On 13 March 2021 and with effect from 2022, an International Agreement on taxation and double taxation between Spain and the United Kingdom in relation to Gibraltar has recently been approved. The Agreement creates a set of rules to define tax residency, prevent double taxation and introduce transparency between Spain and Gibraltar on tax matters. Due to our geographical location in relation to Gibraltar and the scope that this Agreement may have in taxation and fiscal matters, we will analyse the most important aspects.
This Agreement represents an important step forward in international relations between the two countries, as it represents an unprecedented agreement on tax matters, where both parties strengthen their international relations in the pursuit of common interests.
The Agreement establishes a series of casuistry and requirements where the tax residence will be Spanish, which we highlight:
For example, in the case of an organisation based in Gibraltar whose assets (real estate, among others) are largely located in Spain, it will have Spanish tax residence.
This Agreement represents a turning point in the taxation of organisations that tried to benefit from the 10% or 20% Gibraltar tax rate despite carrying out the bulk of their operations in Spain or having real estate in Spain, since, with this Agreement, the formal aspects of the incorporation or management of the organisation are set aside in favour of having tax residence where the bulk of the organisation’s business or management is physically located and, consequently, its taxation.
There are also tax developments for individuals regarding the transfer of their tax residence between the two countries.
At MDG Advisors we will propose the best solutions to our clients who are involved in this situation. If you have any queries, please do not hesitate to contact us.