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Brexit

Tax treaty finalised as Spain approves ‘no deal’ Brexit contingency plans

The Rock of the British overseas territory of Gibraltar, historically claimed by Spain, is seen from the Spanish side of the border near La Linea de la Concepcion, southern Spain, November 23, 2018. REUTERS/Jon Nazca

Gibraltar, the UK and Spain have finalised the terms of a tax treaty that forms part of the package of Brexit agreements relating to the Rock.

News that the treaty had been finalised was revealed by Josep Borrell, Spain’s Minister for Foreign Affairs, as the Spanish Government approved “temporary and unilateral” measures to mitigate the impact of a ‘no deal’ Brexit on British citizens and companies, not just in Spain but in Gibraltar too.

Asked by this newspaper, Chief Minister Fabian Picardo confirmed the development.

“We have been able to finalise the text of a tax treaty with Spain,” he said.

“The translation has just been finalised.”

“We expect to provide more details of the package of measures agreed, and the detailed terms of the tax treaty, in coming days.”

“I am very pleased that we have been able to reach agreement on this historically difficult subject.”

Speaking to reporters at a midday press conference yesterday, Mr Borrell said he would sign the treaty on Spain’s behalf later that same afternoon. It was later confirmed however that the signing would likely be next week.

The Chronicle understands the treaty will be signed on Gibraltar’s behalf by the UK’s de facto deputy Prime Minister, David Lidington.

The agreement was negotiated by the three governments but is an international treaty and as such will be signed by the UK Government, which is responsible under the 2006 Constitution for Gibraltar’s external relations.

The text of the treaty has taken months to negotiate and translate, and will not be made public until both the UK and Spain have both formally signed it.

The Gibraltar Government has previously stated that it sets out provisions on fiscal transparency and tax residency rules typical of those commonly found in a double taxation agreement, and in information exchange agreements of the type that Gibraltar has already signed with numerous countries around the globe.

But the government has also been heavily criticised by the GSD for failing to disclose the contents of the agreement in order to enable scrutiny before it is signed.

The long-anticipated news that the treaty had been finalised was revealed yesterday by Mr Borrell during a press conference after the weekly meeting of the Spanish cabinet.

As reported by the Chronicle on Thursday, the cabinet approved a Royal Decree setting out contingency measures to mitigate the impact of a ‘no deal’ Brexit on British citizens and companies in Spain and Gibraltar.

Spain's Brexit contingency plan makes clear that measures agreed by Spain would be conditional on the same terms applying to Spaniards living and working in Britain.

Mr Borrell said the fundamental aim of the decree was to protect citizens’ rights, “be they British or Spanish”.

“They exercised rights and we have to protect and respect that,” he told reporters.

Although the Royal Decree is focused in large part on Britons resident in Spain and companies based in the country, it also contains measures aimed at ensuring frontier fluidity at the border with Gibraltar.

The draft law, which complements EU-wide contingency measures, also includes sections on issues such as road haulage, border inspections on goods, financial services, mutual recognition of professional qualifications and residency rights.

The objective, Mr Borrell said, “is to ensure continuity and avoid ruptures”.

He noted that the EU’s ‘no deal’ contingency measures do not apply to Gibraltar, “…which means we have to apply those measures, and that’s what the Royal Decree does.”

“Our objective there is the protection of the rights of cross-frontier works,” he said.

“Evidently, if the withdrawal occurs, the inhabitants of Gibraltar will be considered citizens of a third country, that’s inevitable, but we will do everything possible to avoid any disruption in the flow of people…[across the border].”

Mr Borrell also said that Spain would not oppose any move by the UK to extend the Article 50 deadline beyond March 29, but that there would have to be a clear objective to such an extension.

“It’s not a question of granting extra time for the sake of it,” he said.

“We need to know why it is being requested.”

“But let’s not get ahead of events. We don’t know what the British are going to decide.”

“We’ll do our best to make sure that their decision makes this Royal Decree that has been so hard to prepare is rendered useless.”

MAIN PHOTO: REUTERS/Jon Nazca