Tax Treaty between Spain and Gibraltar: Spanish Tax Residency in Effect

07 Jan 2022

As clocks struck midnight on the 31st December 2021, key enforceable measures of the new Tax Treaty between Spain and Gibraltar came into effect.

The treaty titled the ‘International Agreement on Taxation and the protection of financial interests between the Kingdom of Spain and the United Kingdom of Great Britain and Northern Ireland regarding Gibraltar’ came into effect in March 2021. The bespoke agreement lays out new parameters for the tax residency of individuals and entities and covers greater cooperation when it comes to the exchange of information.

Below is a summary of how tax residency is decided for individuals and entities.

Tax residency for individuals ‘natural persons’:

Natural persons shall be tax resident only in Spain when any of the following circumstances exist:

  1. They spend over 183 overnight stays of the calendar year in Spain. In determining the count of overnight stays, sporadic absences in neither Spain nor Gibraltar shall be added to the time where these individuals spend the majority of their overnight stays;
  2. In the event that, pursuant to the Spanish tax legislation, their spouse (from whom they are not legally separated) or the natural person with whom a similar relationship has been

established, and/or any dependent ascendant or descendants resides or reside habitually in Spain;

  1. The only permanent home at their disposal is in Spain; or
  2. Two-thirds of their net assets, determined pursuant to Spanish Tax legislation, whether held directly or indirectly, are located in Spain;

If once these four rules are applied, the tax residency status remains unclear, individuals shall be considered tax residents only in Spain unless they can provide reliable evidence that they have a permanent home for their exclusive use in Gibraltar and remain in Gibraltar over 183 days. If doubts persist even after all these parameters are applied, a Joint Coordination Committee will review and arrive at a decision.

Tax residency for entities:

Legal persons, entities and other legal structures or arrangements established and managed in Gibraltar, or governed by its legislation, shall be considered to have residency only in Spain when any of the following circumstances exist:

  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, pursuant to article 13 of the codifying legislation of the Non-resident Income Tax Act of the Spanish tax legislation as may be amended from time to time;
  3. The majority of the natural persons in charge of effective management are tax residents 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;

Liability long after relocation

In addition to the parameters outlined above, the Agreement includes special measures that directly impact Spanish nationals who relocate to Gibraltar and non-Spanish nationals and Gibraltarians who decide to move into Gibraltar.

If you are in doubt of your tax residency status or would like to discuss and develop a robust tax plan, contact us today at 

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