Spain in the dock over non-resident tax laws

17th January 2006, Comments 0 comments

17 January 2006, MADRID — The European Commission is to refer Spain to the Court of Justice over its taxation of non-residents from the sale of property or personal income.

17 January 2006

MADRID — The European Commission is to refer Spain to the Court of Justice over its taxation of non-residents from the sale of property or personal income.

If Spain is forced to change its tax laws, it will benefit many expats who are not registered as residents or those working for short periods in low-paid jobs such as language teaching.

The move comes after Madrid failed to change its legislation after a formal request from the EC last July, the Spanish daily El Pais reported.

Under existing Spanish law, non-residents have to pay 35 percent tax on capital gains from property sales if the home has been held for over one year, whereas residents have to pay only 15 percent.

Spain also applies a flat withholding tax rate of 25 percent on employment-rated income for non-residents. Residents only have to pay 15 percent in the case of the self-employed. This rate is flexible and goes between 15-45 percent.

The Commission said the discriminatory treatment regarding employment income was particularly unfair to those on low salaries.

"The Commission considers that the Spanish tax legislation failed to conform to the EC Treaty requirements, in particularly to the non-discrimination principle," it said in a statement.

"The higher tax burden on non-residents makes it less attractive for Spain to recruit labour from other member states other than from Spain and thus represents an obstacle to the free movement of workers."

It added the tax on capital gains on the sale of property went against the EU's rules on the free flow of capital.

[Copyright EFE with Expatica]

Subject: Spanish news


 

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