Hundreds of Britons who have sold a property in Spain between June 2004 and December 2006 have begun the fight to reclaim their money from the Spanish government, who overcharged them Capital Gains Tax by 20%. However, where as initial conservative estimates put the total amount to be reclaimed at £11,000 per person – totalling an estimated £37 million – over the last three months hundreds of Brits have registered average reclaims of more than £19,300 each – totalling more than an estimated £86 million that British people have been overcharged by the Spanish government.
The tax loophole – which was originally exposed by currency exchange brokers HiFX and Spanish lawyers, Costa, Alvarez, Manglano & Associates – came about after British non residents paid a Spanish Non Residents’ Income Tax rate of 35% on any capital gains, compared to a rate of 15% paid by Spanish nationals. This 20% overpayment not only totals a profit somewhere in the region of an estimated £86 million, but also contravenes European Community Treaty rules on discrimination and therefore was unduly charged by the Spanish Government. British people applying for a refund are also set to add on missing interest at a compound rate of 6% to their reclaims, meaning payouts could be on average 26 % larger than first thought.
However, whilst more than 300 people have so far joined forces and registered requests for rebates since the launch of the website that was set up to help them (www.spanishtaxreclaim.co.uk) , thousands more are still to come forward.
Mark Bodega, Director of currency specialists HiFX said: “Since launching the website and establishing this class action against the Spanish tax authorities, we have always said it would be extremely difficult to put an actual figure on the number of people affected by this tax issue and how much they would be able to reclaim from the Spanish government. This is largely because the Spanish government will not reveal this information, and this is why our initial estimation about the amount being able to be reclaimed was on the conservative side. However, the sums that people are coming forward to reclaim are much larger than anticipated, almost double in size. So far more than 300 people have registered to be part of the class action, which is a huge response – but we anticipate there are more than 4,500 British people affected by this, meaning there are still a lot of people who need to come forward to reclaim what is rightfully theirs.” People who have sold property previous to June 2004 have already missed out on being able to make a reclaim on their overpaid tax, as under Spanish law claims can only be made dating back over a four year period, meaning millions more have become victim to this tax trap.
Commenting on the issue, Spanish Lawyer Emilio Alvarez said: “A change in the law at the start of 2007, which saw the standard Capital Gains Tax for non Spanish residents being brought in to line – ºa reduction from 35% to 15% , passed by largely unnoticed. As a result, thousands of people who had previously sold property in Spain are entitled to a 20% rebate, with estimates now standing at £19,000 each plus interest. The response so far has been amazing, thousands have made enquiries, with more than 200 people registering to begin the reclaim process. However, if anyone believes they have been affected by this they need to move quickly, due to stringent legal restrictions people who sold their property before June 2004 have already missed out, as claimants must register within 4 years, but thousands of Brits can still join forces and fight to get the Spanish tax authorities to pay back the money owed.“In some cases potential claimants are being put off by the lawyers who acted for them during the sale as they are being told that they will not be able to get hold of the necessary forms (Form 212) or that this consumer campaign will not succeed. As a result, we are offering to speak to the Spanish Tax Office on behalf of any clients who have doubts to ascertain whether or not they are eligible and get the forms they need.”
