The European Court of Justice (ECJ) ruling on 6th October 2009 that the higher capital gains tax applicable to non-residents in Spain between 1997 and 2006 was discriminatory, has generated huge interest from non-residents who sold their Spanish property in this period and were subjected to the higher rate of tax.
However, the process to file for the reclaim is not so straightforward. Any application to reclaim overpaid taxes should be filed with the Spanish Tax Authorities stating the amount overpaid and the interest accrued since the payment date.
From this administrative procedure, the tax authorities are required to produce a formal statement error with the calculation of the amounts that should be paid back including the interest.
However, the tax authorities may deny the claim. In such a case the taxpayer must go through the ordinary appeals process. Under Spanish Tax Law, the reclaim period is limited to 4 years from the tax payment date. For example, a property sold on 20th April 2006 would have paid the tax within the due date (4 months from sale on 20th August 2006), the claimant has until 20th August 2010 to file for the rebate.
Failing this, there is a possibility of claiming beyond the 4 year time limit. A judgement passed on 26th January 2010 by the ECJ means the taxpayer can make a claim through an extraordinary procedure via the Council of Ministers to claim the responsibility of the Spanish state as legislator.
Whilst it is not necessary to seek legal help through the procedure, for such a complex process, legal advice is advisable for a successful and stress free outcome.
Source: OPP