Yesterday, a landmark political agreement was reached in Brussels between the UK, Spain, Gibraltar, and the European Commission. The deal, heralded as a historic breakthrough, was announced in a joint press conference by Gibraltar Chief Minister Fabian Picardo, UK Foreign Secretary David Lammy, EU Commissioner Maroš Šefčovič, and Spanish Foreign Minister José Manuel Albares. This marks the final major post-Brexit settlement concerning Gibraltar and has far-reaching implications for taxation, immigration, border control, and trade, all of which will directly affect Gibraltar’s business community.

The Agreement does not compromise British sovereignty over Gibraltar in any way. This will be made abundantly clear in the text of the treaty itself when this is published according to the Gibraltar Government.

The Agreement is a political agreement, nothing more. There is no publicly available text. The deal cannot be scrutinised beyond its intent. The devil is often in the detail. However, the fact that there is now political intent from all four parties (Gibraltar, UK, Spain, EU) for a future Schengen relationship, removes a large amount of the uncertainty and provides a new foundation for an extremely bright future for Gibraltar.

What we know so far:

Sovereignty & governance

• The UK retains full sovereignty over Gibraltar. Spain’s role is strictly limited to Schengen border management.
• UK military and civil jurisdiction remains unchanged. 

Border & immigration: Schengen integration

• Gibraltar will be integrated into the Schengen area, enabling free movement across the border with Spain. Physical land border checks at the border will be removed.
• Schengen-style border controls will be introduced at Gibraltar’s airport and port (in a model similar to French police operating in London’s St Pancras), managed jointly by Gibraltar and Spanish officials. No mention of Frontex.
• UK nationals visiting Gibraltar who are not residents will be subject to Schengen’s 90 / 180-day rule.
• Cross-border staffing should become easier and more reliable. Recruitment and commuting friction decreases. Tourism and services industries should see immediate gains.

Trade & customs: frictionless goods movement

• Gibraltar will effectively enter the EU customs union, allowing goods to move freely between Gibraltar and Spain without checks or duties.
• Spanish imports (including food, medicine, and construction materials) will no longer face port-of-entry delays.
• Supply chains should operate more efficiently. Reduced delays and lower logistics costs will benefit retail, hospitality, construction, and freight sectors.

Taxation & regulation

• Gibraltar will keep its VAT-free status, however a new “transaction tax” or increased import tax will impact prices on some goods in order to achieve a "level playing field" with Spain.
• Pricing distortions (especially on tobacco and fuel) will be reduced through taxation alignment with Spain.
• Commitments have been made on tax transparency, state aid, labour, and environmental regulations.
• A financial assistance mechanism will be introduced to support employment and economic transition.
• Direct taxation remains firmly at the behest of the Gibraltar Government.

Airport

• The opportunity for flights to operate from Gibraltar airport to EU destinations, increasing Gibraltar’s connectivity to the continent and improving its prosperity

What's next?

The text needs to be finalised, probably in the Autumn. Then ratification in the UK, EU and Gibraltar parliaments.

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