Brussels (Brussels Morning) Spain will remove Gibraltar from its tax haven blacklist based on an agreement with the UK on tax cooperation that came into force earlier this month, El Pais reported on Tuesday.
The unprecedented treaty, published in Spain’s Official Gazette on Saturday, aims to make sure Gibraltar will apply EU-equivalent legislation when it comes to tax transparency and the fight against money laundering, despite the UK’s departure from the EU.
Tax residents
The agreement also aims to reinforce cooperation and information exchange between the Spanish and British authorities to prevent Gibraltar, legally a British Overseas Territory, from attracting Spanish tax evaders. The treaty sets clear rules on which persons and companies will be considered tax residents in Spain. Exceptions will be made, however, for legal entities incorporated in Gibraltar prior to 16 November 2018.
The EU and the Organisation for Economic Cooperation and Development (OECD) had lready removed Gibraltar from their list of “non-cooperative jurisdictions”, but Spain retained Gibraltar on its own tax haven blacklist, which was originally set up in 1991.
Schengen area
According to Spanish diplomatic sources, the new agreement complements the preliminary agreement reached on 31 December last year, to let Gibraltar join the Schengen area, the details of which are still being ironed out by London and Brussels. The ultimate goal should be to bring Gibraltar’s legislation into line with Spain’s on import duties, value-added tax and special excises.
Gibraltar, a small territory at the southern tip of the Iberian peninsula, was ceded to Britain in 1713 during the War of Spanish Succession. Disputes over sovereignty and jurisdiction remain to this day, though previously eased by both Spain and the UK being EU members. Residents of Gibraltar overwhelmingly voted to remain in the EU in the Brexit referendum, opening a new set of contentious problems for London when dealing with its Overseas Territory.