Brexit sparked a review of how Spain, Gibraltar, and the UK worked together to create tax residency and tackle tax evasion.
The provisions of the latest agreement will take effect from the start of the next fiscal year, so on July 1, 2021 in Gibraltar and January 1, 2022 in Spain, wrote Jason Porter, director of Blevins Franks.
Handles it:
- Fiscal cooperation between the authorities of Spain and Gibraltar;
- Tax residence criteria for individuals and companies; And the,
- Specific administrative cooperation procedure.
It aims to eliminate tax fraud and the harmful effects of the characteristics of the current tax system.
This can affect people who have interests in both regions; For example, those who are registered as residents of Gibraltar and work, or own and spend time on property in Spain.
If it were determined that they were tax residents in Spain rather than Gibraltar, this would have significant tax consequences.
The agreement establishes that from the date on which the application of the European Union law in Gibraltar ceases due to Brexit, the legislation equivalent to the European Union law in force on that date will remain in Gibraltar in terms of transparency; Administrative cooperation; Harmful tax practices and fight against money laundering.
Residence rules for people
Disputes that arise when a person is a tax resident in both jurisdictions will now be resolved in favor of Spain if any of the following criteria are applied:
- A person spends more than 183 nights in Spain; or,
- Spouse – or related partner – and / or economically dependent assets and grandchildren who have habitual residence in Spain; or,
- The only permanent home of an individual is in Spain; or,
- There are at least two thirds of a person’s net worth in Spain.
Spanish citizens who transferred their residence to Gibraltar after March 4, 2019, the date of the original signature, will be considered tax residents in Spain only.
For non-Spanish citizens, the fiscal quarantine rule presented to Spanish citizens will apply, that is, they will retain the Spanish tax residence in the year of change of residence and for the following four years, except:
- Those who spend less than a full fiscal year in Spain; And the,
- Residents registered in Gibraltar who stay less than four years in Spain.
Rules for legal persons
Companies and other legal structures established and managed in Gibraltar or regulated by its laws will be considered exclusively resident in Spain when any of the following criteria apply:
- Most of its assets, or most of its enforceable rights, are on Spanish soil; or,
- Most of his income is of Hispanic origin; or,
- Most of the people responsible for the effective administration are tax residents in Spain; or,
- Residents in Spain have political or financial control over the company, entity or other legal form.
Administrative cooperation and exchange of information
The agreement also provides a system to improve administrative cooperation and information sharing on tax matters, to assist with tax collection and compliance.
Authorities will share information each year about people who reside in one jurisdiction but who work or do business in the other state.
The first exchange will cover the period from January 1, 2014 to the effective date of the agreement.
The agreement does not contain any mechanism to avoid double taxation. Just a reference to the local regulations of each region.
Here you have news of the agreement between Spain, Gibraltar and the United Kingdom Reports from a British newspaper Serene It states that the British in some EU member states, including France, Latvia, Malta and Luxembourg, have until June 30 to apply for tax residency. He will be in charge of the Netherlands until October 1, 2021.
Whereas, UK citizens in 14 other EU countries such as Italy, Spain, Portugal and Germany will be able to take advantage of automatic residency status after Brexit if they are already legal residents beforehand.
This article was written for international consultant Written by Jason Porter, Director of Financial Management at Blevins Franks and new department head European Advisory Service on Immigration.
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