Irish owners of property in Spain could benefit from a decision by the European Commission to take the Spanish government to court over its tax laws.

The Commission said yesterday it was taking a case against Spain in the European Court of Justice over two tax laws that it says discriminate against non-residents.

One part of the case relates to rules for capital gains tax. Spain currently levies tax on property sales at a rate of 35 per cent for non- residents and 15 per cent for residents. "The different tax rates clearly discriminate against non-resident owners of properties," said a spokeswoman for tax commissioner Laszlo Kovacs.

A survey last year by the commercial office of the Spanish embassy and the solicitor Tom McGrath, who advises on overseas property purchases, estimates that around 200,000 Irish people have acquired property in Spain in the past decade.

The commission is taking Spain to the European court on the basis that its capital gains tax rules do not conform with the freedom of capital movement and non-discriminatory principles that are enshrined with EU treaties. It constitutes indirect discrimination on the grounds of nationality, said the commission in its ruling.

Frank Ryan, chairman of IFG Ireland, a financial services firm that offers advice on tax to Irish property owners in Spain, said a change in the capital gains tax rules in Spain would benefit anyone that was considering selling their property.

But he said many of the property owners in Spain were holiday home owners rather than investors and may not plan to sell properties to realise gains.

Property owners may have to wait for more than a year before a European Court judgment is issued in the case. It remains unclear if Spain will oppose the case.

Meanwhile, Spain will also face infringement proceedings at the European court over a 25 per cent withholding tax levied on non-residents receiving Spanish income. In contrast, Spain applies a progressive taxation system for Spanish residents, ranging between 15 per cent and 45 per cent. As a result, non-residents are subject to a higher tax burden than resident individuals. The difference in treatment is most significant in the case of taxpayers receiving a comparatively low income, says the commission.

This tax law does not conform to the EU treaty and also makes it less attractive for employers to recruit workers from other member states rather than from Spain, said the commission, which sees the rule as an obstacle to free movement of labour.

The commission said it would also take Greece to court over VAT charged for road assistance and car registration taxes and send a reasoned opinion - a summary of the EU executive's concerns - to Germany over tax on executors of wills and Portugal over non-resident withholding tax charged at foreign banks.