Daily Telegraph - 19th. April 2008

Up to a year ago British property owners in Spain suffered a higher capital gains rate than the locals when they sold, Emma Simon reports:-

Thousands of Britons who have sold property in Spain in the past few years could be due a tax rebate worth £10,000 or more.

Spanish property experts claim that many people paid too much capital gains tax when they sold their property, because Spanish tax law unfairly penalised foreign property owners. As a result lawyers are now pursuing legal action in order to force the Spanish government to pay compensation to those affected.

The controversy surrounds the capital gains tax that is paid when a Spanish property is sold. Until recently British property owners (and other foreign nationals) had to pay 35 per cent of any gains as tax. This compared with just a 15 per cent tax charge that was paid by Spanish nationals.

It is estimated that these additional tax payments netted £37m for the Spanish government. But the European Commission challenged these rules, which it claimed were discriminatory and contravened EU rules.

As a result the Spanish government changed its tax rules at the start of 2007, and the 15 per cent tax rate is now levied on both Spanish and overseas property owners. But to date there has been no move to offer rebates to those who had previously paid the higher rate – hence the legal bid to force the government to refund these "discriminatory" tax charges.

How many Brits are affected ?

The exact figures are unknown, but conservative estimates suggest at least 4,500 properties have been sold by UK owners in the past four years. Privately some property experts put the figure much higher, and suggest almost 70,000 could have been hit with this unfair tax charge.