More about the law

The European Court of Justice Ruling

Until the end of 2006, the Spanish Government charged non resident property owners a higher rate of Capital Gains Tax when they sold their property than local Spanish residents had to pay.

Foreign non-residents were charged 35% Capital Gains Tax, compared to just 15% paid by residents of Spain.

A ruling by the European Court of Justice found that this double standard was discriminatory, and ordered the Spanish Government to apply the same rate of Capital Gains Tax to both residents and non-residents.

Furthermore, the European Court of Justice ruled that European Citizens who had been illegally overcharged Capital Gains Tax should now be allowed to reclaim their tax.

The Reclaiming Procedure

European Law does not offer a mechanism for reclaiming the tax, and the procedure is governed by the laws of the member state, in this case Spain.

Spain has chosen not to make the reclaim procedure simple.

The Spanish procedures for reclaiming the illegally charged tax are complex and must be pursued through a judiciary route involving the European Court of Justice, the Spanish Supreme Court and the Spanish Council of Ministers.

Many claims were denied due to following an incorrect legal procedure.  It is absolutely imperative that the reclaim is carried out by Tax Lawyers qualified to deal with both European Tax law as well as domestic Spanish Tax Law.

There are two distinct types of claims:

• Those who paid the full 35% Capital Gains Tax or 5% retention and are making their claim within four years of selling their property.  In effect this means only those who sold their property in 2006 and paid Capital Gains Tax.  If you fall into this group then you should make your claim as soon as possible.  If you delay, then this will increase the time taken to pursue your reclaim.

• Those who paid the full 35% Capital Gains Tax  or 5% retention and sold their property between January 1997 and 2006.  This is a longer legal procedure because it falls outside of the four year window set by the Spanish Taxman for the backdating of tax reclaims.

If you sold your property in Spain up to 4 years ago, then it is imperative that you should start your reclaim now to avoid legal delays. But even if you sold you property before that, you should start your reclaim as soon as possible: the sooner you start, the sooner you will receive your tax back!