Xàbia Motion on Asset Declaration

English version of Motion agreed by Xàbia Town Council - April 2013
(Source http://www.xabiademocratica.info/xd/xd-news/motion/)

On October 12, 2012, the Law 7/2012, which among other things sets the obligation for all tax residents to declare all property and assets located abroad that exceed 50,000 euros was proposed. The said Act was implemented by Royal Decree 1558/2012 of 15 November and HAP/72/2013 order of January 30, in approving the construction of the model 720 for presenting this statement. 

The origin of that plan is standard anti tax fraud made by the Spanish government in order to avoid fiscal opacity. The conception of the rule was that Spanish and foreign people during the last decade in the so-called “Brick Boom”, had diverted funds or property acquired outside the country and that their respective tax returns did not mention those assets. The standard requires the declaration of real property and of assets or securities that exceed 50,000 euros held outside the country, of which they are owners, co-owners, authorized signatories or beneficiaries. 

The group undersigned (Javea Council) states that this motion recognizes the importance of acting forcefully to combat tax fraud and that any policy designed to eradicate these malpractices has our fullest support. However we highlight the incongruity of applying a standard explanatory memorandum which was introduced in association with the Royal Decree-Law on tax amnesty. The Amnesty that among other measures was introduced extraordinarily allowed for some to have the opportunity to benefit from a special regulation allowing those individuals or legal entities that opted for this exceptional and temporary alternative, to settle up with the Spanish tax authorities at reduced costs by paying only 10% of the amount of undeclared income and earnings without having to justify their origin.

Oblivious to the aim of the legislator is that the most vulnerable to this law is the foreign resident with tax residence in Spain. This in no way has been taken into account in the law set forth above and on which fall all the weight of the regulation to demand compliance with totally disproportionate penalties that are unprecedented in any state of the European Union.

The sanctions affect all those tax residents in Spain who do not submit the asset disclosure before April 30 and those who submit returns that are incomplete, inaccurate or not formalized by electronic filing. The amount of these penalties ranges from 5,000 euros to 10,000 euros for each asset, account, or undeclared deposit. Also the tax authority will calculate the amount of the penalty as though the value of the asset was an unreported capital gain over the last year. As an example; Foreign national residing in Spain who does not declare a home in their country of origin that is valued at 150,000 euros, would have the home treated as a capital gain and so would pay 37% of the value to which would be added, interest and a penalty provided for in the Tax Code as a special sanction under Law 7/201. Total payable as penalty 162.070 euros. -That is more than the value of the home that was omitted, without taking into account that this home was acquired by paying the transfer tax in their country of origin and that the money to buy the house came from earned income.that was taxed in the country of origin. It is such a disproportionate penalty that could lead directly to confiscation of the property in question.

To this must be added that most susceptible to this situation are retirees, many of them elderly, who have to file the return by electronic means, in a model the understanding of which is impossible for a non qualified person, forcing them to pay a professional to do it for them. This for assets that have already been taxed in their country of origin.

Also the model demands assessments of investments and pension funds that they are unable to provide mainly because they oscillate and lack a market value. (Examples; trusts, fiduciary deposits etc.)

In Javea the percentage of the population affected by this law is over 55% of the total population and as such are some of the predominant users of local services. This law and the required form is therefore highly detrimental to the local economy as these people might choose to change their tax residency, residency or directly request to be unsubscribed from the Padron which was the case yesterday when 17 foreign residents asked the Xabia Helpdesk how they could unsubscribe from it.

This group (Javea Council) believes that the regulation could be considered unconstitutional because it is creates an ad hoc special disciplinary regime within the Tax Code, violates the free movement of capital within the EU and violates treaties that prevent international double taxation.

For all we request the plenary of the municipality;

1. - I refer to the Ministry of Finance and Public Administration this motion in order to report on the direct damage that application of this regulation will cause the in coastal towns with large foreign populations.

2 - Urge the Ministry of Finance to moratorium Law 7/2012 in order to properly inform all taxpayers of the regulation 720 and to adapt the model simple easy to understand forms that do not require submission by digital means and the removal of disproportionate penalties.

3. - To initiate a review procedure of the Law 7/2012 to achieve equality with the tax systems of other EU countries in order to avoid international double taxation, in which the information is exchanged between member states which for individuals in many cases it is impossible to provide. Only in cases of states considered tax havens should the individual taxpayer be required to provide the information.

4. - To propose that other Municipalities with an eminent foreign population adopt this motion in order to be able to defend the rights of its residents

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