Administrative Co-operation on Tax Matters under the UK-Spain Tax Treaty regarding Gibraltar

The signing of the Treaty with Spain on “Taxation and the Protection of Financial Interests”, signals a new era of tax transparency and exchange of information between Spain and Gibraltar in both directions.

Individuals and any company, trust or entity should be aware that the Treaty requires “an enhanced administrative co-operation … with a view to exchanging information that is foreseeably relevant to the administration, enforcement and collection …” of all types of national and local taxes.

Relevant Time

The Treaty will come into force once all of Gibraltar’s, the UK’s and Spain’s procedures to give effect to it are completed. These formal procedures have been completed in Gibraltar and the UK, but certain provisions may need changes to Gibraltar law to give the authorities relevant powers. In Spain the procedure is a little unclear but may take longer, as it may involve Parliamentary approval of some sort.

The enhanced provisions on administrative co-operation, exchange of information and transparency come into operation when the Treaty becomes effective but in respect of periods identified below.

EU law is currently applicable. The Treaty provides that current and future EU law will continue to apply beyond Brexit, as will OECD and G20 standards.

Co-operation provisions

Stated succinctly, there is full exchange of information and administrative co-operation in matters related to taxes and duties and enforcement of all taxes and duties between Spain and Gibraltar. This is achieved in various ways.

All current and future EU provisions regarding mutual administrative assistance on exchange of information and wider co-operation and assisting in the recovery of taxes and duties will have full force and effect beyond Brexit.

Additionally, the OECD and Council of Europe’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters and any future OECD and G20 standards will be applied in Gibraltar.

Spain and the UK (regarding Gibraltar) will establish a liaison body to deal with issues arising under the Treaty.

That liaison body is obliged to provide mutual assistance whether a person, company, trust or entity is resident or non-resident in either Spain or Gibraltar, with the following forms of co-operation being specified:

• Automatic or on request exchange of information or joint control of or participation in tax examinations;
• Collection and preservation;
• Service or transfer of documents.

There will be automatic exchange of information in both directions of:

• Annual information, within four months of the end of each calendar year, on workers in each jurisdiction registered as resident in the other, with the first exchange backdated to 1 January 2014 and due within four months of the Treaty entering into force. A worker includes any individual employed and/or carrying on a trade, business, profession or vocation in Gibraltar, who is resident within 80 kms from Gibraltar, and, vice versa, employed or operating within 80 kms of Gibraltar;
• Six-monthly information, including ownership, licence plate, value and acquisition date, on 31 March and 30 September, on vessels, aircraft and motor vehicles registered in each jurisdiction relating to residents of the other, with the first exchange backdated to 1 January 2014 and due within four months of the Treaty entering into force.

The following will apply as between Gibraltar in favour of Spain:

• free access to the Companies Registry and Gibraltar Land Registry as required by EU Law;
• direct access to public information or information held by The Gibraltar Commissioner of Income Tax, for taxable periods commencing with or charges of tax on or after 1 January 2011, on
  • beneficial ownership of companies and foundations;
  • settlors, trustees, beneficiaries, assets of all trusts or other legal structures established or managed in or governed by the law of Gibraltar, if the settlors, trustees, protectors or beneficiaries are Spanish tax resident or the assets are in Spain.

Administrative arrangements

Aside from the liaison bodies referred to above, a Joint Co-ordination committee will be formed. It shall endeavour to resolve by agreement any difficulties or doubts.

New era of tax transparency and co-operation

This new era of tax transparency co-operation between Gibraltar and Spain should not be ignored by any individual or companies, entities, trusts, trustees or direct or indirect beneficiaries having connections with Spain.

Seek advice now and take steps to reduce the possibility of unfavourable effects.