine for UK Expat ref Modelo 720
27 April 2016 @ 18:58

Huge non-disclosure fine for Spanish resident

by Sandy Paterson

Huge non-disclosure fine for Spanish resident

The European Court of Justice (ECJ) is to hear an appeal from a pensioner who lives in Granada. The reason for the appeal? An order by the Hacienda to pay €442000 in fines, costs and interest due to non-disclosure of foreign assets one year late.

I am writing this hard on the heels of my previous article “No place left to hide” in which I discussed the Common Reporting Standard and Automatic Information Sharing between government tax offices around the world.

Doubtless (unless you have been living up in the mountains with no access to news for the last few years) you will already be aware of the need to disclose foreign assets on your Modelo 720 return. The problem is that a lot of Expats have been burying their heads in the sand in the hope that somehow their assets overseas would be invisible.


A Reminder of what needs to be declared


The three disclosure categories are:

  • Bank accounts (including UK accounts)

  • Investments (including things like offshore bonds, ISAs etc)

  • Immovable property.

Assets in any one category greater than €50,000 must be declared on Modelo 720 every year.


Mr. Pensioner from Granada


Assets have needed to be declared since 2013. However, Mr. Pensioner from Granada did not mention €340,000 in shares and cash he had tucked away in Switzerland until his 2014 Modelo 720 return. (By the way, under the new Automatic Information Sharing scheme Switzerland will soon be telling the Spanish Hacienda of this type of investments automatically).

So for whatever reason Mr. Pensioner from Granada neglected to disclose the assets he was presented with the huge bill in May 2015 which is now subject to appeal with the ECJ.


Why such a huge amount?


This case has been the first time that the Hacienda has imposed the maximum available fine of 150%. They have stated that this non-disclosure is a “serious violation”. A bit heavy handed in my humble opinion, and that of Mr. Pensioner from Granada’s legal representatives. However with Expats being such a “soft targets”, and the need for governments around the world to build up the coffers, it would not be a surprise to see more such “examples” made of individuals.

El Economista have discovered that the €442000 comprised of the following:

  • Fine for failure to declare on time- €253950

  • Regularise undeclared assets - €169300

  • Interest - €16060

Since inception the declarations via Modelo 720 have amounted to €126.3bn the majority from money tucked away in Switzerland and Luxembourg.  


What does the future hold?


It is believed that the European Commission has written to the Spanish Government regarding the policy as they believe it may contravene European Law. This may very well prove to be the case but on the evidence of the Hacienda’s handling of tax reforms over recent years it may be prudent not to hold your breath!



In the meantime for those of you who wish to discuss how investments can be made in a way which is Spanish tax compliant and does not need to be declared on Modelo 720, please get in touch with one of our Independent Financial Advisers in Mallorca and download a FREE Financial Guide for some bedtime reading.

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