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Spanish CGT win for UK property vendors

05 May 2009
Issue: 4204 / Categories: News , Capital Gains
Recent sales may be entitled to tax refund

UK taxpayers who have recently sold property in Spain may be entitled to a capital gains tax refund.

In 2007, Spain reformed its CGT system, reducing the non-resident tax rate from 35% to 18%, the same rate applicable to residents.

Until December 2006, Spanish residents were taxed at a rate of 15%, while the rate for non-residents was 35%.

The Spanish High Court of Justice recently found in favour of a British couple who argued that the treatment was discriminatory under EU law.

Deloitte’s Patricia Mock said: ‘As a result of this ruling, individuals who were charged at the 35% rate could be entitled to claim a refund of the excess over the 15% rate’.

Due to the Spanish statute of limitations, claims can only be made in respect of property disposals in the 2005 and 2006 calendar years, prior to the rule change in 2007, warned Ms Mock.

In many cases the Spanish tax paid would have been credited against the CGT liability in the home country, so a refund of tax would not be worthwhile.

In some cases, however, the Spanish tax paid may exceed the home country tax on the gain so that the credit was limited. In these instances, a claim for a refund should be considered as an option.

Other instances in which a claim should be considered are where some or all of the gain was covered by the annual exemption or losses, thus reducing the effective UK rate.

Non-UK domiciles, who were paying tax on the remittance basis and did not remit the gain to the UK, hence paying no UK tax on it, will also find it worth investigating a refund claim.

Issue: 4204 / Categories: News , Capital Gains
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