WHAT IS EXIT TAX AND WHY DOES IT MAKE IT DIFFICULT TO LEAVE SPAIN

DID YOU KNOW THAT YOU MIGHT HAVE TO PAY TAXES TO LEAVE SPAIN?

An exit tax is a tax that you will have to pay if you change your tax residence to another country and meet a number of requirements. If, for example, you leave Spain with 25% of the shares or stock of a company valued at more than 1 million euros, you will have to pay taxes as if you had sold the company, without even selling it, just for the fact that you have left the country.

However, this tax will only affect you if you want to move to a country outside the European Union (like Andorra). If, on the other hand, your change of residence occurs between states of the European Union or the European Economic Area (where there is a tax information exchange) you will not have to pay an exit tax. You can emigrate simply by providing a series of information to the Treasury. However, you will have to pay this tax if, within 10 years of your departure, you breach the communication obligations, you sell the notified securities or you leave the EU or the EEA.

This is where the main problem with changing the tax residence to Andorra lies for large estates.

More information on exit tax can be found in Article 95a of the IRPF Act.

Who does the exit tax affect?
The exit tax affects taxpayers with a lot of money on an individual level, and therefore does not apply to most Spanish residents. You are subject to this exit tax if you meet the following requirements:

– You are a tax resident in Spain, but you are moving your tax residence to a non-EU or EEA country.

-You have been taxed in Spain at least 10 of the 15 tax periods prior to the last tax period (IRPF).

-You hold shares or stock representing 25% of a company whose value exceeds 1 million EUR.

-You are the holder of a portfolio of shares or units whose market value exceeds (overall) 4 million EUR.

What does exit tax charge?
Exit tax is paid in the last IRPF tax return filed by the taxpayer who ceases to be a tax resident in Spain. Taxes the following cases:

–Holding participations or shares in companies or entities valued at more than 1 million EUR, in which the emigrant has a share equal to or greater than 25%, having the capacity to exert a significant influence on the latter and thus being the actual holder in accordance with the money laundering prevention laws.

-Holdings of a porfolio of shares or units with a market value exceeding 4 million EUR.

How much is the exit tax?
The exit tax taxes the result of the following formula: market value of the shares – acquisition value of the shares. The rates applied to this gain can reach as much as 23%, with forecasts to increase to 27% in future legislatures.

The exit tax is, therefore, an inconvenience for those international investors and large estates that establish their residence in Spain and that can cause many of them to flee before accumulating 10 years in the country.

The exit tax affects taxpayers with a lot of money on an individual level

To pay for the exit tax, you don’t have to be a millionaire. You may even have to pay to own high-value shares.

With holdings or shares of 25% or more in companies or entities

You will have to pay the exit tax if you own 25% or more in companies or entities with a market value of over one million euros.

With a portfolio of shares valued at over 4 million

You will have to pay the exit tax if the value of your holdings and/or shares in companies exceeds the market value of EUR 4 million.

THE EXIT TAX IS AN OBSTACLE, BUT NOT AN IMPEDIMENT

At ANCEI, if you decide to change your tax residence to Andorra, we will help you analyze your exit tax and study what options you have to avoid or reduce this burdensome tax. Don’t hesitate to contact us for advice!

WE’LL HELP YOU CALCULATE YOUR EXIT TAX

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