Change of tax residence and exit tax for individuals

In today’s world, it is increasingly common for individuals involved in business projects or holding significant financial assets to change their tax residence. As a result, taxpayers who are tax residents in Spain may lose that status due to long-term or even permanent relocations to other jurisdictions, whether in search of more favourable tax regimes or environments offering greater business development opportunities.

This growing international mobility entails significant tax consequences, with the exit tax being one of the key issues to consider in any change of tax residence.

Change of tax residence and the concept of exit tax in Spain

Exit tax is a mechanism through which latent capital gains on certain assets are taxed when a taxpayer changes their tax residence to another country.

This operates as a deemed (notional) disposal of the assets, even though no actual sale has taken place, with the aim of preventing potential gains arising from a future disposal from falling outside the taxing jurisdiction of the former state of residence.

In Spain, this regime was introduced in 2015, and its application to individuals is governed by Article 95 bis of the Personal Income Tax Act (IRPF). Other comparable jurisdictions, such as France, Germany, Italy or the Netherlands, had already implemented similar regimes, as has the United States.

Scope of application and taxpayers subject to exit tax

Spanish legislation provides for two scenarios in which exit tax applies following a change of tax residence:

• Taxpayers holding shares or equity interests whose combined market value exceeds €4 million. This includes listed and unlisted companies, as well as holdings in collective investment schemes (funds, SICAVs, etc.).
• Taxpayers holding more than 25% of the share capital of a company, provided that the market value of such shares or interests exceeds €1 million. In this case, exit tax applies only to the holdings that meet this condition.
  
  

In these circumstances, the taxpayer must include in the savings income base of their IRPF, corresponding to their last tax year of residence in Spain, the capital gain resulting from the positive difference between the market value and the acquisition cost of the shares or interests, calculated in accordance with the valuation rules set out in the IRPF legislation.

Time requirements and exclusions

For exit tax to apply, the individual must have been tax resident in Spain for at least 10 years within the previous 15 years, and must cease to be a Spanish tax resident.

Exit tax also applies when the change of tax residence is to a tax haven, even if, under Spanish domestic rules, the individual might otherwise still be deemed resident in Spain.

Other types of assets, such as real estate or non-financial assets, are not subject to this specific exit tax under the Spanish tax system.

Practical example of exit tax calculation

Assume an individual who is tax resident in Spain holds a 30% shareholding in an unlisted company (SL), with a market value of €1,500,000 and a tax acquisition cost of €500,000, and who changes tax residence to the United States on 15 January 2026.

• Acquisition cost: €500,000
• Market value: €1,500,000
• Capital gain (IRPF): €1,000,000

Taxation under the savings income scale (IRPF)

In this case, the IRPF exit tax cost amounts to €281,880, representing an effective average tax rate of approximately 28% on the latent capital gain.

The gain is calculated based on the value of the shareholding as at 31 December 2025, the date of accrual of IRPF for the 2025 tax year, which is the last year in which the individual is considered a Spanish tax resident. The relocation takes place at the beginning of 2026, and therefore the change of tax residence is deemed to occur in that year (assuming all residence-change requirements are met).

Accordingly, the individual must file their final Spanish IRPF return for 2025, including the exit tax gain, within the ordinary filing deadline, i.e. by 30 June 2026.

Change of tax residence and deferral or postponement of exit tax

Spanish legislation allows, in certain cases, for the deferral or postponement of the payment of exit tax arising from a change of tax residence:

• Automatic deferral for transfers to EU or EEA countries (with effective exchange of information) or Switzerland, for a period of up to 10 years. The tax is only payable if, during that period, the shares are sold, the taxpayer ceases to be resident in those jurisdictions, or the information obligations before the Spanish Tax Agency are breached. If the period elapses without these events, no tax is payable.
• Temporary transfers to countries with a Double Tax Treaty, not considered tax havens and including an information exchange clause, may qualify for a five-year deferral, extendable for a further five years, provided the move is for employment reasons. This deferral is discretionary and may require guarantees.
  
  

In all cases, strict notification and reporting obligations or formal applications must be complied with. Failure to do so may result in the loss of these deferral options.

Conclusions on changes of tax residence

Where a change of tax residence affects individuals with significant financial assets or substantial shareholdings, it is essential to analyse the tax impact in advance, as the potential cost can be very substantial.

In certain cases, medium-term tax planning prior to relocation can significantly reduce or mitigate the impact of exit tax, through measures such as asset restructurings, gifts, partial disposals or other legally valid alternatives.

Do you need advice? Access our area related to change of tax residence and exit tax:

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