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Spain and the UK Sign Tax Agreement on Gibraltar

Spain's Ministry of Foreign Affairs, the European Union, and Cooperation has announced the signing of a tax agreement with the UK concerning Gibraltar. The agreement is designed to combat tax fraud and money laundering in Gibraltar once the UK leaves the European Union and includes new rules on tax residency for both individuals and companies.


Spain Signs Gibraltar Tax Treaty with the United Kingdom

The Minister of Foreign Affairs, the European Union and Cooperation has today signed, ad referendum, an International Agreement between the Kingdom of Spain and the United Kingdom of Great Britain and Northern Ireland with regards to taxation and the protection of financial interests. On behalf of the United Kingdom, the Agreement will be signed today by Minister for the Cabinet Office, David Lidington.


This Agreement has the status of an International Treaty, and it is the first Treaty that Spain has signed with the United Kingdom regarding Gibraltar since the Treaty of Utrecht in 1713. This Agreement is signed in the framework of the United Kingdom’s withdrawal from the European Union. The signature ad referendum requires approval from the Council of Ministers. Furthermore, due to the subject of the Treaty, it is subject to the corresponding parliamentary approval.

As is known, the European Union has negotiated a Withdrawal Agreement which includes an annexed protocol on Gibraltar as a result of the negotiation between the United Kingdom and Spain. Said protocol mentions the four Gibraltar Memoranda of Understanding signed on 21 November last (on citizens’ rights, tobacco, cooperation on environmental matters and cooperation in police and customs matters) as well as the Tax Agreement signed today by Minister Josep Borrell which has been bilaterally negotiated with the United Kingdom.

This Agreement constitutes an essential element so that Gibraltar’s exit from the European Union pursuant to the Withdrawal Agreement and its Protocol on Gibraltar takes place in an orderly way, in accordance with Spanish interests in matters of taxation and in the fight against fraud and tax evasion.

Should the United Kingdom not sign the Withdrawal Agreement and leave the European Union without an agreement, the tax treaty will still be equally useful as it ensures Spain that there will be a high degree of cooperation from the relevant tax authorities when European Union law stops being applicable in Gibraltar.

The objectives that have been reached in this treaty are:

  • The reduction and elimination of tax fraud and the adverse effects for the Spanish Treasury derived from the characteristics of Gibraltar’s tax regime.
  • The establishing of clear rules in order to more easily resolve conflicts regarding the tax residency of natural persons.
  • The prevention of tax residents of Spain using businesses subject to Gibraltar's tax regime or for said businesses to undertake economic activities in Spain.

For this, the Agreement establishes a reinforced administrative cooperation regime between the relevant authorities of the respective tax offices. This regime includes the exchange of information on certain categories of income and assets of particular importance in the fight against fraud in the area. Likewise, the dynamic adaptation is expected of this special cooperation regime to the new standards of the European Union and the OECD with regard to transparency, administrative cooperation, harmful tax practices and the fight against money laundering.

The agreement also establishes a series of rules in order to resolve the conflicts regarding the tax residency of natural persons, with the aim of solving the problems of the false residencies in Gibraltar of natural persons who actually reside in Spain.

With regard to legal persons and other Gibraltarian entities, their tax residency is established in Spain when they have a significant relation with Spain, either due to the location of the majority of their assets or the obtaining of the majority of most of their income in our country, or when the majority of their owners or directors are tax residents of Spain.

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