Those who have paid Capital Gains Tax (CGT) on sales made in Spain at the rate of 35% are due a refund following a recent court decision. The EU commission deemed some time ago that the Spanish authorities were not entitled to charge 35% CGT to foreigners while taxing locals at a rate of just 15%. This is the first time, however, that a legal case has actually been taken and won.
The High Court in the region of Valencia has ruled in favour of a British couple, Mr and Mrs Roy, telling the Spanish tax authorities to repay them, having charged a CGT rate of 35% instead of 15%.
"This discriminatory law was in force for many years, It will have affected thousands of people" said Emilio Alvarez of Valencian law firm Costa, Alvarez, Manglano."
The opportunity to lodge a tax reclaim hinges on a change to the Spanish tax laws in December 2006, effected following an EU ruling that the discrepancy in rates charged to locals and foreigners was illegal.
In 2007, Costa, Álvarez & Manglano initiated a legal action to reclaim from the Spanish Government part of the Capital Gains Tax paid by EU citizens on the sale of their property in Spain. The firm has recently obtained a final judgement from a Spanish High Court obliging the Spanish Tax Authorities to refund overcharged Capital Gains Tax.
This judgement sets a legal precedent for thousands of EU citizens to reclaim money owed to them by the Spanish authorities. Essentially if you sold a Spanish property between mid-2004 and 31st December 2006, paying CGT at 35 %, you are entitled to a refund.
TheSpanish tax authorities had, up to this point, resisted retrospective demands for refunds. This Valencian court decision last month at the end of a year-long case, is the first ruling to go in favour of a claimant.
Costa, Álvarez & Manglano warns that, due to legal time limits, submissions should be made quickly to avoid the expiration to an entitlement to a refund. According to the European Court of Justice and Spanish Law, you must present your reclaim within four years of the Capital Gains Tax payment date.
Several hundred people have signed up to pursue claims but, in typical Spanish style, the process is not particularly straightforward. Firstly they must lodge a claim at their Spanish tax office. Assuming this is rejected (and it probably will be) claimants have one month to appeal to an 'economic tribunal'. If that, too, rejects the claim (and it probably will) then claimants have two months in which to start pursuing the issue through the courts. This, of course, involves employing a Spanish lawyer, preferrably one au-fait with Spanish tax law. Making a claim to the tribunal incorrectly or not doing so within the time period allowed will normally lead to the claim being struck out completely.
Costa, Alvarez, Manglano says: "The decision in Valencia was very clear, we don't expect other High Courts in Spain to make a different decision."
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