Expats in Spain will soon live with a milder version of the Modelo 720 worldwide asset declaration form after EU court rules the worst aspects illegal

Judging by recent news reports, you could be forgiven for thinking that Spain’s egregious Modelo 720 Worldwide Asset Declaration reporting requirement is already dead and buried since the European Court of Justice (ECJ) declared aspects of it illegal on Thursday. The bad news is the Modelo 720 will almost certainly live on in one form or another. The good news is, it will be a milder financial threat to expats living in Spain.

Last Thursday 27th of June the ECJ ruled that Spain’s Modelo 720 Worldwide Asset Declaration reporting requirement violates EU regulations and prevents the free movement of capital with excessive penalties. The Spanish press reported it as a “severe blow” to the 720 form, and attention has immediately switched to how people can claw back the fines they have suffered at the hands of the Modelo 720 since it was introduced by the PP finance minister Cristóbal Montoro back in 2013.

But as Raymundo Larraín points out in an article here yesterday, the Modelo 720 tax declaration form isn’t going anywhere. It will just be tweaked to get around the ECJ’s objections and carry on being a headache for expats in Spain with assets of 50,000€ or more (per asset class) abroad.

The good news is the fines and penalties for falling foul of the Modelo 720 are expected to be much lighter, so it won’t be such a big risk for expats living in Spain. 

As I have explained in previous articles, Spain’s Modelo 720 Worldwide Asset Declaration reporting requirement was introduced to target corruption and tax evasion but mainly just ended up being a nightmare for expats who moved to Spain having quite legitimately accumulated wealth abroad. 

To cynical people it looked like a deliberate attempt by the Spanish government to target the wealth of foreigners living in Spain. Personally I think that, like many Spanish laws, it was just  lazily drafted with no care for unintended consequences, and when it became clear that the biggest group of victims were expats in Spain, lawmakers probably just shrugged their shoulders and thought “well, they can’t vote anyway, so who cares.”

Cristóbal Montoro

The Modelo 720 was introduced by the PP Government back in 2013 ostensibly to clamp down on tax evasion and corruption. The PP party at the time stank of corruption, and the law was introduced with an amnesty that basically allowed bent politicians and their cronies to legalise wealth with just a slap on the wrist, whilst expats with legitimate wealth outside of Spain were put in a risky situation. If you didn’t know about the new law, or made any mistake in your declaration, you could be ruined by huge fines. 

Since it was introduced I have heard from many expats who have fallen foul of the Modelo 720.  They were placed under terrible financial stress simply because they moved to Spain and didn’t know about it, or have made understandable mistakes in the declaration. Because it is so badly designed the form is a minefield of reporting risks even if you declare ontime. Fines for making a mistake like getting one number wrong start at 10,000€. Spain’s Modelo 720 Worldwide Asset Declaration reporting requirement has long been one of the reasons I give for not buying property in Spain (as an expat). 

I have also heard from a lot of people who have decided against moving to and investing in Spain because of the Modelo 720. According to Spanish press reports the Treasury has collected 230€ million in penalties and fines since it was introduced. On the other hand I have no doubt that Spain has lost many billions of Euros of foreign investment thanks to this stupid reporting requirement that only really harms expats in Spain. The only thing the Modelo 720 has done is damage Spain’s international reputation and leave the country poorer.

Perhaps the current government will take the opportunity presented by the ECJ’s ruling to scrap the law altogether? It would be doing Spain a big favour, but it’s not going to happen. The current Spanish government is a coalition of Socialists and Communists. The last thing they will do is scrap a tax declaration that targets wealth outside of Spain. The Modelo 720 is here to stay.

But the good news is the fines and penalties are expected to be much lower as a consequence of the ECJ’s ruling that Spain’s Modelo 720 contravenes EU law. How low, we will have to wait and see.

Thoughts on “Expats in Spain will soon live with a milder version of the Modelo 720 worldwide asset declaration form after EU court rules the worst aspects illegal

  • mwpicard@gmail.com says:

    How can one attempt to claw back fines paid based on this illegal and punitive law? Are any attorneys active in this SPI community ready to take on a case on a success fee basis?

    • Mark Stücklin says:

      According to one expert just 5% of the 2.5m residents of Spain (mainly expats) obliged to declare the 720 actually did so. That means 2.375,000 families at risk of massive fines. No wonder expats are shunning Spain if they know about this.

      From what I have read since this news broke some people will be able to claw back their fines, but only in certain cases. I’ll invite a lawyer to explore this topic in an article here.

      • I am no legal person but they say they will have a new version out before March end. ???But I don’t see how . That will have to go to the European court again to be checked ,and there not very quick . The only way is to scrap 720 and make a new law up and call it something else . Because if you filled in a new 720 form I would have thought you would be braking the law as would they . Your thoughts please

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