#capitalgainstax

Tap the fingers

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

This request is based on the fact that the current rules are contrary to the free movement of capital as enshrined in Article 63 of the Treaty on the Functioning of the European Union (TFEU).

Current situation

Currently, taxpayers resident in Spain can choose to pay the tax on capital gains, obtained from the sale of assets, immediately upon realization of the profit, or to defer the payment and pay it spread over more than a year. However, non-residents do not have this option. They must pay the tax on their capital gains immediately at the time of the transfer of the assets, without the possibility of deferral.

Infringement procedure

On 2 December 2021, the European Commission launched an infringement procedure against Spain by sending a formal notification. As Spain did not align its legislation with EU requirements, 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 fails to comply, the Commission may refer the case to the Court of Justice of the European Union.

Consequences for non-residents

Non-residents are currently in a more disadvantageous position compared to Spanish residents when they sell assets in Spain and wish to receive payment in instalments. The current rules can be considered discriminatory, as they disadvantage non-residents compared to residents in Spain.

Next steps

Spain now has two months to react and take the necessary measures to bring its legislation into line with EU law. If Spain fails to do so, the case may be referred to the Court of Justice of the European Union, which could lead to legal and possibly financial consequences for Spain.

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