On Friday 26th February 2021 H.M. Government of Gibraltar published various notices in the Gazette in relation to the International Agreement on taxation and the protection of financial interests between the United Kingdom and Spain regarding Gibraltar (the “Treaty”).
Pursuant to section 3A(2) of the Income Tax Act 2010 (the “Act”) (which requires the Minster, by notice in the Gazette, to publish the texts of International Tax Agreements), the Income Tax Act 2010 International Agreement (Spain) Notice 2021 was published which replicates the text of the Treaty. The Income Tax Act 2010 Notice of Amendment of Schedule 12 (Spain) was also published to amend Schedule 12 of the Act (which lists all of Gibraltar’s International Tax Agreements) to include the Treaty. Gibraltar now has two International Tax Agreements– with the United Kingdom and Spain.
The Treaty aims to clarify the tax position of individuals and entities resident for tax purposes in both Gibraltar and Spain, and subsequently help to regulate relations between the two jurisdictions. Under the Treaty, individuals will continue to be tax resident in Spain or Gibraltar in accordance with their domestic law. However, those with dual residency are not exempt from tax residence in Spain if certain criteria are met. For more information on this visit: https://www.gibraltarlawyers.com/uploads/PDF/ISOLAS_Tax_Agreement.pdf
Although the text of the Treaty has been replicated into the Act, the Treaty itself shall only enter into force once both parties have given notice that they have completed their respective internal respective ratification procedures, and shall take effect under the provisions of Article 2 for taxable periods commencing on or after the date of entry into force of the Treaty.
The automatic exchange of information on workers registered with the Gibraltar Income Tax Office as residents in Spain, and vessels, aircraft and motor vehicles registered in Gibraltar relating to tax residents in Spain, and vice versa, will be retrospective, commencing on or after 1 January 2014.
In respect of any other exchange of information not mentioned above, the taxable periods will commence on or after 1 January 2011 or where there are no taxable periods, for all charges to tax arising on or after 1 January 2011.
In addition to the above, the International Agreements on Taxation Matters (Spain) Regulations 2021 (the “Regulations”) were also published, which came into effect on the date of publication. The Regulations have effect for and are in connection with the implementation of the Treaty and, in particular, to enable the Commissioner of Income Tax to provide the Spanish tax authorities with relevant information, as set out in the Treaty.
The Regulations also gives effect to Article 3(2) of the Treaty by making provision equivalent to –
(a) Council Directive (EU) 2015/2376 of 8 December 2015 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation (“DAC 3”); and
(b) Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements (“DAC 6”).
DAC 3 provides for the mandatory automatic exchange of information on advance cross-border tax rulings and advance pricing arrangements.
DAC 6 introduces mandatory disclosure rules for intermediaries (and in some cases taxpayers) in respect of cross-border arrangements that exhibit certain “hallmarks”.
DAC 6 had previously been replaced with the European Union Mandatory Disclosure Regime (“MDR”) under Gibraltar law, but has now been re-introduced (although only in relation to arrangements between Gibraltar and Spain).