1.The International Agreement on Taxation and the Protection of Financial Interests regarding Gibraltar (‘the Agreement’) was laid on 15 March, and the scrutiny period is scheduled to end on 30 April. It was considered by the EU Financial Affairs Sub-Committee at its meeting on 3 April.
2.The Agreement is the first international agreement signed by the UK and Spain over Gibraltar since the Treaty of Utrecht in 1713. It does not ‘roll over’ a prior EU international agreement. Instead, it is a new agreement that commits Gibraltar to align with EU law on matters related to transparency, administrative cooperation, harmful tax practices and Anti-Money Laundering after Brexit. It also provides rules for resolving conflicts over tax residency between Spain and Gibraltar. It is part of a package of agreements resulting from Brexit and is referred to in the Protocol on Gibraltar in the Withdrawal Agreement. While it has been negotiated by the Government of Gibraltar, the UK has signed the Agreement as the State responsible for Gibraltar’s international relations.
3.In terms of individual tax residency, the Agreement states that, primarily, tax residency of individuals will be determined by the domestic law of Spain and Gibraltar. Where these laws lead to residency in both, individuals will be considered as Spanish tax residents if any of the following conditions apply: (i) they spend over 183 overnight stays in a calendar year in Spain; (ii) their spouse or dependent family members reside in Spain; (iii) their only permanent home is in Spain; or (iv) two thirds of their assets are located in Spain. Sporadic absences in neither Spain nor Gibraltar would be added to the time where the individual spends the majority of their time.
4.The Agreement also includes “special rules for determining tax residency”, which are asymmetric and to the advantage of Spain. For example, Spanish nationals who move their residency to Gibraltar after 4 March 2019 “shall in all cases only be considered tax residents of Spain”. Non-Spanish nationals who move from Spain to Gibraltar would, with some exceptions, also be considered as Spanish tax residents for an additional four years. Such measures are sometimes introduced for jurisdictions that are considered to be tax havens, but these provisions will continue to apply to Gibraltar even when it has been removed from Spain’s blacklist of tax haven jurisdictions, as Spain has committed to doing (see paragraph 9).
5.This asymmetry and the nature of the measures under the Agreement could potentially have human rights implications for those affected, for example under Article 1 to the First Protocol to the European Convention on Human Rights (ECHR), and under equality laws. We do not seek to resolve the question of the Agreement’s compatibility with the ECHR here, but it is unfortunate that the Explanatory Memorandum provided by the Government did not include a section on human rights, so it is not possible to identify whether the UK Government has any concerns about this question.
6.Under the Agreement, legal persons, entities and other legal structures established and managed in Gibraltar, or governed by its legislation, will also be considered Spanish tax residents exclusively if any of the following conditions apply: (i) the majority of its assets are located in Spain; (ii) the majority of its income is accrued in Spain; (iii) the majority of the natural persons in charge of effective management are tax resident in Spain; or (iv) the majority of the interests in the capital or equity, voting or profit-sharing rights are under the control of Spanish tax residents. Those moving from Spain to Gibraltar after the date of entry into force of this agreement would also in all cases maintain tax residency only in Spain.
7.Beyond rules for determining tax residency, the Agreement commits Gibraltar to a ‘static alignment’ with existing EU legislation on transparency, administrative cooperation, harmful tax practices and anti-money laundering. It also includes a commitment to ‘dynamic alignment’ with EU legislation on mutual administrative assistance now and into the future, as well as any OECD and G20 standards introduced in this area. The Agreement also provides for the automatic exchange of information on workers—which is standard in such a treaty—the automatic exchange of information on “vessels, aircraft and motor vehicles registered in Gibraltar relating to tax residents in Spain”, and enhanced access to beneficial ownership information for entities based in Gibraltar. Although the EM does not reference compliance with the General Data Protection Regulation (GDPR), following an exchange with officials, we were informed that any information exchanged under the Agreement would be subject to the rules provided by the Convention on Mutual Administrative Assistance in Tax Matters of the OECD and the Council of Europe, and therefore would not be affected by personal data transfer rules in the GDPR.
8.The Agreement would establish a Joint Coordination Committee, formed by the tax authorities of Spain and Gibraltar, to supervise and coordinate the cooperation activities set out in this agreement, seeking to resolve any disputes by mutual agreement. The Liaison Bodies would be responsible for directly undertaking the actions outlined in the agreement. Either side may terminate the agreement by giving notice of at least six months before the end of any calendar year.
9.The Agreement has proved controversial in Gibraltar. The main opposition party, the Gibraltar Social Democrats (GSD), has described the Agreement as “intrusive and harmful” to Gibraltar’s interests, arguing that the Agreement undermines Gibraltar’s fiscal sovereignty and could affect its ability to attract inward investment. On the other hand, the content of this treaty should not be considered in isolation. As a consequence of its signing, Spain has removed its veto over Gibraltar signing up to the OECD’s Base Erosion and Profits Shifting (BEPS) programme and has agreed to remove Gibraltar from Spain’s blacklist of tax haven jurisdictions, subject to effective implementation. This could deliver reputational benefits for Gibraltar. Through the Agreement, Spain also directly recognises the activities performed by Gibraltarian tax authorities, a recognition that is considered to be politically important by both sides. The Agreement is also mentioned in the Protocol on Gibraltar contained in the UK-EU Withdrawal Agreement. For these reasons, the Chief Minister of Gibraltar has described the Agreement as “massively significant”.
10.We draw special attention to the UK-Spain tax agreement regarding Gibraltar, on the grounds that
1 International Agreement on Taxation and the Protection of Financial Interests Between the United Kingdom of Great Britain and Northern Ireland and the Kingdom of Spain regarding Gibraltar, CP 72, 2019: [accessed 3 April 2019]
2 This date takes account of the fact that both Houses will sit from 8–11 April. It will change if further sitting days are scheduled.
3 Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community (11 March 2019): [accessed 4 April 2019]
4 In addition to the Government’s Explanatory Memorandum, the Gibraltar Government has also produced a summary of the Agreement. HM Government of Gibraltar, Summary—International Tax Agreement (5 March 2019): [accessed 4 April 2019]
5 The Agreement provides that where these provisions are not conclusive, a natural person would be considered tax residents only in Spain, unless they are able to provide reliable evidence that they have a permanent home for their exclusive use in Gibraltar and that they remain in Gibraltar over 183 days.
6 Article 1 to the First Protocol of the European Convention on Human Rights provides: “Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.” Questions may also arise as to whether it is acceptable to discriminate against Spanish nationals moving to Gibraltar (as compared to Spanish nationals moving to other States); and the justification for taxing non-nationals who were resident in Spain in the past, but have since left.
7 We note the recommendation of the Joint Committee on Human Rights, in its report (17th Report, Session 2017–19, HC 1833, HL Paper 310), that a human rights memorandum should be provided with international agreements. At the very least, potential issues of this sort should be identified in the Government’s Explanatory Memorandum.
8 The second two conditions are subject to some exceptions.
9 Gibraltar Social Democrats, The Tax Treaty is Intrusive and Harmful to our Interests (18 March 2019): [accessed 4 April 2019]
10 HM Government of Gibraltar, Tax Treaty with the Kingdom of Spain (4 March 2019): [accessed 5 April 2019]