Spain?s Tax Exchange Agreement With Gibraltar Nears Signing

07.12.10

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A Tax Information Exchange Agreement (TIEA) between Spain and Gibraltar has been agreed and is awaiting final adjustments before being signed, possibly early in 2011. The aim of the agreement is

A Tax Information Exchange Agreement (TIEA) between Spain and Gibraltar has been agreed and is awaiting final adjustments before being signed, possibly early in 2011. The aim of the agreement is to reduce tax evasion and end the Spanish government?s view of Gibraltar as a tax haven for Spanish residents.

The tax treaty is part of the tripartite talks between Spain, Gibraltar and the UK aimed at settling issues such as taxation, visas and maritime security.

The treaty was ready and awaiting a British signature in May, according to a spokesman from the Spanish Foreign Ministry. Gibraltar?s chief minister, Peter Caruana, underlined the territory?s willingness to enter into a TIEA with Spain as soon as possible. He commented: “The text is agreed and as far as we are concerned could be signed tomorrow? We don't want to be seen as a threat to Spain's public treasury.

Caruana said that Gibraltar is going beyond the minimum requirements in the standard agreement signed with other countries ?because we recognise that as an immediate neighbour, Spain feels more threatened.?

Talks have been delayed because Spain does not recognise Gibraltar as an independent sovereign state and a British colony since 1704. The continuance of the talks signals a change in stance by the Spanish government.

Matters appeared to hit a set-back in March 2008 when a report in the Spanish press implied that the Spanish government was thinking of applying to the Organisation of Economic Co-operation and Development (OECD) to place Gibraltar on its ?blacklist? of unco-operative tax havens.

The Spanish government inferred that Gibraltar was supporting tax evasion and money laundering through its unhelpfulness to respond to requests from Spain for assistance in fraud and fiscal investigations.

Gibraltar's Chief Minister, Peter Caruana dismissed the Spanish allegations and said: “If the Spanish government is saying that the Gibraltarian authorities are not co-operating with Spain in the way we co-operate with other countries, then that is simply untrue.

In 2009 matters appeared to improve when senior Spanish and UK ministers held the third Ministerial Meeting of the Forum of Dialogue in Gibraltar on 21st July.

In a communiqu?and a statement released by the Gibraltar government, Gibraltar welcomed progress in the discussions under a cordial and constructive atmosphere. Regarding co-operation in financial services and taxation, Spain and Gibraltar highlighted their desire to establish normal lines and methods of co-operation including the exchange of information on tax matters to aid in the investigation of tax crimes. The countries also agreed to establish liaison and exchanges between regulatory authorities, and increase co-operation on taxation and anti money laundering issues and policies.

Gibraltar has signed 18 TIEAs in accordance with the OECD?s model to promote international co-operation in tax matters through exchange of information. Countries sharing exchange of tax information with Gibraltar include the UK, France, Portugal, Ireland, Iceland and Germany. The first TIEA was signed with the US in March 2009 shortly before the G20 summit in London which ignited the global crackdown on tax evasion and declared in a statement that ?the era of banking secrecy is over?.

The International Monetary Fund (IMF) has said that the Gibraltar government and the private sector were conscious of the risk to the jurisdiction?s reputation. The IMF said: ?The Gibraltar authorities are concerned with protecting the reputation and integrity of Gibraltar as a financial centre, and are cognizant of the importance of adopting and applying international regulatory standards and best supervisory practices. Gibraltar has a good reputation internationally for co-operation and information sharing.?

Until early 2009 had Gibraltar held back from signing tax information exchange agreements on the grounds that countries like Switzerland had declined to make the same concessions. But Switzerland has since had to relax its strict confidentiality principles and is tightening up on European account holders it suspects of evading tax in their home countries saying that it did not want undeclared foreign assets in Swiss bank accounts. In early 2011 the UK and Germany will begin talks with Switzerland for an agreement for Switzerland to tax at source all accounts held in Switzerland by UK and German tax residents respectively. It is thought that France and Italy are interested in similar agreements. Could Spain be next?

It is more than likely that Gibraltar banks have long been used by Spanish residents, including expatriates with homes and businesses in Spain, to ?hide? their money from the Spanish tax authorities. A TIEA would deter Spanish residents from evading Spanish tax in this way. In any case, secreting money away from the taxman is now both very risky and potentially far more costly than paying the tax.

Spanish taxes can be significantly reduced with careful and legitimate tax planning. There are financial vehicles which can be used structured so that you pay the least amount of tax as is necessary. At the same time these financial vehicles can provide a total wealth management service whereby not only can taxes be reduced but income generated and capital given the opportunity to grow.

For reassurance in these products consult a tax and wealth management specialist like Blevins Franks with 35 years of experience in Spain and the UK to discuss the options best suited to your specific circumstances.

By Bill Blevins, Managing Director, Blevins Franks

25th November 2010

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

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