Agreement concerning taxation and the protection of financial interests between Spain and the UK regarding Gibraltar
Agreement concerning taxation and the protection of financial interests
An agreement (signed in March 2019) concerning taxation and the protection of financial interests between Spain and the UK regarding Gibraltar entered into force in March 2021.
The agreement does not follow the OECD Model Tax Convention, and generally the main aspects of the agreement cover the tax residency of natural and legal persons, double tax relief, and exchange of information procedures. The agreement specifically reflects that it in no way affects any issues regarding the sovereignty of Gibraltar or the respective positions of the parties in this regard.
In relation to the residency of legal persons, the agreement provides rules for determining the tax residency of legal persons, entities, and other legal structures or arrangements (e.g., companies). These rules apply to accounting periods beginning on or after 4 March 2021 and can determine that legal persons that are established and managed in Gibraltar or governed by Gibraltar law, are residents of Spain only when any of one the following circumstances is present:
For those legal persons incorporated in Gibraltar before 16 November 2018 and that have fallen within circumstances (3) or (4) above, the agreement includes a safeguard provision that allows for Gibraltar-only residency to be retained provided that the taxpayers can demonstrate sufficient presence, business, and economic operations in Gibraltar. In order to satisfy this requirement, there are five specific conditions, all of which must be met as of 31 December 2018 with supporting evidence for the safeguard to be available.
In accordance with the agreement, the Gibraltar tax authorities must provide the Spanish tax authorities with a list of legal persons and others that meet the conditions of circumstances (3) and (4) and also meet the five conditions as of 31 December 2018, together with details on the legal and beneficial ownership and the natural persons in charge of effective management of those legal persons.
The Gibraltar tax authorities have recently made available a form (Return ES1) to allow for submission of the necessary information and evidence. Completed forms are due by 30 April 2021 and can be uploaded directly using a secure facility (gateway).
Both the form and the gateway are available on the website of the tax authorities: https://tax.egov.gi/
Guidance [PDF 167 KB] and a set of “frequently asked questions” (FAQs) are provided by the tax authorities in relation to completion of the form (refer to the Return ES1). The Gibraltar tax authorities guidance states that the submission of the form is not mandatory, but a failure to provide the information may result in the above rules being applied and tax being imposed by Spain.
For more information, contact a KPMG tax professional in Gibraltar:
Darren Anton | +350 200 48600 | email@example.com
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