The Luxembourg-based court has found that the Spanish taxman discriminated unfairly against EU residents by slapping 35% tax on profits made from selling property in the country.

Spanish residents, including foreigners living in the country, are only charged 15% tax on similar property transactions.

The landmark ruling opens the floodgates to claims for multi-million euro tax refunds from the Spanish authorities according to IFG Spain, an Irish-owned company that provides financial advice to foreigners buying property in the country. But it warned that, in order to qualify, the claims may have to relate to taxes paid in the previous four years.

It could be another year before the Spanish tax code is changed to give effect to the European Court ruling according to Elaine Higgins, managing director of IFG Spain.

This leaves people who currently have property on the market in a grey area, unsure about whether they should pay tax at the old rate of 35% and then apply for refunds when the tax code is changed.

"Anybody with a sale on the table at the moment, or who is likely to sell before the end of the year, needs to consider their position, " said Higgins. "Owners selling property at the moment cannot be sure of which tax rate is applicable."

An estimated 50,000 Irish people have bought holiday homes in Spain in recent years and their finances are under scrutiny both in Spain and back at home.

After turning a blind eye for years, the Spanish authorities have begun clamping down on tax dodging by foreigners who rent out their holiday homes.

Meanwhile, the Revenue Commissioners in Dublin are preparing to investigate how Irish people have financed their Spanish properties amid concerns that many investments were made to hide "hot" money from the taxman.