Details on Gibraltar's new Transaction Tax

From 10 April 2026, Gibraltar will operate within a bespoke customs union with the European Union. This arrangement does not place Gibraltar inside the EU Customs Territory. It establishes a bilateral customs framework governing the movement of goods, supported by a new transaction tax regime that replaces existing import duties.

This article sets out the core features of the customs union, the movement of goods under the new arrangements, and the structure and operation of transaction tax and excise duties.

The nature of the customs union

The customs union applies to all goods produced in the EU and in Gibraltar. Trade in those goods between the two territories will be free of customs duties and quotas. EU rules equivalent to those governing the free movement of goods will apply within the scope of the customs union, subject to the specific mechanisms agreed in the treaty.

Goods will generally move between the EU and Gibraltar by land. Importation of EU goods by sea is permitted where those goods are first cleared at a designated customs office within the EU. Exportation by sea from Gibraltar remains available for goods destined for non-EU countries.

Customs clearance for imports into and exports from Gibraltar will take place at designated customs offices situated within the EU. These are Algeciras, La Línea, Sagunto, and a further office in Portugal to be confirmed.

Movement of EU goods

EU goods moving to Gibraltar will travel from their point of departure to a designated customs office under standard EU transit rules using a T2 form. Customs clearance will be completed at that office, with the exception of EU VAT formalities. EU goods moving to Gibraltar in commercial quantities will not be charged EU VAT.

Following clearance, the T2 transit will be closed and a new transit procedure will be opened for the journey from the designated customs office to Gibraltar using the New Computerised Transit System under a new code, T2GI. HM Customs in Gibraltar will close the T2GI transit on arrival and will be responsible for levying transaction tax and any applicable excise duties where the goods are placed on the Gibraltar market.

EU goods may be placed into special customs procedures in Gibraltar without triggering transaction tax or excise duties at the point of importation. These procedures include customs warehousing, inward processing, and temporary admission. Goods may remain in a customs warehouse for between one and nine months, subject to specific exceptions. Inward processing and temporary admission apply for three months, with extensions available where justified. Authorisation and supervision of these procedures will rest with HM Customs, applying legislation aligned with EU customs law.

Exports of EU goods from Gibraltar to the EU will follow the reverse process. HM Customs will open a T2GI transit to a designated customs office, which will then complete EU customs formalities and open a standard T2 transit to the final EU destination. Ship supplies, including bunkering fuel and aircraft supplies, are excluded from this regime and may leave Gibraltar by sea or air without presentation at a designated customs office.

Movement of non-EU goods

Non-EU goods will move under the same structural framework, using T1 and T1GI transit procedures. Entry by land is the default, with limited exceptions for goods placed under inward processing or temporary admission and for bunkering fuel, which may arrive by sea.

Sanitary and phytosanitary checks will be carried out at the first point of entry into the EU rather than at the designated customs offices.

Special customs procedures apply to non-EU goods with important differences. Both HM Customs and the designated customs offices will supervise these goods, applying Gibraltar and EU legislation respectively. Customs duties will be levied at EU Common External Tariff rates by the designated customs office, with the proceeds paid back to Gibraltar. Time limits are extended, and goods may remain in customs warehouses without restriction. Where warehouses contain both EU and non-EU goods, the non-EU regime applies.

Exports of non-EU goods to the EU follow the same land-based transit procedures. Exports to non-EU destinations may leave Gibraltar by sea without presentation at a designated customs office.

Replacement of import duties with transaction tax

Existing import duties will cease to apply on the entry into force of the treaty. They are replaced by a transaction tax and excise duties, where applicable.

Transaction tax and excise duties apply only where goods are placed on the Gibraltar market. They are charged and collected by HM Customs on importation unless the goods are placed into a special customs procedure, in which case liability arises only when the goods are released for sale. Goods manufactured in Gibraltar are taxed when they leave the production site.

The taxable amount for transaction tax is based on the customs value of the goods and includes other taxes and duties payable on importation, excluding transaction tax itself, together with incidental expenses such as transport, insurance, and packing.

The standard rate of transaction tax will begin at 15 per cent and will increase annually to reach 17 per cent by the third year. That rate is linked to the lowest standard VAT rate applied by any EU Member State.

A reduced rate of 5 per cent and a super-reduced rate of 0 per cent apply to specific categories of goods drawn directly from Annex III of the EU VAT Directive. These include, among others, children’s clothing and footwear, bicycles, works of art, foodstuffs, water, pharmaceuticals, medical equipment, books and periodicals, and solar panels installed on qualifying buildings. Other exemptions contained in EU VAT law also apply, including those relating to bunkering fuel. LNG used for electricity generation and electricity produced in Gibraltar are specifically exempted from both transaction tax and excise duty.

Oversight and market safeguards

An independent consultative body will be established jointly by Gibraltar and Spain to assess the impact of transaction tax and excise duty rates on market conditions. Comparable bodies operate elsewhere in the EU.

Where significant distortions arise, the body may recommend adjustments to transaction tax rates for particular goods or categories. Increases are limited to levels necessary to address distortion arising from rate differentials with Spain. Reductions may not exceed two percentage points below the lowest EU rate and may not fall below 15 per cent. A safeguard mechanism exists where recommendations are not implemented and distortions persist.

Excise duties

Excise duties apply only to tobacco, fuel, and alcohol. EU minimum excise rates will apply to tobacco and alcohol from the start of the regime, together with a retail price differential mechanism for cigarettes. Fuel is exempt from excise duty for the first three years. Thereafter, excise rates may not be more than six per cent below those applied by Spain. The independent consultative body will perform an oversight role in relation to excise duties, with additional provisions for exceptional circumstances.

Goods placed on the Gibraltar market

From the entry into force of the treaty, goods produced in or placed on the Gibraltar market must comply with EU standards, subject to transitional arrangements. Goods lawfully marketed in the EU will be presumed compliant when imported into Gibraltar.

Limited exemptions apply for certain foodstuffs, medicines, and medical devices, in particular where devices are imported for use by the Gibraltar Health Authority and its professionals. The Office of Fair Trading will oversee compliance, and conformity with EU standards will form a condition of manufacturing licences issued in Gibraltar.

Personal allowances

For the first three years, personal allowances will apply to goods carried by travellers for personal or family use or as gifts. Allowances are set at a value equivalent to EUR 430 per person for sea and air travel and EUR 300 per person for land travel, together with quantitative limits on tobacco, alcohol, and fuel.

After the three-year period, the allowances regime will fall away. Travellers may carry any quantity of goods between Gibraltar and the EU, subject to demonstrating that the goods are for personal use if required.

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