Gibraltar: Process for determining whether legal entities are residents of Spain

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.

Criteria for determining residency in Spain

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:

  1. The majority of the assets, whether directly or indirectly owned, are located in Spain or consist of rights that may or must be exercised in Spain
  2. The majority of the income accrued in a calendar year derives from sources in Spain
  3. The majority of the natural persons in charge of effective management are tax resident in Spain
  4. The majority of the interests in the capital or equity, voting or profit-sharing rights are under the direct or indirect control of either natural persons who are tax residents in Spain or legal persons, entities, and other legal structures or arrangements linked to tax residents in Spain

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. 

Reporting form due by 30 April 2021

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:

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 | 



The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.