Agreement between Spain and the United Kingdom on the fiscal control of Gibraltar
On 4 March 2019, an international treaty with the United Kingdom was signed ad referendum, pending agreement by the Council of Ministers and parliamentary approval, which includes various measures aimed at preventing Gibraltar from being treated as a tax haven.
This agreement is a very important step towards preventing the use of this territory to evade money laundering and/or tax evasion controls.
It sets out the new tax rules governing the cross-border relationship between Gibraltar and Spain and completes the package of four memoranda detailing how the relationship between the Spanish and Spanish governments will be following the UK’s exit from the European Union.
The agreement sets out the measures that will resolve tax residency disputes for individuals, thus leaving no room for fictitious tax residency and the possible use of companies to hide the identity of their real owners.
Individuals will be considered tax resident in Spain if any of the following circumstances apply to them:
- The only permanent residence at their disposal is in Spanish territory.
- They make more than 183 overnight stays in Spain during the calendar year.
- Two thirds of their net assets are in Spanish territory or their spouse or descendants have their habitual residence in Spain.
Legal entities may have their tax residence in Spain, either because the majority of their assets are located in Spain, or because the majority of their owners or directors are tax resident in Spain, or because most of their income is obtained there.
Direct access to public information on the beneficial owners of companies, partnerships, legal persons and foundations, as well as to public and non-public information on trusts, is envisaged. Similarly, in accordance with the Directive on the prevention of money laundering, the agreement provides for free and direct access to Gibraltar Companies Registry entries.
To ensure future exchanges of information and deter fraudsters, Spain has been inspired by the model France has with Monaco. The foreign affairs negotiators have used this French scheme as a basis, which they consider to be very protective, and have made it stricter for Gibraltar, according to their interpretation.
After Brexit, this tax treaty remains “equally useful”, according to the Spanish government, “as it ensures Spain a high degree of cooperation from the competent tax authorities when EU law ceases to apply in Gibraltar”.
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