Spain & Britain ink Gibraltar tax deal ahead of Brexit

Spain & Britain ink Gibraltar tax deal ahead of Brexit
A fiscal treaty regarding disputed Gibraltar has been signed by Spain and Britain. Hailed as “massively significant” by Gibraltar’s leader, it is part of a deal sealed in November between London and the EU on Brexit.

The deal must now be approved by the Spanish cabinet and ratified by the parliaments of both countries.

Gibraltar’s leader Fabian Picardo said the Spanish government had pledged “that the effective implementation of this treaty will lead to Gibraltar being removed from the Spanish blacklist of tax haven jurisdictions in the future.”

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According to Spain, the treaty provides “clear rules to more easily resolve conflicts of tax residence” and allows for “the reduction and elimination of tax fraud and [other] effects that harm the Spanish Treasury, deriving from the nature of Gibraltar’s tax regime.”

Gibraltar offers very attractive tax rates for businesses and capital. Corporate profits are taxed at a top rate of 10 percent compared with 25 percent in Spain. There are an estimated 55,000 companies registered in Gibraltar even though the population is just around 30,000.

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It is “essential” that Gibraltar’s departure from the EU, planned for March 29 with Britain, takes place “in an orderly way and in keeping with Spanish interests in terms of fighting fraud and tax evasion,” said Madrid.

The Spanish Foreign Ministry noted that the treaty’s text stipulates that individuals and other entities in Gibraltar must register their tax residency in Spain if that is where they earn most of their revenue, own most of their assets, or if a majority of their owners or managers live there.

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Spain has long criticized Gibraltar’s low-tax regime, while the latter has argued that it is a crucial part of its services-based economy.

Spanish Foreign Minister Josep Borrell welcomed “the first international agreement signed by Spain and the United Kingdom over Gibraltar since the Treaty of Utrecht,” which dates back to 1713 and saw Spain cede the “Rock” to Britain.

A tiny British territory located at the southern tip of the Iberian Peninsula, Gibraltar has long been a point of contention between the UK and Spain. Madrid asserted a claim to the territory despite it being ceded to the British Crown centuries ago after being captured from Spain. Over the years, the Spanish have tried various attempts to retake the land.

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