Since the introduction of legislation in 2012, (LEY 7/2012, de 29 octubre, de prevención y lucha contra el fraude fiscal), Spain has required all Spanish residents to make an overseas assets declaration, notifying the authorities of the worldwide assets that they own or control.
Under the Law, failure to make an overseas assets declaration, or submission of an inaccurate one, would result in costly penalties. Unreported overseas assets that were later discovered by the authorities, were treated as undeclared income on which tax should have been paid. The fines and penalties for such could amount to more than 150% of the undeclared asset value.
Whilst the law was aimed at deliberate high level tax evaders, the fact it allowed penalties to be imposed simply for non-declaration of overseas assets, meant that expats and other foreigners living in Spain, who are likely to have such assets, could fall foul of this rather intrusive legislation.
Indeed many received harsh penalties, simply for making the declaration late or making a mistake on the form, despite having legitimately acquired their overseas assets BEFORE taking up residency in Spain.