Exit tax Spain

If you hold GmbH shares and move to Mallorca, you sell nothing when you leave – yet you still get a tax bill. The Foreign Tax Act (Außensteuergesetz) treats giving up your residence like a sale at market value: no money changes hands, but the tax still falls due.

What does the exit tax cost when moving to Mallorca?

How high the bill turns out depends on three figures: the value of your shares today, what you paid for them at the time, and your other income in the year you leave. There is no fixed rate.

You're affected if two things coincide: within the last 5 years you held a stake of at least 1% in a corporation, and within the last 12 years you were subject to unlimited income tax liability in Germany for at least 7 years.

What's then taxed is not the full increase in value. Under the partial-income method (Teileinkünfteverfahren), 40% of the market value remains tax-free, while in return you may only deduct 60% of your acquisition costs. What remains is added to your other income as income from business operations and taxed at your personal tax rate – there is no separate rate for the exit tax. The calculator above shows you the amount for your case, broken down by income tax and solidarity surcharge.

How it's calculated

The calculation runs in five steps, and each one can be found in the law.

1. Notional capital gain. The market value of your shares at the time of leaving (the law calls this the common value) minus the tax-relevant acquisition costs.
2. Partial-income method. Of the market value, 40% remains tax-free, and of the acquisition costs, 60% is deductible. Both sides are rounded separately – anyone who instead shortens the finished profit will end up a cent off on odd amounts.
3. Tax-free allowance. Up to €9,060 remains tax-free, proportionate to your shareholding quota. The allowance tapers off as soon as the taxable portion exceeds the – likewise proportionate – amount of €36,100. For larger shareholdings, it is therefore usually used up entirely.
4. Tax rate. The remaining amount increases your taxable income. The calculator determines the additional burden as a difference: tax with the exit gain minus tax without it. Only this way does it become clear what leaving actually costs – an average rate or the top tax rate applied to the whole amount would both be misleading.
5. Solidarity surcharge. It is determined separately for the income tax of both calculations, with the exemption threshold and mitigation zone, and then compared. The surcharge on the difference would be something else entirely and usually too low.

The progression clause (Progressionsvorbehalt): the point almost every rough calculation leaves out

You move in July and start earning in Mallorca from August. That means in the year you left you were only temporarily subject to unlimited tax liability in Germany – and precisely then, your foreign income is taken into account for the tax rate, even though it isn't taxed in Germany itself. The rate goes up, but the taxable base doesn't. This is the standard case when moving to Mallorca, not an exception; anyone who leaves it out of the calculation is systematically calculating themselves poorer than they are. The calculator has its own field for this.

Who is affected – and who isn't

The threshold of 1% refers to the last 5 years, not to the day of the move. If you're currently below it because a capital increase has diluted your stake, you can still be affected. Conversely: if you've never reached the threshold, the move doesn't trigger exit taxation.

A few constellations lie outside what the calculator can capture, and are still important to know:

• Inherited or gifted shares. For the question of how long you were subject to unlimited tax liability, the periods of your legal predecessor also count; overlapping years are only counted once. Anyone who only counts their own years arrives at an incorrect result.
• Shares from a contribution in kind. If they were acquired at book value or intermediate value, under certain conditions they are also considered covered even below the shareholding threshold.
• Investment funds and exchange-traded funds (ETFs). A separate rule under the Investment Tax Act applies to investment shares, one that ties in with entirely different figures and specifically excludes the partial income procedure. From "my fund quota is well below the threshold" it does not follow that you're in the clear.
• Real estate. It doesn't trigger exit taxation. Rental income from German properties remains taxable in Germany, and the German speculation periods continue to run unchanged. If you want to buy a property in Mallorca after moving, it's worth taking a look beforehand at the purchase incidental costs and the process of buying a property.
• Gift and inheritance. A gratuitous transfer to a person who is not subject to unlimited tax liability also triggers taxation – so it's not a way out, but a trigger in its own right, one that can additionally trigger gift or inheritance tax.

Paying in annual instalments

The assessed tax can, on application, be paid in 7 equal annual instalments. The instalments are interest-free. However, the application is generally only granted against provision of security, and the first instalment is due within 1 month after notification of the tax assessment; the remaining instalments each on 31 July of the following years.

Important, because it's often told differently: This instalment payment applies equally to all countries of emigration. An indefinite, interest-free deferral that only ended upon the actual sale and applied only to the European Union and the European Economic Area (EEA) existed up to assessment period 2021. Since assessment period 2022, the law no longer provides for it. The fact that Spain is an EU member gives you no advantage over moving to Switzerland or Dubai when it comes to exit tax. Anyone who emigrated before 2022 and has an ongoing deferral keeps it – for such existing cases, the law expressly stipulates that they are to be handled under the old legal provisions.

The instalment plan ends early if an instalment is not paid on time, if you breach your annual notification obligations, in the event of insolvency, and to the extent that you sell or transfer the shares, or distributions totalling more than 25% of the value are made. Exactly this proportion is still harmless – the threshold only applies above that.

And a point that is often overlooked in instalment models: the shares are only deemed to have been acquired at market value to the extent that the tax attributable to them has been paid. Anyone paying in instalments over several years has a split cost basis for that period – and on a later sale, this is no minor detail.

Return to Germany

If the emigration is based on only a temporary absence and you become subject to unlimited tax liability again within 7 years, the tax claim lapses. Upon request, the tax office can extend the period by no more than 5 additional years, if the intention to return continues unchanged.

However, this lapse depends on several conditions being met simultaneously: in the meantime, the shares must not have been sold, transferred, or contributed to business assets; distributions and the repayment of contributions together must not exceed the threshold mentioned; and the German taxation right must be re-established at least to the extent it existed at the time of emigration. A transfer upon death to a natural person is harmless in this regard, provided that person meets the requirements.

Anyone planning this route should know that the tax authorities scrutinise the actual relocation of one's centre of life very closely. Days of stay, rental agreements, re-registrations, and social ties all count; a residence that exists only on paper won't hold up.

Deadlines and notification obligations

The emigration must be declared in the income tax return for the year of emigration. Anyone who wants instalment payment must apply for it – nothing happens automatically. After that, an ongoing obligation begins: you must notify the tax office of your current address every year by 31 July and confirm that the shares are still attributable to you, and you must report any event that triggers early payment of the tax – within one month. Both must be submitted electronically using the officially prescribed data format.

On the Spanish side, a separate reporting system is added as soon as you become tax-resident there. Anyone holding assets outside Spain reports them via the Modelo 720 — a form used by the Spanish tax administration for foreign assets, with its own deadlines and thresholds. Which country is entitled to tax which income is governed by the Double Taxation Agreement between Germany and Spain; however, it has hardly any effect on the exit tax itself, since it is tied to a point in time at which Germany is still your state of residence.

For the period afterwards, three further articles are worth reading: income tax as a resident, the Beckham regime for new arrivals and the overview of taxes and law regarding property ownership on Mallorca. If you hold a property there, you are also affected by wealth tax, the property tax IBI and taxes on the sale of a property.

What this calculator does not calculate

It estimates the additional income tax and solidarity surcharge in the year of emigration for exactly one holding that you hold as private assets, triggered by 'giving up residence'. Not included are: church tax, child allowances and the more-favourable-treatment test (Günstigerprüfung), the valuation of your shares by an expert appraiser, loss scenarios, business holdings, investment fund units, and the one-fifth rule for extraordinary foreign income. You must not add up the results of multiple runs for multiple companies – the allowance applies per company, while progression applies jointly.

What the market value of your shares actually is will ultimately be decided by a valuation report, not a calculator. And the acquisition cost is not always the historical purchase price: in the case of an earlier move to Germany, a substitute value may take its place; in the case of acquisition without consideration, the predecessor's costs apply; and later contributions increase it. Anyone who doesn't know this value will get a figure from the calculator that is based on the wrong foundation.

Legal basis

The exit taxation is set out in § 6 of the Foreign Tax Act (AStG); which shares are covered, how the gain is determined and how high the allowance is, is governed by § 17 of the Income Tax Act (EStG). The partial income procedure follows from § 3 number 40 letter c and § 3c paragraph 2 EStG, the tax scale from § 32a, and the progression clause from § 32b EStG. The current version of § 6 AStG applies to income tax for the first time for the 2022 assessment period. The calculator above shows the status of the values used underneath the calculation; the sources are individually linked there.