Origin-country exit tax and how it interacts with Spanish tax

Key rules

• Cost base: Spain generally uses your original purchase cost, not the value taxed on exit.
• Tax credit: Spain's foreign tax credit often does not cover an exit tax, so treaty relief matters.
• Deferral: Moves within the EU or EEA can usually defer or spread the exit tax, but you often must ask first.
• Annual reporting: Deferral usually comes with yearly reporting, and the tax falls due when you sell.

Exit-tax thresholds, deferral terms and treaty relief change and vary by country, so confirm current rules with your origin tax authority and an adviser before you leave.

The short answer

Plan for the risk of being taxed twice. Your origin country may tax a gain you have not realised when you leave. Spain will generally not treat that taxed value as your new cost. When you later sell, Spain works out your gain from what you originally paid. Relief, if any, comes from a tax credit or from the treaty between the two countries. It does not come from a higher cost base.

Decide this before you leave. Deferral options are often only available if you ask in time.

Which countries charge an exit tax

Many do, and the details differ.

• Canada: a deemed sale at market value applies to most capital property, but not Canadian real estate. There is a CAD 3,000 reporting threshold.
• Germany: unrealised gains are taxed on holdings of 1% or more in a company, if you were resident 7 of the last 12 years.
• Netherlands: a conserved assessment applies to substantial interests (5% or more) and to some pensions and annuity rights.
• France: the tax applies to securities of at least 800,000 euros, or a 50% stake.
• Norway: it applies to unrealised gains in shares and similar assets, with no minimum threshold.
• Denmark: shares are treated as sold, but the tax can be deferred.
• United States: the expatriation tax applies to "covered expatriates". That means net worth of at least 2 million dollars, or failing the tax-liability or compliance tests.
• United Kingdom: there is no general exit tax.

Thresholds and holding periods change, so check the current rules for your country.

Will Spain credit the tax you paid?

Often not directly. Spain gives a credit for foreign tax only when the tax is of a similar nature, was actually paid on the same income and in the same period, and is capped at the Spanish tax on that income. An exit tax is charged on a deemed gain, before any real sale. Spain taxes only the real sale, under its own rules. So the credit frequently does not fit.

A treaty may still give relief. Where a credit does apply, it can in some cases be carried forward four years. The result depends on your treaty and on how Spain's tax authority reads your case, so get advice from an adviser who knows both countries before you leave.

Will Spain raise your cost base?

Generally no. Spain does not step up the value of your assets when you become resident. It uses your original purchase cost. Keep your original purchase records, because you will need them to calculate the gain in Spain. Some treaties or rulings may allow a different result, so ask your adviser.

Defer or spread the tax if you move within the EU or EEA

If you move to Spain from an EU or EEA country, you can usually defer or spread the exit tax.

• Germany: instalments over up to 5 years, with no interest. You must ask for this, and security may be required.
• France: deferral is automatic. No guarantee is needed unless there is a risk. The tax is dropped after 2 years (5 years for losses) if you still hold the shares. You must file an annual report.
• Netherlands: a conserved assessment, usually without security inside the EU. It expires after 10 years.
• Denmark and Norway: similar deferral or instalment options.
• Canada: deferral is possible if you post security.

Reporting continues every year. The deferred tax falls due when you sell the assets. Missing a report can cancel the deferral.

What to do

Use the checklist below to list your assets and keep proof of any tax paid. The decision and timeline below help you pick between deferring, paying now and taking treaty advice. The FAQ covers common questions.

Choosing between options

How do you deal with an exit tax from your origin country?

• Defer or spread the exit tax: You move within the EU or EEA, where deferral or instalments are generally available, and you can meet any security or reporting conditions.

• Pay the exit tax now and look for relief in Spain: You cannot defer, or you prefer to settle it on leaving. Spain generally gives no higher cost for the exit-tax value, so relief comes from the foreign tax credit or a treaty.

• Get treaty advice before you leave: You hold large gains and the treaty between your origin country and Spain may give relief, or you are unsure whether the credit will apply.

If you move within the EU or EEA, ask to defer first. Whatever you choose, expect Spain to use your original cost, so get treaty advice before you sell.

Timeline and deadlines

• Ask your origin country's tax authority to defer or spread the exit tax: when you file your departure return, before or as you leave

• In Germany, pay the exit tax in instalments: over up to 5 years, with no interest

• In France, file the annual report on your deferred shares: every year while the deferral lasts

• In the Netherlands, the conserved assessment expires: after 10 years

• Pay the deferred tax when you sell the assets: in the year of the sale

Checklist

• Check whether your origin country charges an exit tax on the assets you hold, and whether you pass its thresholds.

• List your shares, funds and other assets with large unrealised gains, with their original purchase cost.

• Ask a tax adviser whether the treaty between your origin country and Spain gives relief for the exit tax.

• Keep proof of any exit tax you pay, such as the assessment and the payment receipt.

• Keep your original purchase records, because Spain generally works out your gain from the original cost, not the exit-tax value.

• Ask whether you can defer or spread the exit tax if you are moving within the EU or EEA.

Frequently asked questions

Can I defer my exit tax if I move from Germany to Spain?

Yes, Germany lets you pay the exit tax in instalments over up to 5 years for a move within the EU or EEA, if you ask for it. No interest is charged, but you may have to provide security. Reporting duties continue each year.

What happens to a deferred exit tax when I sell the assets?

The deferred tax becomes due when you sell the assets. In France, the tax is dropped after 2 years (5 years for losses) if you still hold the shares, and in the Netherlands it expires after 10 years.

Does Spain use the exit-tax value as my cost when I later sell?

Generally no, Spain calculates your gain on a later sale from your original purchase cost, not the value used for the exit tax. Relief for the double tax comes through a foreign tax credit or a treaty, so ask an adviser about your treaty.

Which countries do not charge an exit tax at all?

The UK has no general exit tax. Canada excludes Canadian real estate from its deemed sale on leaving, so property there is not hit by that tax.