SPAIN and the United Kingdom have reached an agreement to fight tax fraud and money laundering in the British overseas territory of Gibraltar.
The treaty, signed yesterday by Theresa May’s effective deputy David Lidington in London and Spanish Foreign Minister Josep Borrell in Madrid, will set out stricter rules for determining the tax residency of individuals and businesses.
Corporate taxes are taxed at a top rate of 10% in Gibraltar, compared with 25% in Spain, and the territory has 55,000 businesses registered there despite having a population of just 30,000.
The deal however will require individuals who spend more than 183 days of the year in Spain, whose spouse or partner is a Spanish resident, who own a regular home in Spain, or who keep two thirds of their assets of Spanish territory to pay taxes in Spain.
Gibraltar’s Chief Minister Fabian Picardo said: “What we have done – as we have long been offering to do – is reach an arrangement with our nearest neighbour to resolve cases of dispute as to the residence of individuals and companies.
“As a result, I trust we will now be able to end the irritating myth that Gibraltar is anything other than entirely cooperative when it comes to the exchange of tax information.
“Indeed we have obtained a commitment from the Spanish Government that the effective implementation of this treaty will lead to Gibraltar being removed from the Spanish blacklist of tax haven jurisdictions in the future.
“This is massively significant.”
“This treaty will lead to Gibraltar being removed from the Spanish blacklist of tax haven jurisdictions.”Fabian Picardo
Picardo added the treaty meant bilateral recognition ‘for the first time in history’ of the Gibraltarian Status Act, which allows residents on the Rock to identify as Gibraltarian.
Borrell also told reporters that the agreement was the first international treaty between Spain and the UK over Gibraltar ‘since the Treaty of Utrecht’ in 1713, which ceded the Mediterranean port to the British.
The news comes as Gibraltar has become increasingly caught up in the Brexit cross-fire, with Spain demanding – unsuccessfully – that the Rock be termed a ‘colony’ in the draft withdrawal deal.
The Spanish have long battled with the UK over competing claims for the territory, most recently making a claim for the land upon with Gibraltar’s international airport is built.
The historic treaty follows four memorandums of understanding signed last year in which Gibraltar agreed to raise the price of tobacco – the Rock is currently the biggest entry point for illegal tobacco into Spain.
Picardo added: “I also look forward to the Gibraltar and Spanish tax authorities working together in a spirit of normality and cooperation,”
“Together with our agreement on tobacco pricing, this is an important step in slaying the myths that have circulated on Gibraltar.”
“These agreements deal with those irritants in a positive and forward looking way that broaches no concessions and yet normalises the relationship between neighbouring tax authorities.”
The Gibraltar tax deal still needs to be approved by Spain’s Cabinet and both countries’ parliaments, and is expected to be tabled before Gibraltar MPs later this month.