Exit tax for companies: tax implications of international relocations of residence or assets
In an increasingly globalised environment, it is common for companies to structure their corporate groups to optimise tax, operational, regulatory, and commercial efficiency. Within this context, we are seeing a growing number of cases where companies relocate their tax residence or transfer significant assets to more favourable tax jurisdictions, or for purely strategic reasons.
However, such strategic moves may trigger the application of the so-called “exit tax”—a tax measure designed to protect the right of the exit State to tax unrealised capital gains generated within its territory.
Spain, in line with OECD recommendations and European Union directives, has implemented this tax in Article 19 of the Corporate Income Tax Act (Ley del Impuesto sobre Sociedades – LIS).
This provision lays out specific rules covering the relocation of a company’s tax residence, the transfer of assets to another State, and the cessation of a permanent establishment.
In this article, we examine how the exit tax operates for companies, its main tax implications, the options available for deferring payment, and practical challenges in its application.
What is the exit tax and what is its purpose?
The exit tax is a mechanism allowing the taxation of unrealised capital gains when a company transfers its residence or assets to another country. Its aim is to prevent such gains, generated under the jurisdiction of the exit State, from escaping taxation. Effectively, it is a tax on a “deemed” disposal, whereby tax is levied on the difference between the market value and the book value of the transferred assets.
Where is the exit tax regulated in Spain?
In Spanish law, the exit tax is governed primarily by Article 19 of Law 27/2014 on Corporate Income Tax, which transposes the principles of EU Directive 2016/1164 (ATAD). The rule ensures that latent capital gains are taxed when Spain loses taxing rights over certain assets.
When does the exit tax apply?
The tax is triggered in the following cases:
- When a company moves its tax residence outside Spain, unless its assets remain attributed to a permanent establishment in Spain.
- When individual assets are transferred to another State, without maintaining a permanent establishment in Spain.
- When a permanent establishment of a non-resident entity in Spain ceases to exist, and that establishment held assets located in Spain.
Which assets are affected and how is the taxable base calculated?
All assets with unrealised capital gains are subject to exit tax. This includes real estate, shareholdings, financial instruments, intangible assets, and more.
The taxable base is the difference between the market value of the assets at the time of exit and their tax book value.
Tax rate and timing: how much could relocation cost?
The applicable tax rate is the standard Corporate Income Tax rate (currently 25%, except for special cases such as entities with turnover below €1 million). The tax becomes chargeable at the moment the relocation or cessation of the permanent establishment takes effect.
The tax return must be filed within the relevant tax period in line with the Corporate Income Tax filing deadlines.
Example (as of 31/12/2025):
| Asset | Tax Book Value (€) | Market Value (€) | Unrealised Gain (€) |
| Holding in subsidiary B | 500.000 | 1.200.000 | 700.000 |
| Industrial property | 800.000 | 1.000.000 | 200.000 |
| Internally developed software | 0 | 150.000 | 150.000 |
| Machinery | 300.000 | 250.000 | – |
| TOTAL | 1.600.000 | 2.600.000 | 1.000.000 |
If the company relocates its tax residence to the Netherlands, and the assets are no longer tied to a Spanish permanent establishment (which is not the case here), the move is treated as a deemed disposal at market value.
The company must therefore pay exit tax on the total unrealised gain: €1,000,000
Tax calculation
- Corporate tax rate = 25%
Exit tax due = €1,000,000 × 25% = €250,000
As will be seen below, in certain cases, the regulations allow the payment of the tax generated by the Exit Tax to be deferred.
When can payment of the exit tax be deferred?
Tax deferral is allowed (interest-free) when the relocation is to another EU or EEA member state that has an effective mutual assistance agreement for tax collection (such as in the Netherlands).
In such cases, the tax may be paid in five annual instalments, provided the conditions are met. The deferral will be revoked if:
a) The affected assets are sold to third parties (proportionally to those sold).
b) The assets are subsequently moved to a non-EU/EEA third country.
c) The taxpayer later moves residence to a non-EU/EEA third country.
d) The company is in liquidation or insolvency proceedings.
e) The taxpayer fails to make a payment on time under the deferral schedule.
Interaction with double tax treaties
While double taxation treaties do not prohibit exit taxes, they may lead to double taxation, where both countries claim taxing rights over the same gain.
It is therefore crucial to assess the elimination methods provided in the applicable treaty and consider initiating a Mutual Agreement Procedure (MAP) if necessary.
How can the impact of the exit tax be mitigated?
Common strategies to reduce the impact include:
- Maintaining a permanent establishment in Spain
- Contributing assets to Spanish subsidiaries before relocation, the phased transfer of assets over time
- Prior corporate restructuring
All such measures must be well justified and grounded in valid economic reasons to avoid triggering anti-abuse rules.
The Court of Justice of the European Union has upheld the legitimacy of exit taxes, provided there is an option to defer payment and no disproportionate restriction on the freedom of establishment.
Spanish legislation has been adapted accordingly in recent years, although interpretative uncertainties remain, particularly in more complex scenarios or with regard to Spain’s regional tax regimes.
Conclusion
Exit tax is a key concept in the international taxation of corporate entities. Its application demands careful prior analysis and structured tax planning.
Companies should thoroughly assess the implications of relocating residence or assets outside Spain, and seek specialised advice to optimise the tax impact and avoid future disputes.
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