In a move that has been widely welcomed, Spain has now formally removed Gibraltar from its list of non-cooperative jurisdictions, bringing to an end a designation that had been in place since 1991.
The delisting follows the International Agreement on Taxation and the Protection of Financial Interests between the United Kingdom and Spain regarding Gibraltar (commonly referred to as the Gibraltar-Spain Tax Agreement), which entered into force in 2021. The Agreement established a framework for tax cooperation and transparency between Gibraltar and Spain and removed the basis upon which Spain had continued to maintain Gibraltar on the list.
Whilst the announcement is significant in its own right, its practical implications may be even more important. Gibraltar’s inclusion on the list was referenced throughout various areas of Spanish tax legislation and could result in enhanced scrutiny and the application of certain restrictions and anti-avoidance provisions in cross-border scenarios.
Its removal therefore has the potential to reduce a number of the historical frictions affecting individuals and businesses with connections to both Gibraltar and Spain.
Although the precise implications will depend on the relevant facts and circumstances, the removal of Gibraltar from the list is likely to be relevant wherever Spanish tax rules have historically applied by reference to Gibraltar’s classification as a non-cooperative jurisdiction. Businesses and individuals with existing cross-border arrangements may therefore wish to revisit long-standing assumptions in light of this development, including the potential application of anti-avoidance provisions, exemptions and reliefs under Spanish domestic law.
Viewed alongside the recent agreement on Gibraltar’s future relationship with the European Union, which is expected to facilitate the removal of the physical frontier between Gibraltar and Spain, the delisting represents a further step towards reducing historical barriers to cross-border movement and economic activity. As a firm that regularly works alongside Spanish advisers on Gibraltar-Spain cross-border matters, we expect many clients to be considering the practical implications of these changes in the months ahead.
