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Brussels opens an infringement procedure against Spain for discriminating against foreign rental owners

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Commission gives two months for foreign owners to also benefit from 60% deduction on personal income tax

The European Commission announced on Thursday the opening of an infringement procedure against Spain for considering that it gives “discriminatory tax treatment” to foreigners who rent their homes. Brussels has so far sent a letter to the government reminding it that Spanish law is a “restriction on the free movement of capital” within the European Economic Area. The EU executive gives him two months to adapt the rules. Otherwise, it could run a gear that could end with a complaint in the Court of Justice of the EU and sanctions.

Citizens or companies resident in Spain enjoy a general 60% reduction for the net income obtained from renting a dwelling for habitual use when they file their income tax return. However, this deduction is not applicable when the landlord is a foreign person or investor. As reported today by the European Commission, Brussels considers that this exception violates the Treaty on the Functioning of the EU, which states that “all restrictions on the movement of capital between Member States and between Member States and third countries are prohibited.

The Commission has formally asked Spain by letter to remove this proviso as it considers that “investors” from other countries are “subject to different treatment which unduly restricts the free movement of capital”. The Commission warns that if no action is taken within two months, it could send it a reasoned opinion. Ultimately, the procedure may end in the Luxembourg Court with sanctions.

The same can happen to you if you do not amend your legislation on the treatment of capital gains. Spanish law exempts, subject to conditions, transfers of shares to tax residents in Spain and other EU member states from this tax. However, it leaves out Norway, Iceland and Liechtenstein, which are part of the European Economic Area. Brussels warns that this legislation also violates EU treaties and gives Spain two months to amend its rules.

Source: El País

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