Moving abroad seems to be an ideal solution for those looking for a quieter life or a better quality of life. However, if you are an entrepreneur, investor or someone with significant wealth, moving out of Spain could mean facing the dreaded Exit Tax. This tax, created in 2015, has generated concern among those who, after years of work and accumulation of wealth, decide to change their tax residence to another country.
In this article, we will explain what the Exit Tax in Spain consists of, how it works, what requirements you must meet and how it affects those with significant shareholdings in companies. In addition, we will give you practical advice on how to handle this tax and what steps to take if you find yourself in this situation.
What is the Exit Tax in Spain?
The Exit Tax is a tax that applies to individuals who decide to move their tax residence outside Spain and who meet certain wealth requirements. It was introduced in 2015 as part of the tax reforms, with the aim of preventing people who move abroad from avoiding taxes on the accumulated gains from their holdings in companies.
This tax is triggered when a person decides to move to a country outside Spain after having been fiscally resident in the country for at least 10 of the last 15 years. In other words, it does not apply to those who have recently arrived in the country, but to those who have been establishing their tax residence in Spain for a considerable period.
Who is affected by the Exit Tax?
The Exit Tax does not affect anyone who decides to relocate, but those with significant wealth, especially with respect to equity interests in companies. For this tax to be triggered, two main criteria must be met: tax residency and equity participation.
- Tax Residency: For the Exit Tax to apply, you must have been a tax resident in Spain for at least 10 of the last 15 years before moving.
- Participation in Companies: The Exit Tax mainly affects people who have important participations in companies. It applies when you have at least a 25% interest in a company whose total value exceeds 4 million euros, or if you have at least 1% in a listed company whose value exceeds 1 million euros.
For example, if you have a 25% shareholding in a company valued at 20 million euros (i.e. a shareholding of 5 million euros), the Exit Tax will be triggered when you move abroad. But if your stake in a 2 million euro company is only 25% (500,000 euros), the Exit Tax will not apply.
Exit Tax Latent Gain Calculation
The Exit Tax is based on the so-called “latent gain”, which is the increase in the value of the shares of a company from the time you acquired them until the time you move. This increase is considered a capital gain and is taxed as such.
The latent gain is calculated as follows:
- Market value of the shares/units at the time of exit.
- Acquisition value: the price for which you bought those shares.
This calculation can generate friction, especially in unlisted companies, where the market value of the shares is not so transparent and can lead to disputes with the tax authorities. It is important to have a proper valuation to avoid problems.
How much do you have to pay for Exit Tax?
The latent gain generated by the exit from Spain is taxed as a capital gain in the Personal Income Tax (IRPF), applying the tax rates corresponding to the savings base, which currently range between 19% and 23% for the lower brackets, and up to 30% for the higher brackets.
The payment is made in the year following the move, together with the IRPF declaration corresponding to the last year in which you were resident in Spain. For example, if you move in 2025, you will have to file the IRPF return in 2026 and include there the fictitious capital gain derived from the Exit Tax.
Exit Tax Deferral
One of the most interesting options of the Exit Tax is the possibility to defer payment. This means that you will not have to pay the tax immediately, but you can defer it until certain circumstances are met. This option is available for those moving to countries within the European Union (EU) or European Economic Area (EEA) with mutual assistance agreements on tax collection.
Some of the countries that allow this deferral are Portugal, Italy, Germany, Norway and Iceland, among others. However, countries such as Switzerland and the United Kingdom are not included in this agreement. The deferral has several advantages:
- You pay nothing at the time of departure.
- The debt is “frozen” as long as you live in an EU/EEA country.
- You will only have to pay if:
- You sell the shares.
- You move to a country outside the EU/EEA.
- It has been 10 years since your departure and you still reside outside Spain.
This deferral can be an interesting option if you intend to continue living in the destination country for a long period of time.
Return Rule: What Happens If You Decide to Return to Spain?
If you decide to return to Spain before 5 years have passed since your departure and you have not sold the shares during that time, the Exit Tax is annulled. This is known as the “return rule”, and allows the Exit Tax to be eliminated, as if it had never existed.
If you have already paid the tax, you are entitled to request a refund of the amounts paid. However, this process is not automatic. You will have to present specific documentation and prove that your holdings are still intact and that you have not made any transactions during your stay abroad.
Practical Advice on Exit Tax
- Plan ahead: Before making the decision to move, it is essential that you consult with a specialized tax advisor to analyze the impact of Exit Tax and study the options for deferral or refund in case of return.
- Keep your documentation organized: If you decide to opt for deferral or refund, you will need to submit detailed documentation to the Tax Agency. Lack of proper documentation may delay the process or result in penalties.
- Evaluate the long-term situation: If you plan to return to Spain at some point, the return rule can be very beneficial, but make sure you meet the requirements to take advantage of it.
Conclusion
The Exit Tax in Spain can be a significant obstacle for those who decide to move abroad after having accumulated considerable wealth. However, with proper planning and the right advice, it is possible to manage this tax efficiently, taking advantage of deferral and refund options. If you are considering moving out of Spain, make sure you fully understand the tax impact and work with a professional to optimize your strategy.
Frequently Asked Questions about Exit Tax in Spain
Who is affected by the Exit Tax in Spain?
The Exit Tax affects individuals who have been tax residents in Spain for at least 10 of the last 15 years and who have significant shareholdings in companies. It is triggered when they move abroad.
How much do I have to pay for Exit Tax?
The Exit Tax is calculated on the unrealized gain on a company’s shares. This gain is taxed as a capital gain in the IRPF, with tax rates ranging from 19% to 30%, depending on the bracket.
Is it possible to defer payment of Exit Tax?
Yes, if you move to an EU/EEA country with a mutual collection assistance agreement, you can request deferral of payment without interest. Countries such as Portugal, Italy and Germany allow this deferral.
What happens if I return to Spain after moving abroad?
If you return to Spain within 5 years and you have not sold the shares, the Exit Tax is cancelled. If you have already paid the tax, you can apply for a refund.
How is the Exit Tax unrealized gain calculated?
It is calculated by taking the market value of the units at the time of exit and subtracting the acquisition value. The difference is considered a capital gain subject to taxation.
Which countries do not allow Exit Tax deferral?
Countries such as Switzerland or the United Kingdom are not included in the Exit Tax deferral agreement, so if you move to these countries, you will have to pay the tax immediately.
