Tuesday, March 19, 2019 - 10:38

The Tax Treaty between Gibraltar and Spain is good for Gibraltar and delivers key benefits which the GSD is simply ignoring in the pursuit of narrow party political advantage. It contains no concessions on sovereignty, jurisdiction or control, says Bossano and Picardo.

The Agreement is a detailed and very technical document which sets out very clearly the terms under which the tax authorities in Gibraltar and Spain will cooperate and the basis upon which determinations will be conducted of the tax residency of people and companies whose place of tax domicile is in dispute.

In fact, any suggestion that the Tax Treaty favours Spain over Gibraltar is nothing more than party political spin typical of the GSD opposition and betrays a lack of comprehension of our territorial system of taxation which taxes on income sources as compared to the Spanish tax system that taxes based on residence.

The GSD’s fake concern about the tax treatment of Spanish nationals being unable to shirk Spanish tax residency also exposes the GSD’s lack of understanding of these matters. This is not uncommon in international tax law.

The Tax Treaty is a technical document and much of the language of the Agreement has a basis in international law, OECD and other precedents and case law. Those precedents and case law and interpretation provide a backdrop of legal certainty to the Agreement. The Government is working on a model FAQ which will be available, when ready, to provide further guidance. The fact of the matter is that the vast majority of Gibraltarian taxpayers are not likely to fall within the scope of the Tax Treaty and those that are will only fall in scope in the event of ‘tripping wires’ that prompt an investigation by the Spanish tax authorities. Gibraltarians who own genuine holiday / second homes in Spain have nothing to fear from this Tax Treaty. They will not be falling into Spanish taxation as a result.

The historic Tax Treaty between Gibraltar and Spain achieves, amongst other things, the following:

• It provides, for the first time, certainty and clarity in the context of tax in the cross-border context;

• It establishes a mechanism whereby disputes about determinations on tax residence can be properly, safely and sensibly addressed by reference to international interpretations of the language of the Tax Treaty and does not, as the GSD suggests, leave Gibraltarians (or other nationals for that matter) to fend for themselves. In fact, the direct opposite is true. It is worrying that the GSD have not been able to understand this;

• Importantly, it paves the way for Gibraltar’s exclusion from Spain’s list of tax havens - it is likely that Gibraltar’s exclusion from the few lists of other countries on which remain will follow shortly too;

• It captures, in an international Agreement, Gibraltar’s long-stated commitment to tax transparency;

• It turns the page on decades of Spanish propaganda presenting Gibraltar as an opaque and uncooperative tax haven;

• It has already secured Spain’s withdrawal of her veto over Gibraltar signing up to the OECD’s Base Erosion and Profits Shifting (BEPs) programme, something that enables Gibraltar to join the programme forthwith, thereby joining the top flight of countries complying with international tax transparency requirements and therefore a further blow to those who seek to denigrate us;

• Importantly, it creates to right to the eradication of double taxation for those long and detrimentally affected by the absence of such an agreement; and

• It enables non-Spanish nationals to properly and transparently plan their way out of Spanish tax residency if desirable.

The Minister for Economic Development, and former Chief Minister, Sir Joe Bossano, commented on the GSD’s attack on the Government: "There are no concessions in this Tax Treaty on sovereignty, jurisdiction or control. The GSLP would not agree to any concessions. I fought the concessions made in the Brussels Agreement and in the Airport Agreement under the AACR. I fought the concessions made in the Cordoba Agreements by the GSD, especially on the Airport on which the GSD then spent £84m and for which we have not had anything in return. I would not accept any concessions being made by a Government I am a member of. This is an agreement in which Spain recognises the Gibraltarian population, our national competent authorities our laws and our institutions. Under the GSD, we had instead the fictional ‘post boxing arrangements’ via London because Spain wanted to pretend that we did not exist. So I am satisfied that the GSD are wrong to say anything in this amounts to any concession on sovereignty, jurisdiction or control.”

The Chief Minister, Fabian Picardo, said: ‘It is clear that the GSD is as incompetent as it is lazy. They have not done their research before seeking to scare people on the Tax Treaty. The fact that Spanish nationals remain Spanish tax resident is nothing novel in international tax. For example, nationals of the United States of America remain tax resident in America for up to fifteen years after they depart the United States. These are measures designed to deter tax avoidance and they do not go to the tax sovereignty of the nation to which any such US national may have moved.