EU to force Spain over ‘illegal’ expat tax

Part-time expats who rent out their Spanish homes can now claim the 60 per cent tax reduction given to Spanish nationals in the same circumstances.

In a rare intervention by the European Commission, the practice of charging non-permanent resident expats tax on earnings from renting their Spanish properties is now considered unfair as well as illegal. The 60 per cent income tax reduction granted to Spanish citizen property owners will now be made available to their expat equivalents after the end of the two-month period granted by the EC to enable the tax office to get its house in order.

De facto, the European Commission has put Spain on notice, during which time it must respond to the EU giving a full explanation of the reasons why it was treating foreign property owners unfairly. Should the EC not accept Spain’s explanation, its response will state why it believes Spanish lawmakers have acted outside EU law and are therefore in violation. Should this happen, Spain will be given another two months to remedy the situation in a manner which complies with EU law.

Finally, should Spain still not comply for whatever reason, EU lawmakers will take the country to the European Court of Justice in order to seek restitution. In addition to this issue, the EU is considering a similar legal strategy to deal with the member state’s Modelo720 foreign asset declaration form, a compulsory document due from all residents who hold property or over €50,000-worth of investments overseas. Brussels believes fines imposed for non-disclosure are against EU law, and are prosecuting the Spanish taxman as a result.

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