Relations between the UK and community clubs after divorce, in principle, are set for March 30, are still unknown. Despite their doubts, Brussels warns early on that there is a risk: that couples who are still the focus of unfair practices when they no longer comply with EU rules Spain has tried to limit this possibility in Gibraltar with an international agreement signed on Monday by the Spanish Foreign Minister, Josep Borrell, and the British Presidential Minister in charge of Brexit, David Lidington. Foreign sources have explained to EL PAÍS the main lines of this document.
The Government believes that the scheme will be implemented as soon as possible and within the framework of the UK withdrawal (with or without agreement). It must be approved by Congress because it is an international agreement. London has so far refused to make concessions in this area, but Brexit’s concern that it will leave its colony isolated from community clubs has served as an incentive to forge an alliance with Spain. In this context, the four memorandums signed last November between London and Madrid were also framed to soften the main dispute related to Rock (among them, the price of tobacco, which agreed to raise Gibraltar to limit smuggling).
The tax agreement establishes an objective scale to determine who is a tax resident in Gibraltar and who is not. Citizens who spend more than 183 days a year, have their spouse with a place to live in Spain, have a habitual residence or have two-thirds of their assets in Spanish territory must pay taxes to the Spanish Ministry of Finance. The rule affects those currently considered tax residents in Gibraltar.
The source consulted ensured that this type of deviation was, for the time being, not so large, but they warned that, without commitment between London and Madrid, they could grow after Brexit. “We have removed all incentives for residents of Spain who want to build their business in Gibraltar. We protect ourselves for the future, “predicted sources consulted.
More relevant than people chapter is that of a company. Spanish authorities calculate that there are around 55,000 companies based in this small region of 30,000 people, close to one of the poorest areas in Spain, Campo de Gibraltar. If the British colony were a country, it would be the third region with the highest GDP per capita in the world. And unemployment is 1%, compared to 35% for La Línea de la Concepcion.
Focus on the company
With this imbalance as the basis, Spain hopes to end unfair practices through a set of criteria for legal entities. These entities will be taxed by Spain when most assets are in Spain, when their income comes from the region, when the people managing it are tax residents in Spain or when most of the rights to capital are exercised by Spain.
For these very strict rules, some exceptions are made to accommodate companies that really have activities outside of Spain. All companies incorporated in Gibraltar before November 16, 2018 and who can demonstrate, among other requirements, that 75% of their income from Gibraltarian activities will escape the norm.
The success of this scheme will depend on the third leg contained in the agreement: the exchange of information. The Gibraltarian Administration will share tax data with the Spanish ones. There will even be several automatic transfers. They will be the ones who influence the data of workers in Gibraltar who live in Spain and vehicles, ships and aircraft registered in Rock. The same thing will apply to Gibraltarians who work in Spain or have assets in this country.
Asked about the pact, a British spokesman referred to a recent statement by Rock’s chief minister, Fabian Picardo: “I am very pleased that we can reach agreement on this historically complex issue.”
One of the main incentives to start the United Kingdom in these negotiations is to improve the reputation Gibraltar will get if the agreement is fulfilled. Spain was determined to remove the Stone from the list of tax sites when it discovered that the British colony adopted the provisions of this agreement. Initially, it was proposed that this commitment be included in the wording of the agreement. In the end the text has run out of references to that future.
However, sources consulted at the Ministry of Foreign Affairs guarantee that this is the goal and that several declarations, without binding value, might be made, reflecting the new situation.
Foreign authorities reject the name adopted by Spain and provide examples of information exchange agreements that they have signed with other EU countries, including Germany, France and Italy. Community clubs do not refer to Gibraltar as a tax haven (Brussels has so far tried to remain neutral in litigation involving two Member States).
To guarantee future information exchange and to prevent fraudsters, Spain has been inspired by the French-owned model with Monaco. Foreign negotiators have used this French scheme as a basis, which they consider very secure, and have tightened it in the case of Gibraltar, according to their interpretation.
El Peñón has a very attractive tax for the company and capital. Corporate tax has a maximum rate of 10% of company profits, compared to the general 25% in Spain.