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Spanish tax rip-off: The fight begins

Jaimie Kanwar

Investors caught up in the Spanish ‘Tax trap' are fighting back against the Government...

Among them are hundreds of Brits, who were overcharged by 20% on Capital Gains Tax after selling a property in between June 2004 and December 2006. Initial conservative estimates put the total amount to be reclaimed at £11,000 per person, totalling an estimated £37 million.

However, 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.

Tax Loophole

The tax loophole - which was originally exposed by currency exchange brokers HiFX and Spanish lawyers, Costa, Alvarez, Manglano & Associates (CAMA)- 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.

Initial estimate ‘conservative'

Mark Bodega, Director of currency specialists HiFX said: "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 200 people have registered to be part of the class action.

"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."

Time is of the essence

A spokesperson for CAMA added: "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.