Mar 06 - Government Publishes Agreed Text of Tax Treaty With Spain
The Chief Minister has written to the Speaker of the Parliament, Adolfo Canepa, providing him with a copy of the agreed text of the Tax Treaty between Spain and Gibraltar.
The Government is therefore now able to release the agreed text of the Tax Treaty between Spain and Gibraltar.
An explanatory note is also attached. The Minister for Europe will now also send a copy of the signed Treaty to the House of Commons.
The Spanish Minister of Foreign Affairs has today also provided copies of the Tax Treaty between Spain and Gibraltar to relevant Spanish parliamentarians.
The Chief Minister, said: “I am very pleased to now be able to publish the agreed text of the Tax Treaty agreed between Spain and Gibraltar. Publication will enable potentially affected taxpayers to understand how best to structure their affairs and regularise their positions going forward. Additionally, we are also providing a simpler explainer text to assist.”
In a video on social media, the Chief Minister added:
“I am very happy with the agreement that has been reached. I think it is good for Gibraltar. It protects Gibraltar as a separate and autonomous tax jurisdiction. It protects and recognises the concept of the Gibraltarian and in particular it recognises the Gibraltarian Status Act, which means that not only is Spain recognising the act of our Parliament which designates Gibraltarians, it is recognising that we have a Parliament with separate legislative function and power.
“I had to formally write to David Lidington authorising him to enter into this agreement because under our Constitution, taxation is a matter which is the responsibility of the Gibraltar Government. But because external relations under the Constitution are the remit of the United Kingdom international treaties can only be entered into for Gibraltar by the United Kingdom and it is for that reason that not the Foreign Secretary or indeed the Minister for Europe, but the Deputy Prime Minister also known as the Chancellor of the Duchy of Lancaster entered into this agreement as he entered into the Memorandums of Understanding for Gibraltar with the consent and approval of the Government of Gibraltar.
“Absolutely Gibraltar remains a completely separate jurisdiction to the United Kingdom when it comes to matters of taxation. The only relevance of the United Kingdom in the document is to enter into it as the state responsible for our external relations. There is a recognition by Spain of the Gibraltar competent authority, the Income Tax Office as the Gibraltar competent authority, and the interchange will be between the Spanish competent authorities in taxation and the Gibraltar competent authorities in taxation. And that will be a direct exchange between Gibraltar and Spain, and Gibraltar therefore being a separate jurisdiction to the United Kingdom.
“Frontier Workers will continue to pay tax in Gibraltar, at least those frontier workers that are individuals who are resident in Spain and work in Gibraltar. Gibraltar taxes on the basis of source of income. So if you work in Gibraltar we tax your income at source in Gibraltar. Many of those frontier workers who come into Gibraltar every day to work go back to Spain and also taxed on their income in Spain. What this agreement does is it says that both states will give unilateral tax relief against tax paid already in a particular state. So, for example, if you are a Spanish cross-frontier worker you will continue to pay your tax in Gibraltar, it will be deducted from your salary. When in Spain you will have to pay only the difference between the higher rate of tax in Spain and the amount of tax you have paid in Gibraltar if there is a higher difference. There are some, there is a handful of Gibraltarians who live here and actually work in Spain, they will pay their tax in Spain and in Gibraltar we will not require them to pay anything other than the difference between the Gibraltar tax rate and whatever tax they paid in Spain. For those handful of people this likely means that they will enjoy the benefit of unilateral double tax relief because our rates are lower than the Spanish. But for Gibraltar’s tax take, for our Income Tax Office and our PAYE take, this will not mean that we lose income from cross-frontier workers.
“So, we are very pleased to have done this agreement now. I mean this is probably one of the only silver linings that Brexit has and that is that we have been able to sit down with Spain as a result of Brexit and negotiate things that Spain has been resistant in negotiating with us before. Spain has insisted that we have not been cooperating on matters of exchange of information et cetera in taxation. We have been offering to do so. In 2013 I wrote to the then Spanish Tax Minister Snr. Montoro and offered an agreement of this type. So, what we have achieved is that finally Spain and Gibraltar have an agreement on taxation and this will take the whip hand away from Spain, who will no longer be able to argue that Gibraltar fails to cooperate on matters of taxation. We know that this will lead to Gibraltar’s removal from Spanish blacklists because that’s what the Spanish have promised it will do. We don’t trust them, so we have retained the ability to terminate the agreement if they don’t deliver but we already know that by doing this we demonstrate that we have an agreement for exchange of information with Spain, an agreement for tax cooperation with Spain and they will find it very difficult indeed to now make the contrary argument internationally.
“Absolutely, if Spain fails to comply with its obligations under this agreement we have retained the right to terminate the agreement. We give 6 months’ notice and the agreement is over. This is a way of ensuring that both sides keep up to their obligations. That the good faith is there in performance of the obligations because if it isn’t, if Spain doesn’t remove us from blacklists when we have performed on our obligations, this will not be immediate it will require us of course to start providing the information and demonstrating our commitment to the agreement, then we stop complying with the obligations under the agreement. We will give notice to rescind and terminate the agreement as we are entitled to do under the terms of this agreement.
“Any actions which are required under this agreement including the decision to terminate it are in the hands of the Government of Gibraltar. Even though the United Kingdom is the signatory, it’s the signatory for Gibraltar and these are all matters which are constitutionally in the Government of Gibraltar. And so therefore any decision on whether or not to rescind is a decision for the Government of Gibraltar. But I want to look forward positively. I don’t trust Spain but I do hope that they are going to comply with their international obligations, if this treaty is properly ratified and that they are going to not just remove us from blacklists, that they are also going to ensure that they provide us with the information that we may need in respect of those who may be seeking to cheat the Gibraltarian tax authorities.”
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