Taxation on Business Transfers in Spain

Taxation on Business Transfers in Spain

The transfer of a business structure is one of the most complex tax events, and one with the greatest economic impact, in a business owner's life. The difference between proper and poor planning can mean, in transactions of a certain size, millions of euros of difference in the net result.

Selling a company in Spain has significant tax implications that must be analysed in order to minimise the tax burden. Taxation depends on the nature of the transaction, the seller's tax residence and the type of company. Because of its close link with the net price ultimately received, it is advisable to address it together with company sale (M&A) advisory from the planning phase.

1. Types of sale: Share Deal vs Asset Deal

The first decision that conditions all the taxation is the structure of the transaction. There are two major types with radically different tax implications for seller and buyer:

IMPORTANT EXCEPTION — Art. 314 TRLMV (formerly art. 108 LMV): A share deal is NOT always exempt from VAT/ITP. If the transfer of shares confers control of a company whose assets consist of more than 50% real estate not assigned to economic activities, the transaction may be subject to VAT or ITP as if the properties were being sold directly. This exception is especially relevant for real estate holding companies, asset-holding companies and real estate investment vehicles. Omitting it from the preliminary analysis of a transaction constitutes a critical tax risk.

Most M&A transactions in Spain are structured as share deals because of their greater legal and tax simplicity for the seller. The asset deal is usually used when the buyer wants to exclude contingent liabilities or the company has very heterogeneous assets.

The choice between a share deal and an asset deal is not only a tax matter: it affects the net price and must be analysed together with a rigorous business valuation, because a lower nominal price may turn out to be more advantageous if the after-tax result is higher.

2. Personal income tax (IRPF): taxation of the individual seller

Calculating the capital gain

When the seller is an individual resident in Spain, the gain is included in the savings taxable base of personal income tax. The gain is calculated as the difference between the transfer value (sale price less inherent expenses: commissions, notary, registry, advisers) and the acquisition value (purchase price plus expenses and taxes paid on the purchase).

Tax scale 2025-2026

The legislator has raised the top marginal rate to 30% for savings bases above €300,000, with effect from 1 January 2025. The full scale in force in 2026, adding the state and regional brackets, is:

The top rate of 30% (in force since 2025) is two points above the previous maximum of 28%. Some Autonomous Communities may exceed this aggregate with their own brackets. The regional scale must always be checked according to the seller's effective tax residence in the year of the sale.

Example: A business owner sells their company for €2,500,000 with an acquisition value of €200,000. The gain of €2,300,000 will bear an approximate effective average rate of 28.5%, resulting in a tax liability of around €655,000. This calculation illustrates why prior planning is critical.

Reduction coefficients (shares acquired before 31/12/1994)

If the shares were acquired before 31 December 1994, the transitional regime of reduction coefficients (Ninth Transitional Provision of the Personal Income Tax Act) may apply, which reduces the capital gain in proportion to the holding period before 1995. There is a cumulative limit of €400,000 of transfer value for the application of this benefit. It is a very favourable regime that still benefits many long-standing business owners.

Instalment sales and deferred price regime (art. 14.2 LIRPF)

When part of the price is collected in years after the sale, the taxpayer may allocate the capital gain in proportion to the amounts collected in each year. This regime eases the tax burden in the year of the transfer, allowing payment of personal income tax to be deferred until the cash enters the seller's estate.

NOTE — Deferred price vs earn-out: A certain deferred price (a fixed amount payable in the future) allows automatic deferral under this regime. An earn-out (contingent price linked to future results) requires an initial estimated valuation of the contingent payment; if the actual amount differs from the estimate, the original return must be corrected. This asymmetry introduces a significantly higher inspection risk if the initial estimate is not properly documented.

Earn-out: contingent price linked to future results

The earn-out is a variable part of the price whose amount depends on the future performance of the company (EBITDA, turnover, operational milestones). Its tax treatment is more complex:

• The Spanish Tax Agency (AEAT) requires the full capital gain to be declared in the year of the sale, including an estimate of the fair value of the contingent payment.
• If the amount finally collected differs from the estimate, the original return for the year of sale must be corrected, with the corresponding interest or refunds.
• If payment extends beyond one year, the enforceability criterion (art. 14.2 LIRPF) may be applied and the gain allocated as the amounts are actually collected.

NOTE — The SPA must expressly decouple the earn-out from any obligation on the seller to stay on or provide services. If the AEAT finds that the payment is conditional on the former owner's personal work, it will reclassify the income as employment income, with marginal rates that can exceed 50% depending on the Autonomous Community.

Non-compete clauses

A post-contractual non-compete covenant remunerates the seller for the restriction of their economic freedom after the transaction. Administrative doctrine and Supreme Court case law are unanimous: these amounts are employment income, not capital gains. As they do not derive from a change in the composition of the estate but from an obligation "not to do", they are taxed in the general base of personal income tax at rates that can exceed 47%, not in the savings base (top rate 30%).

NOTE: The National High Court has reaffirmed that payments under non-compete clauses are taxed in Spain (source State) even if the beneficiary has moved their tax residence abroad at the time of collection. Changing residence before receiving this income does not avoid withholding or taxation in Spain.

Exemption for reinvestment in newly or recently created companies (art. 38.2 LIRPF)

An individual may declare the whole of the capital gain exempt if they reinvest the amount obtained in subscribing shares of newly created companies that meet the requirements of art. 38.2 LIRPF:

• The reinvestment must be total for the full exemption; if partial, the exemption is proportional.
• The reinvestment period is one year from the date of transfer.
• The receiving entity must carry on a genuine economic activity with its own material and human resources.
• Transfers to relatives up to the second degree or to entities related to the transferor are excluded.
• The receiving company cannot be listed on regulated markets at the time of the investment.

3. Corporate income tax: taxation of the corporate seller

Applicable rates — 2025-2026

Law 7/2024 established a path of gradual reduction of corporate income tax for SMEs and micro-enterprises. It is important to distinguish the rates applicable in each year, since they differ between 2025 and 2026:

A document covering both years (2025 and 2026) must differentiate the rates for each year. The 23% rate for SMEs applies only from periods beginning in 2026. In 2025, the rate was 24%. Applying the wrong rate can mean a significant deviation in the modelling of the net cash from the transaction.

Double taxation exemption — art. 21 LIS (holding structure)

The main tax optimisation tool for corporate sellers is the exemption under article 21 of the Corporate Income Tax Act (LIS). For it to apply, all of the following requirements must be met simultaneously:

95% exemption, not 100% (Law 11/2021): The exemption operates on 95% of the gain. The remaining 5% is taxed under IS as "costs of managing the shareholding", resulting in a minimum effective taxation of 1.25% (5% × 25%) on the total gain. On a transaction with a €5M gain this means an IS liability of €62,500. Omitting this figure from the preliminary financial modelling is a serious technical error.

Given the enormous tax differential the holding structure opens up — from 30% to an effective 1.25% — it is worth understanding properly how it influences the transaction. We develop this in our article on the holding company and its impact on valuation and sale.

Asset-holding entities and 2026 Supreme Court case law on property leasing

The art. 21 LIS exemption is excluded if the transferred entity is an asset-holding entity (art. 5.2 LIS: more than 50% of assets consisting of securities or assets not assigned to an activity for more than 90 days). This is the main source of litigation.

The Supreme Court ruled in 2026 that the employee requirement in property leasing can be deemed met if management is centralised in another company of the same corporate group, provided there is a genuine economic and functional unit. This criterion eases access to the art. 21 LIS exemption for real estate groups with centralised human resources.

4. Asset Deal: taxation on the sale of assets

Corporate income tax

In an asset deal, the selling company is taxed under IS on the difference between the sale price of each asset and its net book value. If the company has tax losses carried forward, they can mitigate the impact — a relevant element in the price negotiation.

VAT and transfer tax

The global transfer of an autonomous economic unit (a going concern) may qualify for the VAT exemption under art. 7.1 of the VAT Act. If it does not meet the requirements, the assets are taxed according to their nature:

• Assets assigned to the activity: subject to and not exempt from VAT (general rate 21%).
• Property on second transfer: VAT-exempt, subject to transfer tax (ITP) (6%–10% depending on the Autonomous Community).
• Property on first transfer: subject to VAT (10% housing, 21% commercial premises) and stamp duty (AJD).

Municipal capital gains tax — IIVTNU

If the asset deal includes urban property, the seller is subject to IIVTNU. Following the 2021 Constitutional Court judgment, it is possible not to pay tax where there has been no real increase in the value of the land, but this must be documented. The amount can be very significant for long-held properties.

Correctly identifying the tax contingencies of each asset — and of the seller itself — is one of the objectives of due diligence, which in a sale must also cover the tax dimension to avoid surprises at closing.

5. Taxation of non-residents — IRNR

Applicable rates and double tax treaties

When the seller is not tax resident in Spain, taxation is governed by the Non-Residents Income Tax Act (IRNR) and the Double Tax Treaties (DTTs). As a general rule, most DTTs give taxing rights to the seller's country of residence. However, if the Spanish company's assets consist mainly of real estate (more than 50% of asset value), the DTT usually allows Spain to tax the transaction.

In transfers of property by non-residents, it is the buyer who withholds and pays over 3% of the total price (form 211). The non-resident seller settles the final tax through form 210 and may request a refund of any excess. Without a tax residence certificate for the seller, the payer must withhold according to domestic IRNR rules.

6. Family business: tax regime for gratuitous transfers

When the company is transferred by inheritance or gift, the family business regime offers very significant reductions in Inheritance and Gift Tax (ISD) and the exemption of the value of the shares in Wealth Tax (IP). The access requirements are common across all jurisdictions:

State regime: 95% reduction and 10-year period

At state level, the ISD reduction is 95% of the value of the shares transferred, with a period for maintaining the activity and the shareholding of 10 years. Failure to meet this period requires supplementary self-assessments to be filed with late-payment interest, which can wipe out much of the benefit obtained.

Community of Madrid — Family Business Support Act (March 2026)

LEGISLATIVE NEWS MARCH 2026 — The Community of Madrid has approved the Family Business Support Act, which introduces substantial improvements over the state regime and that of other regions. It is the most favourable regulation in Spain in this field.

The changes introduced by this law in Madrid are as follows:

The extension of the benefit to non-family employees with a management track record is an unprecedented development in the Spanish tax landscape: it allows a trusted manager to receive shares in the company with a minimal tax burden, facilitating management buy-outs (MBOs) and non-family succession.

For business succession transactions in Madrid, the regime approved in March 2026 offers the most favourable combination in Spain: a 99% reduction, a period reduced to 5 years and access for non-family executives. Any succession planning should analyse the advisability of establishing tax residence in Madrid before the transfer.

Other notable Autonomous Communities

Although Madrid leads with the 2026 reform, other regions also offer favourable conditions that improve on the state regime:

• Andalusia: 99% reduction with the holding period reduced to 3 years for gifts (a precedent that has partly inspired the Madrid reform).
• Basque Country and Navarre: their own regional tax regimes with reductions of 95%–99% and periods adapted to each territory.
• Other Autonomous Communities: generally apply the state reduction of 95% with the 10-year period, although some have introduced partial improvements.

7. Tax planning strategies

Tax planning is the factor with the greatest impact on the seller's net result. These are the main levers available, always within the legal framework in force:

Prior holding structuring (art. 21 LIS)

Creating a holding company that owns the shares of the operating company can reduce the effective taxation of the gain from 30% (personal income tax for an individual) to 1.25% (corporate income tax with the 95% exemption). The contribution must be made under the tax neutrality regime (Chapter VII, Title VII LIS) sufficiently in advance — at least one year, although 2-3 years are recommended to avoid challenges from the AEAT on economic substance.

The AEAT pays special attention to holding companies created shortly before a sale. Economic substance (real registered office, effective management, own activity) and the valid economic reasons for the restructuring are essential defensive elements in the event of an inspection.

Tax neutrality regime in reorganisations

Mergers, demergers, contributions of business lines and share exchanges may qualify for the special regime of Chapter VII, Title VII LIS, which allows taxation of latent gains to be deferred until a subsequent transfer. It requires notification to the AEAT and the existence of valid economic reasons other than mere tax saving.

Splitting the transaction over time

If the sale can be structured as several transactions in different tax years, the individual seller can take advantage of the lower brackets of the savings scale in each year, reducing the effective average rate. A particularly effective strategy in medium-sized transactions.

Instalment sales and earn-outs (art. 14.2 LIRPF)

The regime of allocation in proportion to collections allows payment of personal income tax to be deferred. Combined with a well-structured earn-out documented as a price adjustment — never as remuneration for services — it can significantly reduce the effective average rate.

Reinvestment in newly created companies (art. 38.2 LIRPF)

Full exemption of the capital gain through reinvestment in newly created companies within the year following the transfer. One of the most powerful levers for the individual seller, provided the requirements described in section 2 are met.

Tax residence planning and exit tax

Moving tax residence to a jurisdiction with lower taxation can be legitimate if executed sufficiently in advance. Spain applies an exit tax (art. 95 bis LIRPF) to taxpayers with more than 10 years of residence in the last 15 and financial assets above €4 million (or €1 million if more than 25% is concentrated in one entity).

Failure to meet the minimum periods of effective residence in the new country can lead to the regularisation of the deferred exit tax with interest and surcharges, wiping out much of the intended benefit.

Beckham Law for inbound executives

For sellers under the special inbound expatriate regime, gains on the sale of shares in foreign entities are fully exempt in Spain. The legal location of the assets before the transaction is decisive. See section 2.

Succession via the family business regime (especially in Madrid)

For gratuitous transfers, the family business regime offers reductions of up to 99% in ISD, with the period reduced to 5 years in Madrid since March 2026. Combined with the Wealth Tax exemption, it is the most efficient tool for intergenerational transfers or transfers to trusted executives.

When new shareholders or executives come into the capital, it is advisable to protect the transaction with a good shareholders' agreement, governing the entry, continuity and exit of the parties.

8. Comparison of tax scenarios

9. Conclusion: taxation as a value lever

Transferring a company in 2026 requires planning that combines tax efficiency and legal certainty: convergence of personal income tax rates towards 30%, limitation of the corporate income tax exemption to 95%, new obligations for non-residents and the real estate exception of art. 314 TRLMV as a hidden risk.

The difference between the most efficient scenario (a holding company with the 95% exemption, or the Beckham Law with foreign assets) and the least favourable (direct sale by an individual at 30%) can exceed 28 percentage points on the gain. On a transaction with a €3 million gain, the difference exceeds €840,000 net: a decisive argument for early planning.

The keys for the seller are: structure in good time (at least 2-3 years), document every element exhaustively (earn-out, non-compete, value accrual), analyse the family business regime in the light of Madrid 2026 and check art. 314 TRLMV in transactions with a real estate component.

At Maraz Corporate Finance we support our clients from prior planning to closing, coordinating the tax analysis, the valuation and the negotiation to maximise net value. If you are considering the sale of your company, we invite you to contact our team for a personalised, confidential analysis.

Javier de Rojas Roca de Togores

Partner - Maraz Corporate Finance

Frequently asked questions about the taxation of company sales

How much tax is paid when selling a company in Spain?

It depends on who sells and how the transaction is structured. An individual pays savings-income tax (IRPF) of between 19% and 30% on the capital gain. A company pays Corporate Income Tax at 25%, but it can apply the 95% exemption under article 21 of the Corporate Income Tax Act (LIS) if it sells through a holding company, reducing the effective rate to 1.25%. The difference between one route and the other can exceed 28 points on the gain, hence the importance of planning in advance together with company sale advisory.

What is the difference between a share deal and an asset deal for tax purposes?

In a share deal the shares are sold: for the seller it is usually more efficient (savings-income tax or the article 21 LIS exemption) and it is VAT-exempt. In an asset deal the assets are sold one by one: the company pays Corporate Income Tax on the gain on each asset and there may be VAT or transfer tax (ITP). The buyer usually prefers the asset deal (it chooses the assets and avoids hidden liabilities), while the seller prefers the share deal. It is worth quantifying both scenarios with a professional valuation before deciding.

How does a holding structure reduce taxes?

If a holding company sells the shares of its operating subsidiary meeting the requirements of article 21 LIS (shareholding ≥ 5%, holding period ≥ 1 year, genuine economic activity), 95% of the gain is exempt and only the remaining 5% is taxed, giving an effective rate of 1.25%. The key is to set up the holding company sufficiently in advance (2-3 years) and give it real economic substance. It is a decision that must be integrated into the business owner's strategic planning.

How are earn-outs and non-compete clauses taxed?

The earn-out (variable price depending on future results) is taxed as a capital gain, but the Spanish Tax Agency (AEAT) requires an estimate to be declared in the year of the sale and corrected later if the amount differs; moreover, it must be decoupled from any obligation on the seller to stay on, or it is reclassified as employment income (rates >50%). Non-compete clauses, by contrast, are always taxed as employment income in the general base. Documenting these clauses properly in the SPA is essential, and here prior tax due diligence makes the difference.

How far in advance should the tax side of a sale be planned?

At least 2-3 years before the transaction. The reason is that the most efficient structures — a holding company with the article 21 LIS exemption, the family business regime, a change of tax residence — require holding periods and economic substance that the AEAT examines in detail. A holding company created a few months before the sale is a magnet for inspection. Planning early is the most powerful value lever: on a transaction with a €3M gain, it can mean more than €840,000 of difference in the net amount received.