Agreement Details

Indirect taxation in Gibraltar: “transaction tax” and special taxes (Annex 24)

• Gibraltar will establish an indirect tax (transaction tax or TT) and Special Taxes for harmonised taxes which will accrue on the importation, production, irregular entry and on goods carried in the luggage of travelers above the limits of the franchise.

• He The minimum standard TT rate shall not be lower than the lowest rate applied by a Member State (currently 17%). This rate will be reached after a 3-year transition period in which 15% will be applied in the first year, 16% in the second, and 17% or the lowest rate applicable at that time in a Member State from the third year onwards.

  Gibraltar may establish a reduced rate not less than 5% and a super reduced rate less than 5% (the agreement stipulates that this rate will be 0%) for the goods listed in Appendix 1 of Annex 24, according to which:

  • The 5% rate will be applied, among others, to agricultural products, plants and other floriculture products, children's clothing and footwear, child car seats, bicycles, and works of art.

  • The 0% rate will apply, among others, to food products (excluding alcoholic beverages), water supply, pharmaceutical products, medical, sanitary and disabled equipment, supply of books and newspapers or supply of solar panels.

• Regarding the types of Special TaxesThe rates will apply upon the entry into force of the Agreement. minimums provided for in the regulations of the Union and will not differ from 94% or 6 percentage points in relation to those applied in Spain, after a period of 3 years.

  The provisions of the preceding paragraph do not apply to hydrocarbons and tobacco:

  • Hydrocarbons: They must reach the rates applicable in Spain three years after the entry into force of the Agreement

  • Tobacco: Upon the entry into force of the Agreement, the minimum rates provided for in Union regulations will apply, provided that, in the case of cigarettes, they cannot be less than 115 euros per 1,000 units and that the difference in the retail price in relation to the Peninsula and the Balearic Islands cannot exceed 0.80 euros or 15% per pack.

The creation of a observatory An independent body will analyze the evolution of prices and sales in the region to determine whether the difference in taxation causes significant distortions, and may propose that Gibraltar adapt its taxation by raising or lowering tax rates for certain products or product categories. The tax rate determined by the observatory for the Transaction Tax may never be lower than the lowest rate applied in a Member State reduced by 2 percentage points.  For excise duties, it may not be less than the minimum provided for in Union regulations. If an increase in interest rates is necessary to avoid distortions, the observatory can propose raising them without a maximum limit.

The observatory's proposals are binding on the parties. Should Gibraltar fail to comply with the recommendation, a safeguard could be exercised by Spain that would allow Spanish VAT and special duties to be levied on goods presented at customs for transport to Gibraltar.