Exit Taxes and Asset Reporting Before Moving to Mallorca

What Is an Exit Tax?

An exit tax - sometimes called a departure tax or emigration tax - is a charge imposed by your home country when you stop being a tax resident there. The underlying logic is simple: while you were a tax resident, certain gains on your investments, property, and other assets accumulated without being taxed yet (because you had not sold them). When you leave, the home country wants its share of those gains before you take them somewhere else.

Not every country does this. The design varies considerably:

• Some countries (Canada, Australia) treat you as if you had sold all your assets on the day you left, at their market value at that date - called a "deemed disposition." Any resulting gain is taxed in your final return.
• Some countries (the UK) do not tax you on departure but have clawback rules that tax gains if you return within a certain period.
• Some countries (the US) impose an exit tax only in specific extreme circumstances - renouncing citizenship or long-term permanent residency.
• Some countries (Ireland) have no general individual exit tax.

This matters enormously for pre-move planning. If you have significant unrealised gains in an investment portfolio, a share portfolio, or other assets, the timing and structure of your departure can have a large financial impact.

United Kingdom - Temporary Non-Residence Rules

The UK does not have a general exit tax on capital gains for individuals leaving the country. When you leave the UK and become non-resident in Spain, any unrealised gains on your investments are not immediately taxed.

However, the UK has temporary non-residence rules (in the Taxation of Chargeable Gains Act 1992, as amended) that can catch you if you return to the UK too soon.

How the clawback works

If you leave the UK, realise capital gains while abroad (for example by selling shares or a foreign property), and then return to the UK within 5 complete UK tax years, those gains can be treated as arising in the year you return - and taxed at that year's UK CGT rates.

The rule targets assets you held before you left the UK. Gains on assets you acquire after leaving the UK are generally not affected.

What this means for Mallorca movers

If you are planning to sell a substantial investment portfolio or other assets after moving to Spain, be aware that:

• The UK does not tax the gain on departure
• But if you sell the assets within 5 years and then return to the UK, HMRC can tax the gain on your return
• If you stay in Spain longer than 5 complete UK tax years and then return, the clawback does not apply

For genuinely long-term movers this is usually not a concern. For people who might return (for family reasons, for example), it is worth factoring in when deciding when to sell.

UK property: a different rule

Since April 2015, non-residents are subject to UK CGT on gains arising from UK residential property. This applies regardless of whether you have triggered the temporary non-residence rules. If you sell a UK property after moving to Spain, you will likely owe UK CGT on the gain. You report it to HMRC via the non-resident CGT return, which must be filed within 60 days of completion.

Canada - Deemed Disposition on Emigration

Canada has one of the most comprehensive exit tax regimes in the world for individual emigrants. When you cease to be a Canadian tax resident, the Canada Revenue Agency (CRA) treats you as if you had sold all your property at fair market value on the departure date - the "deemed disposition."

What assets are covered

The deemed disposition applies to most types of property, including:

• Shares and mutual funds held in non-registered (taxable) accounts
• Investment property
• Business assets
• Real estate outside Canada (Canadian real estate has its own rules)

Assets excluded from the deemed disposition include:

• Canadian real estate (taxed separately under the Income Tax Act)
• Canadian pension plans (CPP, OAS, RRSPs, RRIFs) - these remain in Canada and are not deemed disposed of
• Rights to pension benefits and employee benefit plans
• Property of a business carried on through a fixed place of business in Canada

Calculating the gain

The deemed gain is the fair market value on the departure date minus your adjusted cost base (ACB). The gain is included in your income for the year of departure and taxed at your marginal rate. The top marginal rate federally is around 33% on the taxable portion of capital gains; combined with provincial rates the effective rate varies by province.

Deferral option

CRA allows you to defer the departure tax if you provide adequate security - typically a letter of credit from a Canadian bank. This means you do not have to sell assets to pay the tax immediately. The deferral arrangement is negotiated with CRA and requires formal steps; it is not automatic.

Your departure return

You file a final Canadian income tax return for the year of departure (called a "departure return" or "T1 Emigrant Return"). This covers your income up to the date you left Canada. The departure return is also where you report the deemed disposition gains.

Pre-departure planning is important. Crystallising some gains before departure (for example, using your capital gains exemptions or timing dispositions to fall in a lower-income year) can reduce the departure tax. A Canadian tax adviser who specialises in emigration planning should review your situation before you leave.

Australia - CGT Event I1

Australia has an exit tax mechanism called CGT event I1, which applies when you stop being an Australian tax resident.

How I1 works

When you cease Australian residency (by becoming a Spanish tax resident), a CGT event I1 is triggered for most "taxable Australian property" assets you hold at that date. You are treated as if you had disposed of those assets at their market value, and any gain is subject to Australian CGT.

Assets covered include:

• Shares in Australian and foreign companies held in taxable accounts
• Units in managed funds and ETFs
• Certain other investment assets

Assets not covered by I1 include:

• "Taxable Australian property" such as Australian real estate and shares in companies where more than 50% of value comes from Australian real estate - these remain taxable in Australia even after you leave, under different rules
• Superannuation - super remains in Australia under normal rules

The 50% CGT discount

Australia applies a 50% capital gains discount to assets held for more than 12 months. This discount is available at the time of CGT event I1. Gains are halved before being included in your income for the year of departure. However, the discount may be proportionally reduced if you acquired the asset while a non-resident.

Deferral option

Australia also allows a deferral of CGT event I1. You can make an election to not have I1 apply at departure, instead deferring the tax until you actually sell the asset. However, if you sell while non-resident you lose the 50% discount on any gain accrued during non-residence. The maths of whether to elect for deferral or pay now depends on how long you expect to hold the assets and what gains have accrued. Take advice.

Superannuation

Your superannuation fund remains in Australia and continues under normal super rules. You cannot access it simply because you have emigrated. Australian super is very tax-effective within the Australian system - withdrawals in the pension phase are typically tax-free for residents over 60. How they are taxed in Spain (under the Australia-Spain DTA and Spanish IRPF) depends on whether you are still a Spanish resident when you take the money. This is an area where the interaction between Australian and Spanish law is complex enough to require specific advice.

United States - No General Exit Tax on Emigration

Most people moving from the US to Mallorca will not face a US exit tax. The US exit tax (technically an "expatriation tax" under Internal Revenue Code Section 877A) applies in a very specific and extreme circumstance: when a US citizen renounces their citizenship or when a long-term lawful permanent resident (Green Card holder who has held Green Card status for 8 of the last 15 years) abandons that status.

If you are simply a US citizen moving to Spain while keeping your US passport, Section 877A does not apply to you. You remain a US citizen, you keep your worldwide filing obligation under the savings clause, and you continue to file US tax returns every year from Spain - but there is no exit tax on departure.

The expatriation tax for renunciants

For the small number of people who do renounce US citizenship, Section 877A imposes a mark-to-market tax on all worldwide assets as if you sold them the day before expatriation. There is a substantial exclusion (around USD 866,000 for 2025, indexed for inflation - check IRS Notice 2025-XX for the current figure). The gain above the exclusion is taxed at capital gains rates.

Renouncing citizenship also involves a one-time exit interview with a US consular officer, a fee (currently USD 2,350), and filing Form 8854. It is an irreversible decision with permanent consequences. It is well outside the scope of a Mallorca relocation guide - seek specialised US expatriation tax advice if this is something you are considering.

FBAR and FATCA remain

Even without an exit tax, moving to Spain creates new US compliance obligations around foreign accounts and assets. See our tax residency and double taxation guide for details on FBAR (FinCEN 114) and FATCA (Form 8938).

Ireland - No General Exit Tax for Individuals

Ireland does not have a general individual exit tax for people emigrating. If you are an Irish tax resident who moves to Spain, you are not deemed to have disposed of your assets on departure.

However, a few nuances apply:

• Departure gains on certain assets: Ireland introduced an exit tax for companies and some funds in 2018, but this does not apply to individual investors holding shares in those funds directly.
• Irish-source income: once you become non-resident, you are taxed in Ireland only on Irish-source income (rental income from Irish property, Irish dividends, Irish employment income). Most investment income from non-Irish sources ceases to be Irish-taxable on emigration.
• Domicile: Ireland uses a domicile-based system for income tax. If you have Irish domicile, certain foreign income becomes Irish-taxable when remitted to Ireland. Moving to Spain does not automatically change your domicile. If you have Irish domicile and significant foreign income or assets, take specific advice on how domicile interacts with your departure.

New Zealand and South Africa

New Zealand: New Zealand does not have a capital gains tax (as of the time of writing - check with Inland Revenue NZ for any updates). There is no deemed-disposition exit tax for emigrants. However, the Foreign Investment Fund (FIF) rules may have applied to you as a NZ resident if you held overseas investments. Once you leave NZ and become a Spanish resident, FIF no longer applies to new acquisitions, but any tax years when you were a NZ resident remain subject to NZ obligations.

South Africa: South Africa has its own CGT exit rules for individuals who cease ordinary residence. From 2022, individuals emigrating from South Africa are deemed to have disposed of their worldwide assets (with some exclusions) on departure. South Africa also has exchange control rules administered by SARS and the South African Reserve Bank. If you have significant South African assets, pension interests (retirement annuities, pension funds), or business interests, take advice from a South African tax specialist before leaving.

Trusts and Corporate Structures

If you hold assets through trusts or companies, the exit tax picture becomes more complex:

• Family trusts: many common-law countries (UK, Canada, Australia, NZ, Ireland) recognise trusts. When you move to Spain and become a beneficiary of a foreign trust while being a Spanish tax resident, Spain may attribute trust income to you under anti-avoidance rules (the transparency rules in LIRPF). This varies by trust structure and jurisdiction.
• Foreign companies: if you hold a controlling interest in a foreign company, Spain has Controlled Foreign Corporation (CFC) rules (transparencia fiscal internacional) that can attribute undistributed profits to you as a Spanish resident.
• Offshore pensions and retirement plans: treated differently depending on whether they fall under a DTA pension article. US 401ks and IRAs, Canadian RRSPs, Australian super, and UK SIPPs all have specific treaty and domestic-law treatment.

Brief mention is the best this guide can do. If you have assets in trusts or holding companies, a proper cross-border tax review is not optional.

Pre-Move Planning Steps

The months before you become a Spanish tax resident offer a planning window that closes once you arrive. Here is a practical checklist:

1. Establish your departure date clearly

The day you become a Spanish tax resident (by crossing one of the three thresholds - see our tax residency guide) is the cut-off for most home-country calculations. Be deliberate about this date. For Canadian and Australian deemed-disposition purposes, it is the date you ceased to be a resident of that country - typically the date you left with the intention of residing abroad indefinitely.

2. Get home-country valuations on all assets

For Canadian and Australian deemed-disposition purposes, you need fair market values of all affected assets on or around your departure date. Gather these contemporaneously - reconstructing asset values years later is difficult and creates dispute risk with the tax authority.

3. Consider realising gains before departure (or after - it depends)

For UK residents: there is no exit tax, but the temporary non-residence clawback applies if you return within 5 years. If you plan to sell assets within that window, consider selling before you leave (when you can use the UK annual CGT exemption) or accepting that the gain will be taxable in Spain with a UK credit if applicable.

For Canadian residents: any gains you realise before departure are taxed at Canadian rates. Any gains included in the deemed disposition are also taxed at Canadian rates. If you have assets with large embedded gains, the question is whether to trigger those gains now (at Canadian rates, possibly with the lifetime capital gains exemption for qualifying small business shares or farm property) or accept the deemed disposition.

For Australian residents: similar logic applies. Assets held for more than 12 months benefit from the 50% CGT discount. If you are close to the 12-month mark on a significant asset, timing your departure around that date could be valuable.

4. Review your brokerage accounts

Many brokerage and investment platform accounts are restricted to residents of specific countries. Once you become a Spanish resident, some platforms will require you to close or transfer your account. US brokerages (Vanguard, Fidelity, Schwab, Charles Schwab International) have varying policies for US citizens living abroad - some will still service you, others will close accounts. UK platforms (Hargreaves Lansdown, AJ Bell) generally close accounts for non-UK residents. Australian platforms have similar restrictions.

Research this before you leave. Transferring or liquidating at a forced deadline, with no ability to time the market or choose tax-efficient lots, is a poor position to be in.

5. Consider a Spanish-resident-compatible investment account

Once you are a Spanish resident, you can open accounts with Spanish banks and brokers, as well as some EU-based platforms that accept Spanish residents. ETFs and funds available within the EU (UCITS funds) are usually the right product class for Spanish residents - US-domiciled ETFs are generally not available to purchase (though you can hold them if you already owned them as a non-resident). This is worth planning ahead so you have somewhere to put proceeds.

6. File your final home-country returns correctly

Do not rush these. For Canada and Australia, the departure return requires specific forms and declarations. For the UK, you inform HMRC of your departure, usually through a Self Assessment return and the P85 form. For Ireland, you notify Revenue through your tax return. For the US, there is no special departure form for ordinary emigrants - you just file your regular Form 1040 for the year of departure, reporting worldwide income up to 31 December.

Asset Reporting in Spain

Once you are a Spanish tax resident, you must report foreign assets above 50,000 EUR per category to Hacienda via Modelo 720 (and from 2023, Modelo 721 for foreign crypto assets). See our tax residency and double taxation guide for the full detail on these obligations.

The key point for pre-move planning: if your home country's exit tax or deemed-disposition rules cause you to realise gains and pay tax, that does not reduce or eliminate your Spanish Modelo 720 reporting obligation on the underlying assets if you still hold them.

When to Get Cross-Border Tax Advice

A local Spanish Gestoria - even a competent one with solid IRPF experience - is generally not the right adviser for pre-emigration exit tax planning. You need someone who knows both sides.

Look for:

• A cross-border tax adviser or international tax firm with specific experience in emigration from your home country to Spain
• For Canadians: a Canadian CPA who specialises in emigration planning
• For Australians: an Australian tax agent with international clients
• For UK residents: a UK-qualified adviser (ACA, ACCA, or CTA) familiar with Spanish residency
• For US citizens: a CPA or Enrolled Agent who specialises in US expats (not a general US or Spanish accountant)

The ideal outcome is a briefing on:

1. What exit tax (if any) applies and how much it is likely to be
2. Whether deferral options are available and worth using
3. What timing changes to your departure date or asset disposals would make a material difference
4. What your Spanish obligations will be once you arrive
5. What ongoing cross-border filing obligations you will have after you move

That comprehensive briefing is worth getting before you book removal trucks. Post-move, the options shrink significantly.