Tax Advisor: Exit Tax in Spain: Implications for Large Investors and Application Conditions

From the perspective of individual taxation, a fundamental aspect to consider when evaluating the tax implications related to changing fiscal residence from Spain to a third country is known as “Exit Tax,” regulated in Article 95.BIS of the LIRPF. This aspect is particularly relevant for large investors who hold stakes in various companies located in Spain as part of their personal assets.

Given the constant increase in competition among countries offering tax advantages, this new tax figure was introduced in the 2015 fiscal year. Its objective is to tax the potential capital gains generated by the ownership of shares or participations by the taxpayer who intends to change their fiscal residence, even if there is no transfer of such shares or participations at the time of the change in fiscal residence.

Requirements for the Application of “Exit Tax”

However, this measure does not apply in all cases, as the following requirements must be met for this tax to be applied to the taxpayer:

1. Have been a fiscal resident in Spain for at least ten years out of the last fifteen.
2. In the case that the taxpayer had previously opted for the special regime for workers posted to Spanish territory, the ten-year period will begin to be computed from the first period in which this special regime is not applied.

Additionally, this regime does not apply to all residents who own shares or participations; minimum thresholds are established. One of them is that the market value of the shares or participations owned by the taxpayer must exceed 4 million euros.

If the Spanish taxpayer who will change their fiscal residence outside of Spain does not meet the aforementioned requirement, this special rule will also apply if, in the last period in which the income tax return must be filed, the percentage of participation in the entity exceeds 25%, provided that the value of the participations in the entity exceeds 1 million euros. In this scenario, the special regime will apply only to the set of participations that meet the requirement, not to all those owned by the taxpayer, as in the case of the first threshold.

Exit Tax Conditions for Payment Deferral

Taxpayers must integrate these incomes in the last period in which they have the status of fiscal residents in Spain and must file the self-assessment of the income tax return. However, they can request a deferral in payment if the following conditions are met:

1. The change of residence occurs due to a temporary displacement for work-related reasons to a country or territory that is not considered a tax haven.
2. For any other reason, provided that, in this case, the temporary displacement occurs to a country or territory that has an agreement with Spain to avoid international double taxation with a clause for the exchange of information.

Treaties in the European Union and Exceptions to the Integration of Capital Gains after a Change of Residence

However, due to the treaties in force in the European Union, if the change of residence occurs to another Member State of the EU or the EEA, the gain must be integrated when, within the period of the ten years following the change of residence, any of the following circumstances occur:

1. Inter vivos transfer of shares or participations.
2. Loss of the status of resident in a Member State of the EU or the EEA by the taxpayer.
3. Non-compliance with the obligation to communicate to the tax administration the choice of these particularities, the obligation to declare the State to which they transfer their residence, as well as possible variations and the maintenance of ownership of the shares or participations.

If ten years pass without any of the mentioned circumstances occurring, it will not be necessary to declare the capital gain, even if the transfer of the participations occurs in future periods.

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