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Spain/Gibraltar Tax Treaty – tax residency of individuals

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16 May 2019

On 4 March 2019, Spain and the UK – acting on behalf of Gibraltar – signed an international agreement on taxation and the protection of financial interests and tax good governance.

This is the first agreement on Gibraltar and Spain since the 1713 Utrecht Treaty, although it does not imply any modification of the respective legal status of Spain and the UK with regard to sovereignty and jurisdiction in relation to Gibraltar.

The treaty has not been yet ratified by the respective national Parliaments.

We highlight the provisions for tax residency of natural persons:

1- Whereby natural persons are deemed resident in Spain and Gibraltar according to their domestic law,

(i) They shall be tax resident only in Spain when any of the following circumstances exist:

  1. a) they spend over 183 overnight stays of the calendar year in Spain, to which sporadic absences in neither Spain nor Gibraltar shall be added,
  2. b) their spouse (not legally separated) or partner and/or dependent ascendants or descendants reside in Spain,
  3. c) the only permanent home at their disposal is in Spain, or
  4. d) 2/3 of their net assets held directly or indirectly are located in Spain.

(ii) They shall be tax resident only in Spain when the above provisions are not conclusive, unless they are able to provide reliable evidence that they have a permanent home to the exclusive use in Gibraltar and remain in Gibraltar over 183 days;

2- Spanish nationals who move their residency to Gibraltar after the date on which this agreement is signed shall in all cases only be considered tax residents in Spain;

3- Non-Spanish nationals who provide proof of their new residency in Gibraltar shall not lose tax residency in Spain within the tax period when the change is made and during the four subsequent years, unless they spend less than one complete tax year in Spain or are registered Gibraltarians (generally British citizens that have resided in Gibraltar for over ten years) that spend less than 4 years in Spain.

4- HNWI, Cat 2, HEPSS or any other equivalent scheme shall not by itself constitute proof of tax residency in Gibraltar.

In conclusion, you will be considered tax resident in Spain if you meet any of the circumstances to be deemed resident in Spain (183 days, family ties, permanent home, 2/3 net assets) or if you don’t but cannot proof that you spend more than 183 days in Gibraltar and own a house at your exclusive disposal there, or if you are Spanish national in all cases (our domestic law is currently is more restrictive because nationals do not lose tax residency when moving to a tax haven in the tax period and subsequent four).

Non-Spanish nationals who have been tax resident in Spain for more than one year and have moved to Gibraltar will be deemed tax residents in Spain for the following four years after they moved. Gibraltarians who have been resident in Spain for more than four years will continue to be resident for four years more.

The rules for Spanish nationals will come into force as of 4 March 2019 if the Treaty if formally ratified.

The rules for non-Spanish nationals will come into force for the taxable periods after the ratification date, the earliest being on 1 January 2020.

Non-Spanish nationals may use this window to consider their position.

In spite of claims for historical Spanish sovereignty over The Rock, Spain (PSOE) has recognized the existence of both a separate tax authority in Gibraltar and the existence of registered Gibraltarians. Moreover, once the treaty is ratified Gibraltar should be removed from the Spanish blacklist of tax haven jurisdictions.

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