Executive summary

Gibraltar is entering into a customs union with the European Union (EU), the features of which are outlined in a Technical Notice issued on 4 February 2026. Further, Gibraltar plans to introduce a transactions tax on goods and implement a new system of excise and import duty. The expected implementation date for the customs union is 10 April 2026, according to a Technical Notice issued on 2 February 2026.

In December 2025, the European Commission announced an agreement on the text of a treaty between the United Kingdom (UK) and the EU in relation to Gibraltar; the treaty establishes a customs union between Gibraltar and the EU, under which Gibraltar plans to implement a transaction tax (TT) on goods, as well as other changes to customs and excise duty. At a public meeting for the business community held on 4 February, it was confirmed that these changes will be implemented on 10 April 2026, replacing the existing customs and excise duty regime in Gibraltar.

Gibraltar does not apply value-added tax (VAT) or sales tax, and no changes are being made in this respect. The TT and excise duty (where applicable) will only apply to goods that are imported or manufactured to be placed for sale in Gibraltar. These will not apply to services.

Transaction tax

The TT will be applied initially at a transitional standard rate of 15%. It will then be increased to 16% for year two. For year three onward, it will be aligned to the lowest standard rate of VAT being applied in the EU, which is currently 17%. Reduced and zero rates of tax will apply to a range of essential goods, mirroring the EU VAT framework.

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.

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.

Excise and import duty

EU minimum excise rates will apply to tobacco products and alcoholic drinks. By 10 April 2029, excise duties for fuel, alcohol and tobacco 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 and Cooperation Agreement, EU Common External Tariff rates will be applied. In addition, the TT would be applied to this if the goods are to be placed on the market in Gibraltar.

VAT on goods from the EU

Businesses purchasing commercial quantities of goods from suppliers in the EU for sale in Gibraltar should be able to do so VAT-free. They would pay the TT on importation, or if applicable, when the goods leave a bonded warehouse in Gibraltar.

Individuals 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.

Transitional rules

No excise duties will be applied to fuel for the first three years of application of the treaty.

Goods that leave their place of origin prior to the 10 of April 2026 will not be subject to the TT, or to new excise rates, provided they arrive within two months of 10 April 2026.

Market competitiveness

An independent body will be established to monitor market competitiveness, particularly between Gibraltar and nearby Spain.