On 4th March 2021 an international agreement between Spain and Gibraltar came into force. The Agreement was published in Spain’s official State Bulletin on 13th March 2021. This is the UK’s first international agreement with Spain regarding Gibraltar since the 1783 Treaty of Paris. The Agreement has created rules to define tax residency, prevent double taxation and introduce transparency between Spain and Gibraltar on tax matters.
Some of the provisions of the Agreement do not take effect starting following the tax year, so some of the consecuences of this new rules will be discovered now, this year and coming months.
The Agreement serves to normalise Gibraltar’s relationship with Spain, as evidenced by Spain’s removal of Gibraltar from its list of tax havens.
Under the Agreement, legal persons, entities and other legal structures or arrangements are tax resident in Spain when any of the following exists:
i.Majority of the assets, whether held directly or indirectly, are located in Spain;
ii.Majority of the income accrued in a calendar year derive from sources in Spain;
iii.Majority of the natural persons in effective management are tax resident in Spain; or
iv.Majority of the ownership, control or profit-sharing rights are under direct or indirect control of Spanish tax residents or entities related to tax residents in Spain.
