Capital gains exemption in Corporate Tax applicable to earn-out in share sale transactions

Key insights on the tax treatment of earn-outs

The Spanish Tax Authorities (DGT), in binding ruling V0062-26 dated January 15, 2026, confirm that the right to the tax exemption also applies to the earn-out, even when allocated to a subsequent tax period after the transfer of shares.

The ruling analyses a share transfer transaction where the price is structured in two components:

• a fixed amount paid at closing, and
• a contingent amount subject to the fulfilment of certain conditions in future periods.

The taxpayer applied the exemption under Article 21.3 of the Corporate Tax Law (LIS) to the fixed portion and raises whether the same exemption applies to the contingent consideration, which is recognized in the taxable base in a later period.

The Spanish Tax Authorities, in line with previous ruling 2200-23, conclude that the earn-out linked to uncertain future events must be included in the taxable base of the year in which those events occur.

They also confirm that such income may benefit from the exemption provided under Article 21.3 of the LIS, provided the legal requirements are met.

Therefore, even if the income derived from the contingent price is recognized in subsequent years, it may still be eligible for the exemption regime.

This administrative criterion is particularly relevant in M&A transactions, where earn-out mechanisms are frequently used to adjust the purchase price based on future business performance.

For this reason, it is essential to assess the tax treatment of earn-outs during the structuring phase of the transaction, in order to anticipate their tax impact from both a timing and tax benefit perspective.