Dispelling myths and improving relations
In a sense, the Tax Treaty changes very little other than to provide clarity and reassurance, and end “the irritating myth that Gibraltar is anything other than entirely cooperative when it comes to the exchange of tax information”. *
Gibraltar’s Chief Minister Fabian Picardo described the Treaty as “an important moment for Gibraltar and for our relations with our neighbour. This treaty recognises the existence of a separate and distinct tax authority in Gibraltar.” *
There are other important components to the Treaty. For example, it includes landmark recognition from Spain regarding the existence of registered Gibraltarians and the Gibraltarian Status Act which determines the details necessary for citizens to be able to register and describe themselves as “Gibraltarians”.
The Treaty has also cleared the way for the Spanish Government to remove Gibraltar from its blacklist of “tax haven jurisdictions” in the future. Other important direct and indirect effects of the treaty include the following:
- Gibraltar will apply for membership of the OECD/G20 Inclusive Framework on BEPS (Base Erosion and Profit Sharing)
- Greater exchange of information between Spanish and Gibraltarian tax authorities
- Elimination of double taxation for cross-frontier workers – approximately 14,000 people live in Spain and commute to work in Gibraltar every day
- Spain will recognise Gibraltar’s rates of corporation tax
A landmark negotiation
The work that went into negotiating the landmark treaty should not be underestimated; it is only the second time that the UK and Spain have been able to agree an international treaty over Gibraltar, and the first since 1713’s Treaty of Utrecht.
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*https://www.gibraltar.gov.gi/new/sites/default/files/press/2019/Press%20Releases/152-2019.pdf HM Government of Gibraltar – Tax Treaty with the Kingdom of Spain
Disclaimer: The above information was correct at the time of preparation and does not constitute investment advice. You should seek advice from a professional regulated adviser before embarking on any financial planning activity.