Vendors who sold between '97 & '06 can claim

I have just read an interesting article by ELS (legal firm based in Fuengirola) discussing how the changes in Spain’s capital gains tax law might allow EU vendors to reclaim part of the 35% they (unjustly) paid to the Spanish government. I wrote about this tax rebate, earlier in the year, but ELS have written a far more detailed and explanatory explanation.

Good news! Have you sold your Spanish property between 1997 and 2006?

Before 2007 the classical Spanish tax scheme on capital gain tax established two different tax rates applicable to profits obtained due to the sale of a property. Residents were subjected to a 15% tax rate while non-residents were obliged to pay 35%.

The European Commission began two infringement procedures against Spain in 2005 and 2006 for not to comply the European Court of Justice Resolutions on capital gains tax. These resolutions stated that Spain infringed the principles of free provision of services and of free movement of capital and persons, by discriminating non-residents trough a less favorable tax regime.

In order to fulfill EU resolutions Spain changed the system approving a homogeneous tax rate for both residents and non-residents from 15% and 35% respectively to 18%. In spite of the reform, the fact is that the tax regime until December 2006 was illegal under the terms of the EU treaties, implying the possibility for those tax-payers affected to Reclaim and be refunded the 20% overcharged.

LEGAL PROCEDURE.

As the European Union Law is directly applicable in every member state, the law and rights derived from the treaties shall be directly applied by the national courts. Therefore there is no need to appeal to any European Institution.

As expected, the Spanish Tax Office hasn’t accepted any of the claims filed, referring the issue to higher instances. Therefore the procedure to achieve a refund is a little bit more complex than just an application. There are 3 instances and claims involved in the process. Being realistic the length of the process can take around 3 years in some cases, however a shorter period seems possible taking into account the ultimate court cases.

LIMITS.

* There is an essential deadline limit according to Spanish Law, only taxes paid during the last 12 years can be reviewed. To interrupt the prescription is necessary to present the administrative application. Therefore only capital gain tax paid from 1997 and December 2006 can be appealed.
* The second limit is that only those who paid the full Capital Gains Tax at 35% after paying the initial Retention (5% of the selling price) can reclaim.

DOCUMENTS REQUIRED.-

POA for litigation.
Copy of the Spanish Tax Form “Modelo 212” signed and presented to the Spanish Authorities at time of payment.

Title deeds of the Purchase and the Selling. If you can not find one of these documents, don’t panic, we will be able to obtain a copy for you

LEGAL EXPENSES.

As the perspectives to achieve a refund of the payments are extremely good, we can offer our clients to make a small provision of funds to cover expenses as power of attorney for litigation, attorneys at law fees etc.. And only charge you once the monies are recovered.

Source: ELS blog

2 Responses to “Vendors who sold between '97 & '06 can claim”

  1. Schofields says:

    Thanks for the advice.

    I also read about this in the UK press. Claiming back tax is no doubt a complex task and getting professional legal advice is essential.

    Philip

  2. I agree Philip,

    I would also recommend people watch out for ‘shysters’ advertising their services.

    Andrew

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