One Month To Reclaim Spanish Illegal CGT Charges

By Alison Steed

PROPERTY owners who were illegally charged capital gains tax (CGT) by the Spanish Government have just one month to reclaim their money.

Many Brits selling property between 1997 and 2006 were charged CGT on the sales by the Spanish authorities in error, and already hundreds of Britons have reclaimed an average of €18,000 (£14,980).

The problem has occurred because the Spanish Government imposed a CGT charge of more than double that applied to Spanish residents on properties they sold in Spain.

The tax loophole - which was originally exposed by currency exchange brokers HiFX and Spanish lawyers, Costa, Alvarez, Manglano & Associates - came about after British non-residents paid a Spanish Non Residents' Income Tax rate of 35 per cent on any capital gains, compared to a rate of 15 per cent paid by Spanish nationals.

This 133 per cent overpayment not only totals a profit somewhere in the region of an estimated £350m for the Spanish Government, but also contravened European Community Treaty rules on discrimination and therefore was unduly charged by the Spanish Government.

In November last year the European Court of Justice (ECJ) ruled in favour of claimants and extended the period in which people had sold a property and could successfully claim from only 2004 - 2006 to 1997 - 2006 meaning any UK / EU citizen who sold a property in Spain between Jan 1, 1997 and Dec 31, 2006 can claim.

Every seller could be entitled to reclaim whether they paid just the 5 per cent withholding tax or the full 35 per cent CGT. However the ruling also stated that all claims need to be settled by the end of October 2010 meaning sellers have just one month left to begin the three month claim process, as August is a holiday month in Spain.

Even Brits who have already attempted and failed to successfully claim can now resubmit their claim via Costa, Alvarez, Manglano & Associates as The European Court of Justice has recently opened new legal actions for this reclaim allowing claimants to make a second attempt. To date Costa, Alvarez, Manglano & Associates has a 100 per cent success rate on claims made.

Home owners who only paid the 5 per cent compulsory withholding tax on their property selling price are now also able to make a reclaim. The average amount for those that have paid the full 35 per cent tax is currently €18,000 and for those who only paid the 5 per cent compulsory withholding tax is €7,130.