The European Commission officially launched an infringement procedure against Spain on Wednesday. The accusation: discrimination against foreigners legally residing in Spain concerning tax matters. Brussels criticizes that “non-resident taxpayers” are required to pay a tax based on the cadastral value of their property, a regulation that does not apply to domestic citizens.
Unequal treatment in property taxation in Spain
At the heart of the issue is Spanish tax legislation, which demands an income tax of 2% of the cadastral value of their main residence as “theoretical income” from non-residents. Resident taxpayers are exempt from this levy. This unequal treatment, according to the European Commission, clearly violates fundamental EU principles: the free movement of workers and the free movement of capital.
Spain’s tax system under EU scrutiny
The procedure began with the transmission of a letter of formal notice to Spain. This is the first formal step in an infringement procedure that could ultimately end before the European Court of Justice (ECJ) if Spain does not promptly rectify the identified shortcomings. The Spanish government now has two months to respond to the demands of the EU executive. Should a satisfactory response not be provided, the European Commission may issue a reasoned opinion, the second and final phase before the case is brought before the Court of Justice of the European Union. This case highlights the ongoing scrutiny of national tax laws by the EU to ensure compliance with European fundamental freedoms.
