Solicitor Valencia

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RETURN OF MONEY PAID BY NON RESIDENT VENDORS WHO PAID 35% CAPITAL GAINS TAX TO THE TAX DEPARTMENT

You may be aware from English newspapers that a Court of Justice in Spain has declared void the payment by non residents of the Capital Gains tax rate of 35%. The Court has accepted that a 15% tax rate is applicable to both residents and non residents.

As a result of this all those involved have a considerable credit that the Tax Department is obliged to return plus interests.

This decision by the Courts was based upon the European Court that prohibits discrimination between European citizens. For this reason the Spanish Government modified the law in December 2006 and from the 1st of January 2007 Capital Gains Tax for both residents and non residents was taxed at an equal rate of 18%.

In principle, the ordinary temporal limit to make the revision of the tax is applicable. This means that those who sold their property 4 years and 4 months ago are eligible to request for this return of money (20% of the gains). This period will be accounted from the date of the petition of the revision of the tax. In other words, those who sold their property from November 2004, 2005 and 2006 may request the return of the money. The rule of 4 years and 4 months is not applicable from today, it is applicable from the day that the non resident requests the return of the money, therefore this is an urgent matter to attend to (for instance, if a vendor requests the revision of the tax on the 1st of May 2009, the sale should have taken place on or after the 1st of January 2005). Notwithstanding, it is also possible in a future judgment that the Court declares contrary to European Law the national restriction of 4 years and 4 months.