Referral by European Commission due to failure to remedy alleged infringement of EU law
The European Commission (EC) yesterday referred Spain to the Court of Justice of the European Union (CJEU) for having failed to remedy an alleged infringement of EU law due to a discriminatory tax treatment of nonresidents in taxing capital gains.
According to the EC release, under Spanish tax law when payment for a transfer of assets is deferred for longer than a year or is paid in installments over a period longer than a year, resident taxpayers may pay the tax either when the capital gain accrues or proportionally deferred on a cash flow basis. However, nonresident taxpayers may not defer payment of the tax and must pay the tax when the capital gains accrue at the time of the transfer of the assets.
The EC on December 20, 2021, sent Spain a letter of formal notice followed by a reasoned opinion on May 23, 2024, asserting that this difference in treatment between residents and nonresidents infringes upon the principle of free movement of capital in violation of EU law. In its formal replies, and in subsequent technical exchanges with national authorities, Spain has maintained that its tax legislation is in line with EU law. The EC, however, considers that efforts by the national authorities have, to date, been insufficient and is therefore referring Spain to the CJEU.
Read a March 2025 report prepared by the KPMG’s EU Tax Centre