On Wednesday 12 March, the European Commission decided to refer Spain to the Court of Justice of the European Union for infringing the free movement of capital, as set out in Article 63 of the Treaty on the Functioning of the European Union (TFEU).
In accordance with Spanish tax legislation, resident taxpayers have the option of deferring capital gains tax when the payment for the transfer of assets is deferred for longer than a year or spread over a period longer than a year. In this case, the tax is paid in proportion to each portion of the price received. This confers a cash-flow advantage since tax is only paid on the portion of the capital gains corresponding to the payments made.
For non-resident taxpayers, on the other hand, capital gains are taxed on an accrual basis, i.e. the tax is deducted in full when the assets are transferred, even if the payment is spread over a long period. This means that non-resident taxpayers cannot benefit from the option of deferring payment of the tax, even if they receive the instalment payment on time.
The Commission considers this tax treatment to be discriminatory. (Original version in French by Anne Damiani)