European Commission asks Spain to adjust tax rules for non-residents

by admin
tax rules

The European Commission has formally requested Spain to change its tax rules regarding capital gains for non-residents.

This request is based on the fact that the current tax rules do not comply with the free movement of capital as set out in Article 63 of the Treaty on the Functioning of the European Union (TFEU).

Current situation

Currently, taxpayers resident in Spain have the option to pay the tax on capital gains obtained from the sale of assets at the time the gain is realised or to defer payment and pay it over a period of more than a year. However, this does not apply to non-residents. Non-residents must pay tax on their capital gains immediately at the time of asset transfer, without the possibility of deferment.

Infringement proceedings

The European Commission initiated an infringement procedure against Spain on December 2, 2021 by sending a formal notification. Spain did not adapt its legislation to EU requirements. Therefore, the Commission has now decided to send a reasoned opinion to Spain. This is a formal request to Spain to amend its legislation within two months. If Spain does not comply, the Commission may decide to refer the matter to the Court of Justice of the European Union.

Cogesa Expats

Consequences for non-residents

For non-residents this means that they are currently in a more disadvantaged position compared to Spanish residents when selling assets in Spain and receiving payment in installments. The current rules can be considered discriminatory because they disadvantage non-residents compared to residents in Spain.

Next steps

Spain now has two months to respond and take the necessary measures to bring its legislation into line with EU law. If Spain does not do this, the case could be referred to the Court of Justice of the European Union. This could lead to legal and possibly financial consequences for Spain.

For more information, please consult the official communication from the European Commission.

Also read: European pressure to save Doñana

Baycrest Wealth

You may also like