Spain Taken To Task Over Tax Treatment Of Diplomatic Employees

By Ulrika Lomas, for LawAndTax-News.com, Brussels

26 October 2007

The European Commission on Thursday sent Spain a formal request to amend its legislation with regard to the tax treatment of diplomatic and consular employees.

Under the current law, persons resident in a Member State other than Spain, when recruited to work in a Spanish diplomatic or consular office, cannot benefit from any personal or family allowances, as they are treated as non-residents for tax purposes.

The Commission considers that this tax provision is contrary to the free movement of persons guaranteed by the EC Treaty, given that those who are Spanish residents before recruitment can benefit from these allowances.

The EC's request is in the form of a ‘reasoned opinion’, the second stage of the infringement proceedings provided for in Article 226 of the Treaty. If Spain does not respond satisfactorily to the reasoned opinion within two months, the Commission may refer the matters to the European Court of Justice.

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