Foreign Property Investors Overpaid Spanish Tax

The Spanish government could soon be facing claims for over-paid taxes from thousands of non-residents who sold property there prior to a change in Spanish capital gains tax rules.

Between 2003 and 2006, Spain charged a dual rate of tax on capital gains - 15% for residents and 35% for non-residents - but was forced to equalise the rate following a ruling by the European Commission, which argued that the higher rate was discriminatory against foreign investors.

Qualifying litigants must: have sold a Spanish property between May 2004 and December 31st 2006; not have been a fiscal resident of Spain when a property was sold; paid any CGT due to the Spanish authorities; and must have sold a property as an individual, not a company.

If it goes ahead, the legal action is expected to become the largest-ever tax claim against the Spanish government. However, it could take two years before a decision on the case is reached.