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Persons should regularise tax residence to prevent impounding of vehicles – 160/2021

By February 24, 2021 No Comments


The Government has received representations from several owners of Gibraltar cars and motorcycles who had these vehicles impounded in Spain. A number of cases have been examined very carefully and brought to the attention of the Spanish authorities. The outcome of that process, which has now concluded, is that the Government is in a position to offer advice set out below.


The situation that has developed is not related to Gibraltar’s departure from the European Union. It is a customs procedure under European Union rules regarding the importation of the vehicle and the residency status of the owner. In short, anyone who is officially resident in Spain cannot own a Gibraltar-registered vehicle, and anyone who is resident in Gibraltar cannot own a Spanish registered vehicle. There is a short period of transition after the purchase where the registration of the vehicle or the residency status of the owner needs to be regularised.


Needless to say, it is not possible to be officially resident in Spain AND in Gibraltar at the same time. This has never been the case.


The objective is a fiscal one in relation to the payment of import duty and VAT on the vehicle by a person who is believed to be mainly resident in Spain. It is important to bear in mind that Automatic Number Plate Recognition cameras (ANPR) are installed on both the Gibraltar and Spanish side of the border and that this provides data as to how often a vehicle may cross from one side to the other.


Therefore the current issue stems from the residence status in Spain of the affected parties and not from their residence status in Gibraltar. This is why those affected are persons with homes both in Gibraltar and in Spain. This means that it is not deemed to be relevant if the affected person can produce a Gibraltar ID card, utility bills or other proof of residence in Gibraltar if at the same time they are deemed to be Spanish residents by the Spanish system. In any case the Gibraltar identity card is not regarded as definitive proof or conclusive evidence for tax purposes and this is a tax issue.


Those affected need to ensure that they have BOTH proper documented residence in Gibraltar and the proper abandonment of residence in the relevant EU Member State, in this case Spain, and for such residence to be established in Gibraltar ONLY. Indeed, these are the rules in all situations and not only as between Gibraltar and Spain. This means that anyone who has not legally moved their residence, will continue to be shown as a Spanish resident even if they no longer live there. Residence in one country does not automatically disprove residence in another. For example, in most cases tax residence is established after residing there for 180 days when there are 365 days in a normal year.


It is clear that in such circumstances, affected parties need to familiarise themselves with the legal requirements in Spain. The best way in which can be done is to engage the services of a lawyer or a tax adviser who will be able to ensure that they comply with all the Spanish rules as well as the Gibraltar rules on residence. It is not enough to comply with the rules of one but not with the rules of the other. This is the same between all countries and not only between Gibraltar and Spain. The new Tax Treaty, which has not yet come into force, will assist with these situations by setting a defined, agreed criteria for the settlement of such tax residency disputes.


It is important to recall, in this context, that the Gibraltar ID card is at this time no longer recognised by the European Union as a valid travel document. This is one of the issues we are seeking to restore in the ongoing negotiations with the EU.