Gibraltar tax quarantine NEW

Manuel Godia

During the process of the United Kingdom´s exit from the European Union, Spain negotiated with the United Kingdom and Ireland an International Agreement on taxation and protection of financial interests in relation to Gibraltar.

The negotiations finished in 2019 with an international agreement that is already in force. The main objectives of this agreement are the elimination of tax fraud as well as the harmful effects derived from taxation in Gibraltar.

In order to fulfil these objectives, the agreement establishes clear rules to resolve easily the conflicts that involve the tax residence of individuals who live in Gibraltar.

Also, these rules will be applied to prevent the use of companies that are taxed under the law of Gibraltar by Spanish tax residents, as well applied to those taxpayers located in Gibraltar who carry out economic activities in Spain.

The International Agreement will allow Spanish Tax Authorities to consider Spanish taxpayers who move to Gibraltar as Spanish Tax Residents.

In relation to this, last June, the Spanish Tax Offices resolved a binding rule regarding Spanish nationals who change their residence to Gibraltar for work purposes. In this binding rule, the Spanish Tax Authorities indicated that Gibraltar is still on the tax haven list of non-cooperative jurisdictions.

Taking into account Spanish Tax Law, those Spanish taxpayers who move to a country that is on the non-cooperative jurisdictions list, will be issued a tax quarantine and therefore they will be considered Spanish Tax Residents for the year they move to the country considered as a tax haven, and for the following four years.

Considering the International Agreement, a Spanish taxpayer who moves to Gibraltar will be regarded as exclusively a resident of Spain for tax purposes, not applying the tax quarantine mentioned above.

Therefore, in this binding rule issued in June 2022, and applying the International Agreement, a Spanish taxpayer who moves to Gibraltar continues to be regarded as a Spanish tax resident by the Spanish Tax Authorities, without a limit of time while living in Gibraltar.

In conclusion, the Spanish Tax Authorities will apply a tax quarantine to Spanish nationals who move their residence to Gibraltar, applying the International Agreement signed with the UK and Ireland, in the wake of the United Kingdom’s exit from the European Union.

For more information regarding this matter or other topics related to Spanish Tax Law applicable to expatriates or the global mobility of employees, please contact us and join our XLNC Focus Group Expatriate Tax & Global Mobility Services.


XLNC MAGAZINE | No. 10 | Autumn 2022


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