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Gibraltar has agreed to implement a minimum 15% sales tax on goods as part of a historic post-Brexit settlement with Spain, aiming to prevent unfair tax competition and facilitate closer economic integration with the European Union.
The agreement requires Gibraltar to establish a “transaction tax” on goods, starting at 15% upon ratification and increasing by 1% annually over the next two years, eventually aligning with the lowest EU rate, currently 17% in Luxembourg. This tax convergence is critical for Gibraltar to join a customs union with the EU, a key element of the new arrangement.
The deal also eases travel restrictions by connecting Gibraltar to the EU’s Schengen border-free zone, enabling freer movement while maintaining passport checks by British and Spanish border guards. Spanish customs will oversee goods entering Gibraltar, particularly to curb longstanding concerns about cross-border smuggling and illegal cigarette sales in Spain.
This breakthrough resolves a major post-Brexit hurdle, opening doors for future UK-EU cooperation in defense and veterinary agreements. Gibraltar retains fiscal sovereignty and will not adopt VAT, preserving some fiscal independence despite harmonizing transaction taxes.
For multinational businesses, tax advisors, and international trade specialists, this deal represents a significant shift in tax and customs regulations in the region, impacting supply chains, compliance frameworks, and risk assessments.
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