European justice considers it illegal for Spain to force the declaration of assets abroad

The CJEU maintains that the restrictions on the free movement of capital imposed by Spanish legislation “are disproportionate”

The Court of Justice of the European Union (CJEU) has declared that Spain has breached its obligations under the principle of free movement of capital. In particular, it considers that the national legislation that obliges tax residents to declare assets or rights abroad by means of the form called “model 720” is contrary to Union law.

The court acknowledges that the contested legislation could be justified by the achievement of the objectives of ensuring the effectiveness of tax controls and combating tax fraud and evasion, since the information available to the Member States in relation to assets that its tax residents hold abroad is less than that which they hold in relation to the assets located in their territory. But it underlines that there are also “mechanisms for the exchange of information or administrative assistance between the Member States”, thus revealing that “this legislation goes beyond what is necessary to achieve these objectives”.

The European Commission asked Spain to modify the controversial legislation 

The European court thus agrees with the European Commission, which in 2019 appealed to the community courts after asking Spain to unsuccessfully modify legislation that, in its opinion, imposes “disproportionate” sanctions on those who do not make the declaration or present it outside of time.