Gibraltar to Introduce 15% Transaction Tax by 2028

July 9, 2025

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Gibraltar, a small country located at the southern tip of the Iberian Peninsula and a British Overseas Territory, has announced plans to introduce a 15% Transaction Tax. As a direct result of Brexit, Gibraltar found itself outside the EU customs Union, which led to the customs checks being implemented when goods and people cross the land border with Spain, its neighboring country.

Implications of Introducing a Transaction Tax

To remove customs checks between EU countries, primarily Spain and Gibraltar, the European Commission insisted that the British territory align its taxation policies with the EU. Additionally, the Spanish government has emphasized that it regards Gibraltar as a tax haven, demanding that the UK and Gibraltar take action to reduce tobacco smuggling, tax evasion, and environmental degradation in the waters around Gibraltar.

As a response to this request, on June 30, 2025, the Gibraltar government announced its intention to introduce a Transaction Tax. As stated in Budget 2025, the standard rate of the Transaction Tax will be 15% in the first year. In the second fiscal year, the applicable rate will be increased to 16%, and in the third year, it will rise to 17%. These rates will apply to the majority of goods.

Similarly to the EU's reduced rate, a 5% Transaction Tax rate will apply to goods such as children’s clothing, works of art, antiques, and bicycles. Additionally, a super-reduced rate of 0% will apply to food, water supplies, pharmaceutical products, medical equipment, books, newspapers, periodicals, and solar panels.

Supply of fuel to vessels for bunkering purposes, ship supplies, hiring, repair, and maintenance of equipment for vessels used in commercial activities, and the supply of goods for the fuelling and provisioning of aircraft used by airlines operating for reward are listed as tax-exempt supplies or transactions. Gibraltar will also introduce excise duties on tobacco, alcohol, and fuel.

Conclusion

The introduction of the Transaction Tax, which is, by its form, closer to an import duty applied at a higher rate than equivalent to VAT, marks the end of Gibraltar’s long-standing tax-free regime. Regarding the implementation deadline, it is to be expected that the Transaction Tax will be implemented in 2028. With the implementation of this tax, Gibraltar will align its fiscal policies with those of the EU, marking a historic political and economic agreement between the UK and Spain.

Source: HM Government of Gibraltar, UK-EU negotiations on Gibraltar-EU relations

What is Gibraltar’s new Transaction Tax and when will it start?

Gibraltar’s new Transaction Tax is a consumption-based levy set to start in 2028. It begins at 15% in the first year, rising to 17% by the third year, and applies to most goods.

Why is Gibraltar introducing a Transaction Tax?

Gibraltar is introducing the tax to align its fiscal policies with the EU’s standards, particularly due to Brexit-related customs checks and pressure from Spain and the European Commission.

What goods are subject to reduced or zero rates under Gibraltar’s Transaction Tax?

A 5% reduced rate applies to items like children’s clothing, bicycles, and antiques. A 0% super-reduced rate covers essentials like food, water, medicines, books, and solar panels.

Are any transactions exempt from Gibraltar’s Transaction Tax?

Yes, exemptions include fuel supplies for ships and aircraft, ship maintenance services, and equipment used in commercial maritime and aviation activities.

How does Gibraltar’s Transaction Tax differ from VAT?

While similar in purpose to VAT, Gibraltar’s Transaction Tax is structured more like an import duty and applies at different rates depending on the goods and their use.

What additional measures accompany the Transaction Tax in Gibraltar?

Alongside the Transaction Tax, Gibraltar will also implement excise duties on tobacco, alcohol, and fuel to further align with EU norms and address concerns about smuggling and environmental issues.

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