Gibraltar 15% Transaction Tax and New Duty Rules

February 22, 2026

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Last June, Gibraltar announced its intention to introduce a 15% Transaction Tax. This announcement followed the European Commission's insistence that the British territory align its tax policies with the EU. The main reason for the Commission's request was to eliminate customs checks between Gibraltar and the EU, particularly Spain. Following the 2025 announcement, on February 4, 2026, Gibraltar announced the introduction of a Transaction Tax (TT) on goods and a new system of excise and import duty, effective this year.

Transaction Tax and a New Excise and Import Duty System

Starting from April 10, 2026, Gibraltar will implement a new customs and excise duty system, replacing the current regime. More specifically, the small country on the Iberian Peninsula continues not apply VAT or sales tax, and the changes will affect only goods imported into or produced for sale in Gibraltar, with no impact on services.

As previously announced, the TT will start at a transitional rate of 15%, rising to 16% in the second year, and, from the third year onward, match the lowest EU VAT standard rate, currently 17%, with reduced rate of 5% and a super reduced rate of 0% applied to essential goods, similar to the EU system. The TT will be charged on goods at import, manufacture, or release from bond, based on their customs value, rather than at the point of sale. Notably, certain items, such as bunkering fuel, ship supplies, and goods not intended for sale, will be exempt from TT and excise duties.

Regarding the excise and import duties, they will follow EU minimum rates for tobacco and alcohol, and by April 10, 2029, fuel, alcohol, and tobacco duties must be within 6% of Spanish levels. These rules will also impact imported goods from the UK, as goods that do not meet UK-origin rules under the UK-EU Trade and Cooperation Agreement will face EU Common External Tariff rates plus TT if intended for sale in Gibraltar.

EU businesses exporting goods for resale in Gibraltar will be able to do so VAT-free, paying the TT on importation, or if applicable, when the goods leave a bonded warehouse in Gibraltar. Local individuals buying goods from the EU will pay EU VAT on such goods, but will not pay TT in Gibraltar.

Goods dispatched before April 10, 2026, will not be subject to the TT or revised excise rates, provided they arrive within 2 months of that date. Additionally, an independent authority, similar to one established between Germany and Denmark, will be established to oversee market competitiveness, with particular attention to price and trade dynamics between Gibraltar and Spain.

Conclusion

The implementation of the TT and the new excise and import duty system in Gibraltar marks a shift in the territory’s indirect taxation framework, aligning it more closely with EU standards while maintaining its long-standing position of not introducing VAT. However, Gibraltar is not joining the EU Customs Territory, and an agreement only creates a customs union between the EU and the British territory.

Source: HM Government of Gibraltar, VATabout

When does Gibraltar’s Transaction Tax take effect?

Gibraltar’s Transaction Tax takes effect on April 10, 2026. From that date, the new customs and excise duty system replaces the current regime, and the 15% transitional TT will apply to relevant goods.

What is the initial rate of the Gibraltar Transaction Tax and how will it change?

The Transaction Tax will start at 15% during the transitional phase. It will increase to 16% in the second year and, from the third year onward, align with the lowest EU standard VAT rate, currently 17%. Reduced rates of 5% and 0% will apply to certain essential goods.

Does Gibraltar introduce VAT under the new system?

No, Gibraltar will continue not to apply VAT or sales tax. Instead, it introduces the Transaction Tax on goods, maintaining its long-standing position of not implementing a traditional VAT system.

On which transactions is the Transaction Tax charged?

The TT is charged on goods at the point of import, manufacture, or release from bond, based on their customs value. It is not applied at the point of sale and does not affect services.

How will the new rules affect EU and UK businesses exporting to Gibraltar?

EU businesses can export goods for resale in Gibraltar VAT-free and pay the Transaction Tax upon import or when goods leave a bonded warehouse. For UK goods, if they do not meet UK-origin rules under the UK-EU Trade and Cooperation Agreement, they may be subject to the EU Common External Tariff plus the TT when intended for sale in Gibraltar.

Are there transitional rules for goods dispatched before April 10, 2026?

Yes. Goods dispatched before April 10, 2026, will not be subject to the Transaction Tax or revised excise rates, provided they arrive in Gibraltar within two months of that date.