The European Commission is opening infringement proceedings against Spain to challenge re income tax rules. capital gains realized by non-residents

During the first half of December 2021, the European Commission opened an infringement procedure by sending a letter of formal notice to Spain asking it to align its rules regarding the taxation of realized capital gains by non-resident taxpayers on the free movement of capital (Article 63 of the Treaty on the Functioning of the European Union).


In the event of capital gains resulting from a transfer of assets when payment is deferred beyond one year or staggered over a period exceeding one year, Spanish resident taxpayers have the option of paying tax. to pay when capital gains accumulate or defer them and pay them proportionately based on cash flow.

However, non-resident taxpayers are not offered this deferral option and must pay tax when capital gains accumulate at the time of the disposal of assets.

The infringement procedure begins with the sending of a letter of formal notice in which the Commission informs the Spanish authorities of the problems identified.

Spain has two months to respond to the arguments raised by the Commission. After that, if the Commission is not satisfied with the response, it can decide to send a reasoned opinion or a formal request to adapt Spanish rules to EU law, allowing two more months for dialogue. If no solution is found, the Commission will take the case to the Court of Justice of the European Union.

Key points to remember

It is recommended to examine past transfers of assets subject to income tax to non-residents whose payment of the counterpart has been deferred for more than a year and to monitor the evolution.

If the Court of Justice of the European Union ultimately concludes that Spain’s rules on capital gains subject to non-resident income tax are not aligned with the principle of free movement of capital, it should be possible to claim late interest for amounts overpaid between the time the capital gain was made (and the tax payment was due) and the various due dates.

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