The legal draft of the EU-UK Agreement in respect of Gibraltar is published

The UK and the European Union jointly published, on 26 February, the draft legal text of the UK-EU treaty to govern Gibraltar’s post-Brexit relationship with the EU. Now awaiting ratification by the respective parliaments, the expected implementation date is 10 April 2026 when the EU’s new Electronic Entry/Exit System (EES) is scheduled to go into fully operation.

The EU-UK Agreement in respect of Gibraltar will complete the legal framework of the relations between the EU and the UK. Gibraltar was not included in the scope of the EU-UK Trade & Cooperation Agreement (UK-EU TCA), which was signed in 2020 and has been in force since May 2021.

The main objective of the EU-UK Agreement in respect of Gibraltar is to remove all physical barriers on persons and goods circulating between Spain and Gibraltar, while fully safeguarding Gibraltar’s sovereignty, the EU’s Schengen area, Single Market and Customs Union, and the autonomy of key British military facilities.

The government of Gibraltar formed an integral part of the UK’s negotiating team at every stage of the negotiations and has given its full support to the Agreement.

There is no direct application of EU law to Gibraltar through the Agreement or enforcement role for the Court of Justice of the European Union in Gibraltar. There are, however, provisions confirming how Gibraltar’s domestic legal system will incorporate EU law where alignment is required and confirms it will be enforced by Gibraltar’s own authorities and courts.

Customs Union

The Agreement creates a customs union between the UK and the EU in respect of Gibraltar. Gibraltar is not joining the EU Customs Territory; it is entering into a bespoke arrangement that enables the free circulation of goods between Gibraltar and the EU without customs checks at the land frontier.

Gibraltar businesses will be able to access the EU Customs Union market. They will be able to sell to customers across the EU, and EU consumers will be able to buy from Gibraltar, without customs barriers. All goods sold on in Gibraltar must be EU compliant, subject to a three-month transition period, from 10 April, for goods already on the market in Gibraltar.

Transaction Tax

Gibraltar’s current import duty regime will be replaced by a new Transaction Tax (TT), which will be applied initially at a transitional standard rate of 15%. This rate will be increased to 16% for year two and for year three will be aligned to the lowest standard rate of VAT being applied in the EU, which is currently 17%.

The TT will be levied at the point of importation or manufacture, or when goods are brought out of bond, rather than applied at the point of sale. The tax rate will be applied to the customs value of the goods. All revenue from the TT and excise duty will be charged in Gibraltar.

A reduced rate of 5% and a super reduced rate of 0% will apply to certain goods as listed in Annex III of the EU VAT Directive. The choice will be determined by that list. Bunkering fuel, ship supplies and goods that are not to be put up for sale in Gibraltar will be exempt from the TT and from excise duties.

EU minimum excise rates will apply to tobacco products and alcoholic drinks. By 10 April 2029, excise duties for fuel, alcohol and tobacco in Gibraltar are to be within 6% of the equivalent Spanish excise rates.

If goods are imported from the UK that do not meet the UK-origin rules contained in the UK-EU Trade & Cooperation Agreement, EU Common External Tariff rates will be applied. The TT would also be applied if the goods are to be placed on the market in Gibraltar.

Gibraltar businesses purchasing wholesale goods from suppliers in the EU for sale in Gibraltar should not pay VAT but will pay the TT on importation, or if applicable, when the goods leave a bonded warehouse in Gibraltar. Individuals in Gibraltar purchasing goods in the EU will pay VAT and will not be able to reclaim this. However, they will not pay the TT in Gibraltar on those goods.

Movement of Persons

The Agreement establishes a new system for the movement of persons, designed to remove all routine immigration checks and physical barriers at the land border while maintaining stability and security across Gibraltar and the Schengen Area.

Gibraltar will remain outside both Schengen and the EU, but Schengen border rules will apply at its external border under a tailored arrangement between the UK and EU. The Agreement provides that all necessary immigration checks will take place at Gibraltar’s airport rather than at the land border.

Gibraltar residents can stay in any Schengen EU member state for 90 days in any 180 without requiring a visa. EU citizens and third country EU residents can stay in Gibraltar for 90 days in any 180 without requiring a visa. Visas may be required for anyone carrying out a paid activity, but exemptions include business travel, sportspersons and artists, journalists and intra-corporate trainees.

Residence Permits and Visas

Gibraltar residence will be evidenced by an ID card or residence permit. Gibraltar residents are exempt from passport control and both the Entry/Exit System (EES) and the obligation to register under the European Travel Information & Authorisation System (ETIAS). Gibraltar residents also have the right to transit through Schengen EU Member States to return to Gibraltar unless specifically excluded.

Under Article 45, a legal right to reside in Gibraltar will be subject to a person holding a valid identity card or residence permit issued in Gibraltar by the UK competent authorities on the condition of the person having been resident in Gibraltar for a continuous period of at least ten years immediately prior to the date of application for the card or being able to demonstrate a ‘genuine connection’ with Gibraltar. A ‘genuine connection’ is defined as being “able to demonstrate actual and regular physical presence in Gibraltar over an appropriate period of time or on the basis of other objective and verifiable criteria”.

Under Article 45 (6) these conditions will not be met “on the basis of predetermined investments having been made in Gibraltar’s economy or real estate; or as a result of any predetermined financial payments having been made to the Gibraltar authorities.”

The issue or renewal of residence permits for foreign nationals seeking to reside in Gibraltar will remain, under Gibraltar law, exclusively a matter for the Gibraltar authorities subject to the conditions in Article 45. However, the grant of residence permits will be subject to consultation with the Schengen authorities in respect of issues of public health, public security or public policy. This is to ensure that residence permits that will allow access to the Schengen area are granted in line with key provisions of EU law.

Nationals of third countries required to be in possession of a short stay visa to enter and stay in the EU will also be required to be in possession of a visa to enter and stay in Gibraltar. Nationals of third countries exempt from the requirement to be in possession of a short stay visa to enter and stay in the EU will not be required to be in possession of a visa to enter and stay in Gibraltar.

Frontier Workers

The Agreement defines the rights of cross-border workers, who live in Spain and work in Gibraltar or vice versa, to provide a secure framework for employment, supporting the integrated labour market between Gibraltar and the surrounding region. It provides mechanisms for social security coordination so that contributions, entitlements and benefits can be administered without disruption.

Under Article 291, frontier workers are defined as either EU citizens legally residing in the Kingdom of Spain or UK nationals legally residing in Gibraltar who pursue an economic activity as an employed person (or as a self-employed person under the respective UK and Spanish laws) either in Gibraltar or in Spain and who return at least once a week to Spain or to Gibraltar, respectively.

Frontier workers’ rights are also extended to their family members – spouses, registered partners, dependant children under 21, and dependant direct relatives – provided they also legally reside in Spain or Gibraltar respectively.

Law Enforcement and Judicial Co-operation

The Agreement includes a law enforcement and judicial co-operation framework, modelled on the UK–EU TCA. It provides for reciprocal intelligence sharing, operational cooperation between the Royal Gibraltar Police and Spanish law enforcement, and joint protocols for cross-border security.

Gibraltar officials will always accompany Spanish officials in any joint operation on Gibraltarian soil. The Agreement also sets out the conditions for arrest warrants and extraditions as well as for freezing and confiscation orders, and the sharing of banking information if someone is suspected of criminality.

Standards’ equivalence

The treaty includes a ‘level playing field’ chapter, based on the UK-EU TCA but going further in certain areas. Under this framework, Gibraltar commits to maintain equivalence on labour standards, tax transparency, anti-money laundering, environmental protection, climate commitments and state aid control.

Aviation and Maritime

In addition, the Agreement contains an aviation chapter that will provide for ‘enhanced’ use of Gibraltar airport by flights between Gibraltar and EU destinations, which have previously been restricted. Only EU carriers or those authorised by the EU will be able to fly these routes. Only UK carriers or those authorised by the UK will be able to fly from Gibraltar to the UK.

A joint venture company will be established between Gibraltar and Spain to select and supervise an airport manager, which will ensure Gibraltar’s agreement for any changes. Gibraltar will incorporate a certain EU civil aviation rule into its domestic regime. The British military base at the airfield is not in scope of the Agreement.

There are further provisions covering maritime and road transport services between Gibraltar and the EU. Notably, there will be no cruise liners calling directly into Gibraltar from any third country other than the UK and the Gibraltar-Morocco ferry will cease operations.

An exemption from visa requirements under EU law will apply to civilian sea crew members when they land to board a ship or go ashore to transit to another country, and who hold a seafarer’s identity document issued in accordance with the relevant international conventions.

Cooperation Council

Finally, the Agreement creates governance structures to manage and oversee cooperation. It establishes a Cooperation Council, with both EU and UK representatives, to supervise and facilitate the application and implementation of the agreement in respect of Gibraltar. It will be co-chaired by a member of the European Commission and a UK government minister and will be supported by three Specialised Committees covering the circulation of persons, the economy and trade, and aviation.