Spain’s traspasos tax keeps ETFs from mainstream

Spain’s tax rule allowing tax-free transfers between mutual funds has steered many retail savers toward index mutual funds rather than exchange-traded funds (ETFs). Data cited by N26, using figures from Banco de España and Inverco, show households hold about €600 billion in mutual funds versus roughly €300 billion in listed securities such as ETFs and stocks.

The traspasos regime lets investors move money between mutual funds without triggering capital gains tax. Investors can rebalance portfolios or switch providers and defer taxation indefinitely. By contrast, selling an ETF to buy another product is typically treated as a taxable event.

Antón Díez Tubet, general manager for Spain and Portugal at N26, described the traspasos regime as “a significant structural barrier to ETF adoption in Spain.” He said the tax treatment, combined with Spain’s long-standing bank-focused distribution model, has made mutual funds the default retail product.

Passive investing is expanding in Spain, but growth is taking place mainly through index mutual funds rather than ETFs. Digital platforms and brokers have increased access to low-cost index funds from major providers, allowing clients to build diversified portfolios and rebalance without triggering tax events under the traspaso rule. MyInvestor, for example, offers broad access to index funds alongside stocks and ETFs but emphasizes funds to let clients preserve the tax benefit when reallocating.

N26 reported a rise in retail interest in 2025: 65 percent of new traders on its platform said they were investing for the first time that year, and customers aged 18 to 29 make up about 30 percent of its Spanish user base. Those figures indicate increasing investor engagement, even as ETF adoption remains lower than in some neighboring markets.

Industry participants say extending traspasos to ETFs would be technically difficult because ETFs trade intraday on exchanges. Attention has shifted to European-level proposals, including the European Commission’s Retail Investment and Savings Account, which could offer a tax-advantaged wrapper for multiple asset classes.

Antón Díez Tubet suggested a retail investment account “could serve as a universal tax wrapper for all asset classes” if it is designed and implemented correctly. N26 responded to a Spanish government consultation by advocating for a long-term investment account that would provide access to all asset classes under a single, transparent tax framework and promote a level playing field between funds and ETFs.

For now, mutual funds remain central to Spanish household savings because of the tax regime and the historical distribution model. Digital platforms and cross-border brokers are offering wider product choice and lower fees, and younger investors are increasing their market participation, but the tax and distribution structures continue to shape how passive investing grows in Spain.