On 17 February 2026, a historic agreement was approved between the European Union (EU) and the United Kingdom regarding Gibraltar, which is expected to enter into force provisionally on 15 July 2026. This agreement will thus complete the legal framework for relations between the EU and the United Kingdom established by the Trade and Cooperation Agreement in force since 2021.
By way of summary, we consider it relevant to outline the changes that this agreement will entail in the areas of customs and indirect taxation:
Customs
- This agreement establishes a customs union between the European Union and Gibraltar, meaning that this territory will become part of the common customs territory. Consequently, goods will be able to move between the EU and Gibraltar without being subject to customs duties or quantitative restrictions.
- Despite this customs union, as long as Gibraltar retains its status as a ‘third territory’, customs and control formalities will apply to the movement of goods within this union. These formalities must be carried out at a designated customs point (DCP) in La Línea de la Concepción (a branch office is also established at Gibraltar Airport), Sagunto or Algeciras. Finally, there will be another in Portugal for situations where the Spanish DCPs are inoperative.
- Generally speaking, within the framework of this union, goods may only enter and leave Gibraltar by land, although the following exceptions are established where entry and/or exit by sea is permitted:
- Supply operations at the port and airport of Gibraltar.
- Completion of special procedures.
- Transport by sea from Algeciras to Gibraltar (less than 2 hours) is permitted under the T2GI transit procedure, provided that the goods are unloaded in full in Gibraltar.
- Furthermore, the movement of goods between the territories of this union must be documented by means of a declaration, code T2GI or T1GI (transit), depending on the procedure under which they are placed.
- The Agreement establishes a system of joint supervision between the EU and Gibraltar through compliance checks, including checks on the documentation of goods, ships, aircraft and travellers, as well as specific checks on special customs procedures. Furthermore, the Union’s authorities will have real-time access to Gibraltar’s customs systems.
- Operators exchanging goods between the EU and Gibraltar under the mandatory transit procedure must provide a guarantee to the relevant customs authority for the amount of the potential customs debt represented by the goods exchanged.
- For the purposes of the previous paragraph, the main actions to be taken by operators are:
- They must point out and declare a representative in Gibraltar within the guarantee, including surname, first name, company name and full address, for the guarantee to be valid for the operations.
- They must formally request the amendment of their existing authorisations for transit operations so that these can also be used for transactions with Gibraltar.
- With regard to the guarantees provided, two situations can be distinguished:
If operators already have a prior guarantee, a new one will not be necessary provided that its scope is extended to cover operations with Gibraltar; this extension may be carried out by means of an addendum.
If a new guarantee is provided, it must comply with the models set out in the IA UCC.
Transaction tax
- Gibraltar will introduce a single-stage indirect tax known as the “transaction tax”, which will be levied on imports, production, unauthorised entry, and goods carried in travellers’ luggage in excess of the allowances provided for travellers.
- The rate of the “transaction tax” may not be lower than the lowest VAT rate applied by an EU Member State, currently 17% in Luxembourg. This rate will be reached following a three-year adjustment period, with 15% applied in the first year, 16% in the second, and 17% or the lowest rate applicable at that time.
- Gibraltar may set reduced and super-reduced rates of the tax.
- In the case of the reduced rate, this may not be lower than 5% and will apply, amongst other things, to agricultural products, plants, clothing, bicycles and works of art.
- The super-reduced rate established in the agreement will be 0% for food products, water supply, pharmaceutical products, medical and healthcare equipment, amongst other products.
Excise Duties
- The excise duties to be implemented in Gibraltar shall be those provided for in the harmonised regulations of the European Union, and the minimum tax rates set out therein must be applied; under no circumstances may taxes lower than those set in said regulations be applied.
- Following provisional entry into force and within a three-year transition period from the date of entry into force of the Agreement, tax rates must be brought into line with those applied in Spain, such that they may not differ by more than six percentage points from those applied in Spain or must be equivalent to at least 94% of the Spanish rates.
- Petroleum products and tobacco are exempt from this general rule; in the case of petroleum products, the rates applicable in Spain must be reached three years after the entry into force of the Agreement. With regard to tobacco, the minimum rates provided for in EU legislation shall apply, and in the case of cigarettes, these may not differ excessively from the retail prices in Spain.
- The United Kingdom, in relation to Gibraltar, must establish a traceability system similar to that of the EU from the entry into force of the Agreement for cigarettes and rolling tobacco. For other tobacco-related products, this must be established within 24 months.
- The United Kingdom will also adopt measures such as the quarterly exchange of information and cooperation with the EU in the fight against smuggling to improve the monitoring of tobacco.
- Both parties are obliged to provide information at the request of the other party within 24 hours of the request.
- Requirements equivalent to those of the EU must be applied regarding product warnings, the prohibition of oral tobacco and distance sales, and the destruction of seized tobacco.
In addition, there are plans to set up an independent advisory body known as an ‘observatory’, which will be responsible for reviewing annually whether differences in tax rates are causing distortions in consumption, and may propose that Gibraltar adjust its tax rates by raising or lowering them.
How can we assist you?
We recommend that traders carry out a review of their trade relations with Gibraltar in order to comply with the formalities required under this Agreement, particularly regarding customs, transit and guarantees, as well as the new tax obligations arising from its implementation.
Salinas & Partners, with over 30 years’ experience in international trade and customs, are at your disposal for any queries or comments you may have.
