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By Lexland Abogados, Marbella (June, 2010)

1- Why did non residents overpay Capital Gains Tax?

The overpayment stems from the different tax laws applicable for taxation of Residents and Non Tax Residents. In the years in question (prior to 2007), the tax law for Personal Income Tax of Spanish residents had established the tax rate applicable to capital gains derived from the sale of real estate at 15%, whereas the similar tax law for personal income tax of non Spanish tax residents had established the tax rate applicable to this very same capital gains at 35%.

2- Why is this discriminatory?

This dual taxation for residents and non Spanish tax residents at different tax rates was considered discriminatory because the actual object subject to taxation (the capital gains from the sale of real estate property) was identical and the only difference resided in the status of the vendor as tax resident or non tax resident, and it is this different treatment which is considered discriminatory in accordance with European Legislation.

3- Is there a time limit to consider?

The deadline to file claims is October 2010, after that date, claims cannot be raised.

4- How much will my claim cost?

The claims are undertaken on a no win / no fee basis, meaning that our professional fees won’t accrue until successful resolution of your claim. If a Power of Attorney is required at any stage during the process, the cost would be borne by you, at an approximate cost of 200 Euros. Additionally, if it should be necessary to file a suit before the Courts of Justice, the cost of the “Procurador” would also be borne by yourself (an estimate of the fees would be 300-600 Euros).

Notwithstanding the above, it would be our aim to have the claims resolved without requiring Power of Attorney or “Procurador”, as has been the case of our successful claims to date.

5 -How do I place a claim?

If you are entitled to a refund and are still eligible to file a claim, our Lawyers will be happy to assist you in filing this claim on a no-win / no-fee basis.

Next steps should be sending us the following documentation:

  • 1. Your Capital Gains Tax Return (Modelo 212) or Title Deeds of Purchase and of Sale along with Form 211 (Modelo 211).
  • 2. Copy of the passports of all owners of the property.

6- What is the Capital Gains Tax Form 212 (“Modelo 212”)?

This is the Tax Return filed to declare the Capital Gains Tax related to the sale of real estate property. The result may be a positive payment or the tax return may be used to apply for refund against the withholding tax suffered at the time of the sale if the resulting capital gains is negative.

Who may have this tax form?

You may have been given this tax return by your lawyer or tax adviser after the sale. Otherwise the lawyer who acted for you during the sale may have this form on file. If neither you nor your lawyer have this Form then it is possible that the Tax Return was not filed, although final confirmation could be obtained from the Tax Agency, and if the form was indeed filed a copy can be obtained from the Tax Agency. If no form was filed it is still possible to claim the refund with Form 211 plus the Title deeds of purchase and sale of the property.

7- What is the “Modelo 211”?

This is the Tax Return filed by the purchaser of your property to pay the withholding tax to the Spanish Inland Revenue. It will be necessary to have this form if you did not file Form 212.

Who may have this tax form?

You should have been given a copy of this tax return by the purchaser. Otherwise the lawyer who acted for you during the sale should have received a copy of this tax form from the purchasers and may still have it on file. If neither you nor your lawyer have this form then the Lawyer who acted for the purchaser should have it on file.

8-How many individuals are affected by this?

There is no official data available on this issue and therefore it’s impossible to know the exact number of individuals affected by this discrimination, however, all non tax residents in Spain who made a profit selling real estate property between 1997 and 2006 were subject to the prior tax law and will have overpaid to a greater or lesser degree their Capital Gains Tax. Due to the situation of the real estate market in these key years, when the market was at its peak, it is obvious that the affected will rank in the thousands.

However, expert currency dealers estimate that 90.000 Britons could be eligible to claim for a total amount of £283 million. But this is just an estimate for UK citizens and citizens from all EU countries were affected by this discrimination and therefore the amount that could be claimed could well exceed these estimates.

9- Do the dates the property was purchase or sold have any bearing on the outcome of the claim?

The only requirement is that one year must have passed between the date the property was acquired and the date the property was sold. The longer the property was owned may only have bearing on the amount of the capital gains that resulted and which was subject to tax.

10- Has this been resolved?

As a result of the condemnation of this situation by the European Commission and due to the threats of imposing sanctions against Spain, the tax laws were modified with effect from the 1st of January 2007 in order that all Capital Gains are now subject to taxation at 18%, irrespective of the nationality or residency status of the individual obtaining the capital gains subject to taxation (a 3% increase in taxation for tax residents, and a 17% decrease in taxation for non tax residents, in comparison to the situation prior to the 1st of January 2007).

11- Has there been any Official Recognition?

As would be expected there hasn’t been any official pronouncement on this issue, but the Spanish Tax Office (Hacienda) has begun to take on board the claims filed without contesting their merits.

12- How do I know if I overpaid my Capital Gains Tax?

If you sold your property between 1997 and 2006 and were non tax resident in all likelihood you may be affected by this overpayment and should contact us to determine the extension of your overpayment and if you are due a refund and are still eligible to apply for the same.

13- What are the Steps involved in claiming?

The initial claim must be filed before the Spanish Tax Office, and only if denied would we need to address a first initial appeal before the Administrative Courts and finally a case before the Administrative Courts of Justice.

14- What amount can I claim?

The exact amount in Euros will depend on the particulars of each case, however the amount should be 20% of the capital gains (profit) obtained from the sale of the real estate property.

Additionally any claim filed would also demand legal interest on this overpayment, which could average approximately 6% per annum from the date of the claim.

15- How do I know if my claim be successful?

Due to the particulars of these claims, the chance of winning is high, although success can never be fully guaranteed. Notwithstanding we can inform you that there has already been success in Court with a final ruling having been handed down by a Regional High Court finding the Administration liable and ordering reimbursement of the Capital Gains Tax overpayment.

Our confidence in our success is such that we are offering to undertake these claims on a no-win / no-fee basis.

16- Power of Attorney: What is it, why is it needed and how do I get it?

We could initiate the process without the Power of Attorney (POA) but this may be required at a later stage.

The Power of Attorney (POA) is a notarized document whereby you grant legal powers to another person (i.e. to your lawyers) to act on your behalf. The POA required will include powers to act on your behalf before the Spanish Tax Office and also specific powers to act on your behalf before the Courts of Justice. It is a document that is required by the Administration and the Courts of Justice and without which any claim filed on your behalf would not be accepted or could not be processed and acted upon by our Lawyers.

The POA must be granted before a Notary Public, in Spanish, and if granted outside Spain must include The Hague Apostille as per the 1961 Hague Convention abolishing the requirement of legalisation for foreign public documents. The POA may be drafted simultaneously in your own language and Spanish, but if solely drawn up in your own language it will require subsequent translation by a Sworn Translator at extra cost. The Hague Apostille is a legal requirement pertaining to the validity of documents in a foreign country.

The POA must be signed by all owners of the property sold and may be granted jointly (cheaper) or separately.

Our Lawyers will be able to guide you through the whole process of obtaining the required Power of Attorney with the Hague Apostille and will be able to assist you in locating a Notary Public close to your domicile in your country and will also be able to provide this Notary Public the information necessary to draft the POA. Of course, if you are in Spain you may grant the POA at a Spanish Notary Public, which our Lawyers will be able to assist you with also.

17- What is the Engagement Agreement?

The Engagement Agreement is the contract signed by all owners of the property sold establishing and defining the relationship with our lawyers in order towards filing of the claim for reimbursement of the capital gains tax overpayment.

18- How long will my claim take?

It is impossible to give an exact timescale for resolution of the claims, which could take up to a couple of years to be resolved. However, we have had claims which have been successfully resolved by the Tax Agency in a mere 2 months.


Juan Miguel Marín Herbert
Abogado / Partner


Published in Spain Info |