The Agreement between Spain and UK regarding Gibraltar
It is now common knowledge that the Agreement between Spain and the UK regarding Gibraltar has become law in March 2021, so what do you need to know?
Firstly, in relation to Tax Residency, the Agreement is a “Tie Breaker” which will be referred to if there are doubts concerning where a person or entity is resident for tax purposes.
If an individual has only resided in Gibraltar or Spain then their residency for tax purposes has not changed due to the Agreement.
The Agreement will be referred to in cases where residency is disputed, but what is Tax Residency? What does it mean?
An individual is tax resident in the country he spends more than 183 days per tax year.
However, cross border workers spend more than 183 days in both Gibraltar and Spain so if there is any dispute then the Tax Authorities would refer to the Agreement. Here are some examples
1.Mr A lives in Sotogrande with his wife and children. He travels every day to an office in Gibraltar to work and returns home to Sotogrande in the evening. His children are at school in Sotogrande and they have no other home.
Mr A is clearly a tax resident in Spain and his situation is not changed by the Agreement.
2.Mr B lives in Gibraltar with his wife and children and owns a property in Sotogrande. His children are at school in Gibraltar. He travels some weekends and stays in Sotogrande and has 1 month staying there in August for holidays. He is careful not to spend more than 183 days in Spain.
Mr B is clearly a tax resident in Gibraltar and his situation is not changed by the Agreement.
3.Mr C has a property in Gibraltar and a property in Sotogrande. He spends his time between the 2 properties without taking notice of the exact days spent in each location and works in Gibraltar mainly. His wife and children live in the property in Sotogrande, his children travel to school in Gibraltar.
Mr C would be treated as Tax Resident in Spain, however, he has never regarded himself as such and would now need to put his tax affairs in order.
The above examples give some idea of how Tax Residency works in practice. If you would like a more detailed assessment from our team on your own individual circumstances, please contact us for an appointment.
Apart from Tax residency what else has changed with this Agreement?
Essentially, very little.
A great deal has been made of Companies registered in Gibraltar being treated as tax resident in Spain, however, this has always been true if the owners are Spanish resident. The main changes relate to ownership of assets in Spain regardless of the ownership of the company. Therefore, if a Gibraltar registered company owns a property in Spain then it will become liable for Spanish tax regardless of the residency of the owners.
If you would like a detailed assessment from our team regarding your Gibraltar registered company please contact us for an appointment.
Additionally, the Agreement also confirms the exchange of information between Gibraltar and Spain and the allowance of tax paid in one country to be offset against tax incurred in the other (Double taxation). Both of these elements have been in existence unofficially for some time.
Knightsbridge offers a unique “see-through advice” to individuals with income or assets in the UK/Gibraltar/Spain triangle. Although we have separate presences in each jurisdiction, we have experienced advisors who can discuss taxation of all three countries. This means you will not be pushed between offices dealing with different people and neither will we need to discuss your situation with external offices. Our in house advisors will deal with all elements seamlessly for you.
If you would like to discuss your situation with us then please contact us for an appointment.