British home owners in Spain set to reclaim thousands

The European Court of Justice (ECJ) has ruled in a landmark legal case that the Spanish government has illegally overcharged non Spanish residents Capital Gains Tax (CGT) by 133% from 1997 up until December 2006. The ruling now paves the way for a possible £283 million refund from the Spanish government to UK citizens alone. 
 
New ruling by the ECJ

The new ruling by the ECJ means that non Spanish citizens who were ordered to pay 35% CGT on their properties as far back as 1997 will be able to make a tax reclaim.  Those home owners who only paid the 5% compulsory withholding tax on their property selling price will now also be able to make a reclaim. The average amount for those that have paid the full 35% tax is currently £13,370 and for those who only paid the 5% compulsory withholding tax is £7,130.

The Spanish court

Following a successful ruling by the Spanish courts in February this year, any non Spanish resident who had purchased a property between 2004 and 2006 was able to apply for a tax rebate following the ruling that the overcharging was illegal.  However, the new ruling by the ECJ means that UK home owners who sold a property as far back as 1997 will now be able to lodge a claim for the estimated £283 million in tax they have overpaid. Figures by currency exchange broker HiFX indicate that with the ECJ extending the reclaim period by an additional eight years (from 1997) then 90,000 British people could now come forward to make a reclaim.
 
The background

Last year a British couple became the first successful claimants against the Spanish government.  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% on any capital gains, compared to a rate of 15% paid by Spanish nationals.  This 133% overpayment contravened European Community Treaty rules on discrimination and therefore was unduly charged by the Spanish government.  Following the launch of the spanishtaxreclaim.co.uk website in March 2008, 600 British people are currently in the process of reclaiming the money they were illegally overcharged.
 
Mark Bodega, Marketing Director of currency specialists HiFX said: "We have been fighting for the last two years to help British people reclaim the Capital Gains Tax that they were illegally overcharged by the Spanish government.  Whilst we had success earlier this year in a Spanish court, which ruled that anyone who sold a property between 2004 and 2006 could come forward to make a reclaim, this announcement by the ECJ is huge. We estimate that with the reclaim period now being extended as far back as 1997, people in the UK who were affected could now come forward to reclaim almost £300 million which rightfully belongs to them, and which they were illegally overcharged.  We are currently working with 600 British claimants who are in the process of putting their cases forward.  We now urge anyone else who thinks they may have been affected by this to come forward."
 
Commenting on the issue, Spanish Lawyer Emilio Alvarez said: "The consequences of the ECJ ruling are huge and far reaching. Following the ruling by a Spanish court earlier this year we have only been able to get refunds for those that were illegally overcharged Capital Gains Tax between 2004 and 2006.  The ECJ ruling means that as many as 90,000 citizens alone could now come forward to make a reclaim."

Potential claimants should however think carefully before choosing their legal representation.
 
Alvarez continues: "We are frequently contacted by people who received wrong advice when making their claim and have as a result now ruined their chances to get their money back. The Spanish legal procedures that rule this refund are complex and may be different for each client.  People affected really need to understand it is worthwhile to use expert advisors who are experts in both taxation and the Spanish legal system otherwise they could be putting their claim in jeopardy."
 
What to do if you think you have been affected:

Seek professional specialist legal advice as it is not a simple case of filing your reclaim with the Spanish Tax Authorities. It is important to choose a specialist Spanish tax solicitor familiar with International tax laws and court procedures as each case may have to go to the Spanish and ECJ Courts. It is important to realize that any cases that are rejected for whatever reason, cannot file the reclaim again.

For more information, and details of how to register your interest, visit spanishtaxreclaim.co.uk.