B Law & Tax
27 February 2024

Exit tax in spain 2024: do i have to pay taxes if i leave spain?

The “Exit Tax”, also known as exit tax, aims to tax the transfer of assets out of Spain, thus preventing individuals and companies from moving their assets to jurisdictions with more favourable tax regimes. 

This tax will not apply in cases where the change of residence is made to another Member State of the European Union or of the European Economic Area that has mutual assistance agreements on the exchange of tax information. 

In Spain, the legal basis for the “Exit Tax” is found in Article 95 bis of the Personal Income Tax Law (Ley del Impuesto sobre la Renta de las Personas Físicas – IRPF). According to this article, tacit or unrealised capital gains are subject to taxation when the following requirements are met: 

1º To have maintained the status of tax resident in Spain for at least ten of the fifteen tax periods prior to the last tax period subject to personal income tax return.  

2º Losing tax residence in Spain. 

3º Be the holder of:  

a) Being the holder of shares or holdings in entities whose market value, determined in accordance with the provisions of article 95 bis 3, exceeds 4,000,000 euros in aggregate.

b) In the event of not complying with the provisions of point a) on the accrual date of the last tax period subject to declaration for this tax, to be the holder of shares or holdings representing more than 25% of participation in the entity, provided that the market value of such shares or holdings in the aforementioned entity, determined in accordance with the provisions of article 95a.3, exceeds 1,000,000 euros. In this situation, personal income tax is only payable on the tacit capital gains corresponding to the shares or holdings referred to in this point b). 

Article 95 bis 3 of the Personal Income Tax Act establishes the following guidelines for determining the market value according to the type of share or holding: 

(a) For securities listed on markets, their market price is taken as a reference. 

b) For securities not listed on the aforementioned markets, they are valued, unless proven otherwise, using the higher of the following values: 

The net assets derived from the balance sheet corresponding to the last accounting year closed before the date of accrual of the tax; 

The result of capitalising at 20% the average of the results of the three accounting years closed before the date on which the tax becomes chargeable. In this calculation, dividends distributed and allocations to reserves, excluding those for the regularisation or updating of balance sheets, are considered as profits.

c) In the case of shares or units representing the capital or assets of Collective Investment Institutions (CIIs), the reference value is taken as the net asset value applicable on the accrual date of the last tax period. 

When the shares or holdings in companies meet the aforementioned requirements, the capital gain is calculated as the positive difference between the market value and the acquisition value of these shares or holdings. 

These capital gains are included in the savings income and are imputed to the last tax period to be declared for Personal Income Tax (IRPF). A supplementary self-assessment tax return must be filed without penalties, late payment interest or surcharges, during the tax return period corresponding to the first tax year in which the taxpayer is no longer tax resident in Spain due to the change of residence. 

In order to avoid an immediate financial burden, deferral of the tax payment is allowed for five years. During this period, the transferred assets are subject to a permanence commitment. In case of a further transfer or change of tax residence outside the European Union, the tax must be paid immediately.

If within these five years the tax residence in Spain is recovered without having transferred the shares or holdings, the tax debt subject to the deferral is cancelled, as well as the accrued interest. If you have paid the Exit Tax, you are entitled to apply for a refund. 

The Exit Tax is a measure by means of which the tax authorities seek to secure their share of the tax burden in the event of a transfer of tax residence outside Spain. This is intended to tax a hypothetical capital gain, which may or may not materialise, and which is considered part of the tax base.  

This raises discussions on freedom of enterprise and freedom of establishment in a competitive and globalised environment, although these issues may open up separate debates and are not necessarily related to tax issues.

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