Investing glossary
Tax-free fund switch
A tax-free fund switch moves your money from one investment fund to another without being taxed on the gain generated — a benefit exclusive to investment funds versus ETFs in Spain.
Backed by Spain's income tax law, it lets you switch funds (for example, from a more expensive one to a cheaper one, or to rebalance your portfolio) without the tax authority treating it as a "sale" for tax purposes, deferring the tax bill until you actually redeem in cash.
It is one of the reasons many investors in Spain prefer indexed investment funds (FI) over ETFs for their long-term core portfolio, reserving ETFs for cases where intraday flexibility or a broader catalog outweighs losing this advantage.