CJEU – Recent Developments in Direct Taxation 2022

1. CJEU 27 January 2022, Commission v. Spain (C-788/19)

1.1. Spanish Legal Framework

As from 2012, Law 7/2012 has incorporated a new obligation to provide tax information into the Spanish Legal System. Under this new regime, all tax residents in Spain are obliged to submit an annual return declaring all their assets and rights located abroad through the so-called “720 form”. Moreover, the law laid down specific penalties connected to the non-submission of said return within the established deadline or submission with missing information or inaccurate or false data.

In connection with this, the Spanish Personal Income Tax Law and the Corporate Income Tax Law set forth that the possession of assets and rights breaching the information obligation is considered an unjustified capital gain and, consequently, must be included in the general taxable base of the oldest tax year open to tax audit. To this effect, it is important to note that the rates applicable to the general tax base in Personal Income Tax differ among the different Autonomous Regions in Spain. For example, the maximum tax rate ranges from 45% in Madrid to more than 50% in Asturias, Cantabria, Catalonia, La Rioja and Valenci...