From 1 January 2007, capital gains tax on property sales and personal income for non-residents in Spain will drop from 35% to 18%. This change was ordered following the European Court of Justice decision upholding a complaint that is was unfair for the tax to be charged at 35% for non-residents, but only 18% for Spanish residents.

Recent research from Mintel states that 800,000 Britons now own a second home abroad. Spain was the most popular location amongst more than four in ten respondents, who have either already bought or are looking to buy abroad. The change in taxation will benefit those Britons who live in Spain temporarily, or who work there for short periods, and are therefore not registered with the Spanish authorities as residents.

"This is fantastic news for Britons living or working temporarily in Spain," commented Ian Smith, head of European Operations at Halifax plc.

Over sixty-five year olds who have lived in their home in Spain for the last three years are currently exempt from Spanish Capital Gains Tax.

In Britain, Capital Gains Tax is charged at 40% on the sale of a second home, but is not charged on the sale of someone's first home.