Under the UK-EU agreement, Gibraltar is set to mandate the introduction of the new indirect tax framework.
Gibraltar is set to introduce a Transaction Tax, showing its commitment to align its indirect taxation regime with the EU. Instead of introducing VAT, it would levy its own transaction tax and excise duties.
The transaction tax replaces the import duties.
What is the Transaction Tax?
Transaction tax isn’t a VAT; following its structure and the manner in which it is imposed and processed is more similar to import duty. It is imposed when goods are imported into Gibraltar and put on the market for sale.
It’s a domestic tax introduced to level the playing field when it comes to EU pricing.
Tax is collected through Customs at the point of entry. (part of the import process)
The tax is levied on commercial goods imported or manufactured for sale within Gibraltar.
Imposition of Transaction Tax
Gibraltar’s Transaction Tax is scheduled for provisional implementation on July 15, 2026.
Tax Rates and Timeline
First phase: 15% Rate (2026): The starting standard rate upon implementation.
Second phase: 16% Rate (2027) takes effect in the second year.
Last phase: 17% Rate (2028): Aligns with the lowest EU value-added tax rate by the third year, currently 17% in Luxembourg)
There is also a Reduced Rate at 5% and a zero rate applicable for certain categories of products.
Calculation of the Transaction Tax
Transaction tax is calculated on the customs value of the goods. The Technical Notice issued in this regard explains that the customs value is the sum of the value of the product, and it may also include the freight costs, insurance, and packaging.
The Notice underscores that there isn’t a one-time formula used for the calculation of the taxable value of the imported products; the calculation depends on the product category and importing route used by the merchant.
Go Live Date
The Transaction Tax is set to be implemented fully within three years of the UK-EU agreement ratification. The ratification of the agreement represents a significant policy shift for Gibraltar, aligning it more closely with the EU fiscal regime.