Do Gibraltar Cross-Border workers need to file a Spanish Tax Return?

Cross border tax issues for those working in Gibraltar and living in Spain

Individuals working in Gibraltar but living in Spain will have to deal with two tax systems. There are many differences between both tax systems, as even the tax years are different in that Gibraltar tax year ends on the 30th June and Spains tax year ends on the 31st December.

Gibraltar employees and their cross border taxation position

As anyone who works in Gibraltar is already aware, employment income is taxed at source under the PAYE (Pay As You Earn) regulations, irrespective of where they live.
Allowances (if claimed) and rates are based on personal circumstances and income during a Gibraltar tax year which commences on 1st July and ends on the following 30th June.
Shortly after the tax year, tax returns are issued which should be submitted by 30th November. The tax office then processes the tax returns and issues an assessment.
If you are tax resident in Spain, and believe that your tax obligation ends by paying tax at source in Gibraltar then you are mistaken. You are deemed to be Spanish tax resident if you spend 183 days or more in Spain in any Spanish tax year (the calendar year). When determining this, temporary absences are ignored, unless you can prove that you are resident in another country.
If you do not spend 183 days in Spain, the tax authorities can still deem you Spanish tax resident if your centre personal or economic interests are in Spain. An example of your personal interests making you resident in Spain is if your spouse and/or (minor) children habitually live in Spain. An example of your economic interests making you resident in Spain is if the majority of your income was generated in Spain.
It is important to note that tax residency is based on the above rules and the double tax treaty between Spain and Gibraltar, and not whether you have obtained “residencia” from your local police station which is primarily used for immigration purposes.

Double Taxation Relief and Residency Rules (Gibraltar–Spain)

Individuals working in Gibraltar but living in Spain face complex cross-border taxation issues. The Spain/Gibraltar Double Taxation Agreement (DTA) ensures that income is not taxed twice, typically by allowing a tax credit in Spain for taxes paid in Gibraltar. However, eligibility for relief depends critically on tax residency, which is determined separately in each jurisdiction and by the treaty rules.

Determining Tax Residency Under the DTA

The treaty establishes a structured approach to resolving residency conflicts when an individual could be considered resident in both Gibraltar and Spain:

  1. Domestic law application – Residency is first assessed under Gibraltar and Spanish domestic law.

  2. Conflict identification – A conflict arises if an individual is deemed resident under both systems.

  3. Residency tests – Four key criteria determine if an individual is only tax resident in Spain:

    • Permanent home: The individual’s only permanent home is in Spain.

    • 183-day rule: The individual spends over 183 days in Spain during the calendar year, counting sporadic absences as time spent where they spend most of their time.

    • Centre of vital interests: Family (spouse and dependent relatives) habitually reside in Spain.

    • Centre of economic interests: At least two-thirds of net assets are held in Spain.

If none of these criteria conclusively apply, the default rule is that the individual is resident in Spain unless they spend over 183 days in Gibraltar and maintain a permanent home there.

Joint Coordination Committee

If doubts remain, the Joint Coordination Committee can assist in resolving the residency conflict. In the first instance, the individual is treated as resident according to the applicable domestic legislation. Certain special rules apply for Spanish nationals, registered Gibraltarians, and other specific groups, particularly regarding the retention of Spanish residency for a number of years after moving to Gibraltar.

Practical Implications

  • Being part of a Gibraltar capped tax regime (e.g., Category 2 residency) does not automatically confer tax residency in Gibraltar for treaty purposes.

  • If you are Spanish tax resident and earn income in Gibraltar, that income is subject to Spanish taxation on a worldwide basis, with relief available under the DTA for taxes paid in Gibraltar.

  • Compliance requires careful tracking of days spent in each jurisdiction, location of family and assets, and consideration of permanent homes.

As a Spanish tax resident you are generally liable to Spanish tax on your worldwide income, capital gains (as they arise) and wealth, (wherever located), meaning that your Gibraltar employment income will automatically be liable to Spanish tax.
Spanish resident tax returns need to be completed during the months April, May and June in the following tax year (the calendar year) in question. Therefore 2025 tax returns would need to be completed during April, May and June 2026.
When completing your Spanish resident tax return you will need to declare your Gibraltar income and Gibraltar PAYE tax.
It is worth comparing the Gibraltar and Spanish tax rates to help you get an idea of whether you could be liable to pay extra tax in Spain on your income.

 Gibraltar tax rates

You can opt from one of two tax systems in Gibraltar which operate in parallel to each other. The Gibraltar tax system is covered in the Gibraltar tax rates and allowances section of our website.

 Spanish tax rates

The central Government Spanish income tax rates are as follows:

  • Up to €12,450: 19%

  • €12,451 – €20,200: 24%

  • €20,201 – €35,200: 30%

  • €35,201 – €60,000: 37%

  • €60,001 – €300,000: 45%

  • Above €300,000: 47%

(The autonomous communities are able to amend the above rates, so it is possible that there may be slight variances to the above table due to this).

You will also benefit from allowances such as a personal allowance, an earned income allowance, allowances for children, etc.

There is also exists a €60,100 exemption for Spanish residents working abroad, unfortunately if the employment income is earned in a black listed territory (Gibraltar is still currently on Spain’s tax black list) then this exemption is not available, so is currently not available to cross border workers between Gibraltar and Spain.

Historically Gibraltar income tax rates were higher than Spanish tax rates meaning that no further tax was payable in Spain on your Gibraltar employment income. This has generally changed due to decreased income tax rates in Gibraltar and increased Spanish income tax rates, but will ultimately depend on your personal circumstances.
If you work in Gibraltar and live in Spain and haven’t completed a Spanish tax return, have received a letter from the Spanish tax authorities or need further advice on your cross border Spanish tax position please contact the tax specialist firm Foresight Consultancy based in Sotogrande www.foresightconsultancy.com or write directly to their international tax specialist, Francesco directly at francesco@foresightconsultancy.com