The European Court of Justice recently decided that the Spanish Government’s different historical capital gains tax (“CGT”) rates for resident and non-Spanish residents, was contrary to EU Law.

The effect of the decision, is that any non-Spanish resident person who sold a Spanish property between October 2005 and December 2006 where Spanish CGT was paid, may be entitled to a 20% rebate plus interest on the capital gains tax paid at the time.

In Spain, CGT for non-Spanish residents was charged at a rate of 35% up to December 2006 while Spanish residents were charged at rates ranging from 15%-45% depending on their period of ownership. Furthermore, Spanish residents were only subject to the 35% rate when their overall income exceeded a certain threshold, while no such rule applied to non-Spanish residents.

From 1 January 2007 a flat CGT rate of 18% applies to all property owners both Spanish and Non-Spanish resident. Refunds of CGT will therefore only apply to disposals made in the period from October 2005 to December 2006 as Spanish law only allows claims to be made for the previous 4 years from the date of the claim.

William Fry Tax Advisors and our Spanish Taxand member firm Garrigues would be happy to assist in processing any claim for repayment of Spanish CGT.

This article has been authored by Conor Bradbury.