Index fund vs ETF in Spain: the cost of not being able to transfer

When you transfer between investment funds the gain is not taxed: the new units keep the purchase value and date of the old ones and the whole gain is taxed when you finally redeem (art. 94 of the Spanish Personal Income Tax Law). ETFs were excluded from this regime by Law 11/2021, effective 1 January 2022, including those listed on foreign exchanges: switching ETF, or from ETF to fund, means selling and paying tax that year.

If you buy and hold and never sell, the final tax is the same: both are taxed when sold, on the same scale. The difference appears when you sell along the way to rebalance, move to a cheaper product or change provider. Tax you don't pay today stays invested and compounds too. If you never sell, only the annual cost (TER) and your broker's purchase fees separate them.

It applies your monthly contributions and a constant annual return, net of each product's TER. Every set number of years the ETF is sold in full and bought back, paying tax on the gain under the savings scale in force since 2025 (19%, 21%, 23%, 27% and 30%), assuming no other savings income or losses to offset that year; the fund makes the same switch through a tax-free transfer. At the end both are sold. Trading fees and dividends are not included (it assumes accumulating share classes).

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• Investor risk profile questionnaireSeven questions on horizon, loss tolerance and experience, with an illustrative ETF allocation.