Considering an international relocation? For high-net-worth individuals, entrepreneurs, and highly qualified professionals, a change of tax residency is a significant decision that requires careful planning so that unexpected consequences are ruled out. One area of obvious attention is that of Exit Taxes. This levy—imposed when a taxpayer changes residence—exists in various jurisdictions, including amongst others the United States, the Netherlands, Germany, and Spain. For those within the scope of an Exit Tax, two main concerns arise: (i) the actual tax itself which can create a liquidity squeeze as it targets fictitious or “paper” gains; and (ii) the high risk of double taxation, as domestic systems and international tax treaties do not adequately address these situations.

This article unpacks the Spanish Exit Tax rules for individuals, highlights critical pitfalls, and outlines proactive strategies to protect wealth, whether relocating from or to Spain.

Spanish Exit Tax: Triggers and Scope

The Spanish Exit Tax involves taxing unrealized, capital gains when an individual ceases to be a Spanish tax resident. Although the policy is presented as seeking to ensure that Spain retains taxing rights over wealth generated during residency, the reality is that such wealth is only notional and can vanish after relocation. In our view, that policy is rather a reaction to certain aggressive tax planning strategies of leaving the Spanish tax net to dispose of long held assets with significant latent gains.

The Spanish Exit Tax targets long-term residents (more than ten out of the last fifteen tax periods) and only latent gains in certain categories of assets – shareholdings worth more than €1 million in the case of significant shareholdings (more than 25%) or more than €4 million in total (regardless of the percentage of ownership), the value of which, for unlisted securities, is estimated on the basis of the company’s accounting records and is similar to the rules provided for the Spanish Wealth Tax (i.e. the higher of the net equity or the capitalized earnings at a rate of 20%). It should be noted that the Exit Tax only applies to shareholdings, including units in collective investment vehicles, but not to other types of assets such as cryptoassets, insurance policies, pension plans or real estate.

The application of the Spanish Exit Tax results in a taxable capital gain equivalent to the unrealized gain that is taxed at a marginal rate of 30% (from €300k) and is declared in the last self-assessment submitted as a Spanish tax resident.

If relocating within the EU/EEA, no immediate tax return is required; Exit Tax liability only arises if within 10 years the shares are sold, or the individual relocates outside the EU/EEA.

For relocations to non-EU/EEA countries, 5 years deferral is possible if moving temporarily for work (extendable up to 10 years) or to a country with a double tax treaty and exchange of information agreement. The deferral is granted if guarantees are provided by the taxpayer (it is possible to pledge the shares that are subject to the Exit Tax), and interest shall be paid to the Spanish tax authorities.

If the taxpayer regains Spanish tax residency, he or she may claim a refund of the exit tax paid. This reflects the anti-avoidance purpose underlying the Spanish Exit Tax rules: the refund and deferral options are designed to ensure that unrealized gains remain subject to Spain’s taxing rights and to discourage relocations for tax avoidance purposes.

Strategic Planning to Manage Spanish Exit Tax Exposure

Mitigating exit tax exposure requires proactive planning well in advance of leaving Spain. Strategies range from staying outside the exit tax scope (planning around the asset category, shortening the qualifying residency period where possible) to actively minimizing the latent capital gain. For example, the reference to wealth tax values allows some legitimate planning based on holding structures combined with a convenient dividend policy.

Other planning techniques include transferring part of the wealth to the next generation to reduce values of reference or even stay below Exit Tax thresholds. Yet not fully effective since donations are transfers which trigger capital gains tax and gift tax but may benefit from exemptions for closely held businesses and favorable regional tax reliefs for next-of-kin transfers. Another approach is contributing shares (or part of them) to a unit-linked insurance policy, since the Spanish Exit Tax applies only to direct shareholdings, not to insurance wrappers. Again, this requires careful structuring to ensure the remedy does not create larger issues, as such contributions could themselves trigger capital gains.

Additionally, taxpayers should assess whether the country of relocation allows for a tax basis rebasing upon arrival to avoid double taxation on the same latent gain. This can sometimes be achieved by structuring an actual disposal or by implementing a share exchange through a new holding company prior to departure.

Moving into Spain and trying to avoid a double-tax scenario

Exit Tax planning should also address the inbound jurisdiction. A key risk is double taxation: the same capital gain may be taxed by the outbound jurisdiction by way of an Exit Tax, and again by the inbound country when the asset is ultimately sold.

Remarkably, the OECD Model Convention — which forms the basis of Spain’s tax treaty network — does not explicitly resolve this scenario, as it involves resident taxation (by the outbound country at the time the Exit Tax is levied) vis-à-vis resident taxation (by Spain when the capital gain is actually realized – i.e. the asset is sold, often in a different tax year).

In this regard, a recent decision of the Economic Administrative Tribunal of Catalonia (7 November 2024) has opened the door to treating a foreign Exit Tax — when payment is deferred until actual disposal — as creditable against the Spanish income tax liability. However, it remains unsettled whether the Spanish Tax Authorities would accept extending this approach to an Exit Tax paid immediately upon departure, given the mismatch in the fiscal year for the tax credit (i.e., Spain would effectively have to waive its taxing rights by granting a tax credit for a year in which the taxpayer was not a tax resident).

Takeaway: Coordination and Foresight are Essential

For individuals subject to Exit Taxes, cross-border mobility comes with substantial tax risks that demand proactive planning—not only for the outbound country but also for the destination of destination. Each case depends on the individual’s wealth structure, the coordination between jurisdictions, and a careful cost-benefit analysis of available alternatives. When planned properly, strategies can significantly reduce Exit Tax burdens and prevent unintended double taxation.

By José María Vargas-Machuca, associate, LLM Amsterdam; and Pedro Fernández, co-founder and Managing Partner of KINSHIP