Brits begin class action against Spanish government

Hundreds of Britons have begun a class action suit against the Spanish government, fighting to reclaim money from property sales made over the last four years.

Some 200 Brits, all of whom sold property in Spain between June 2004 and December 2006, have begun the fight to reclaim capital gains tax – which they were erroneously over charged.

It is thought sellers were overcharged by some 20 per cent on the proceeds of transactions.

The tax loophole came about after British non residents paid a Spanish Non Residents' Income Tax (NRIT) rate of 35 per cent on any capital gains, compared to a rate of 15 per cent paid by Spanish nationals.

The discrepancy was originally exposed by currency exchange brokers HiFX and Spanish lawyers, Costa, Alvarez, Manglano & Associates.

This 20 per cent 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 six per cent to their reclaims, meaning payouts could be on average 26 per cent larger than first thought.

Whereas 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.

"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," explained Mark Bodega, director of currency specialists HiFX.

"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."

Some 300 sellers have registered to date, with further information available at Spanish Tax Reclaim.