If I live in Spain and work in Gibraltar, where do I pay tax?

Question

Accepted Answer

Both, with relief. Gibraltar deducts income tax at source through PAYE on work done in Gibraltar. As a Spanish tax resident you must also declare that salary in your annual Spanish IRPF return and claim the international double taxation deduction, paying Spain only the difference if Spanish tax on that income is higher.
Gibraltar
Gibraltar taxes employment income on a source basis. If you work in Gibraltar, your employer deducts income tax through PAYE and social insurance through payroll, wherever you live.
Spain
If you spend more than 183 days a year in Spain, or your centre of economic interests is there, you are a Spanish tax resident and taxed on your worldwide income through IRPF. A daily commuter sleeping in Spain is almost always Spanish tax resident. Your Gibraltar salary must be declared in your annual Spanish renta, filed in the April to June campaign for the previous calendar year. Note that the Spanish tax year is the calendar year while Gibraltar's runs July to June, so you will need to apportion figures.
Avoiding double tax
Article 80 of the Spanish IRPF Law provides the deducción por doble imposición internacional. You deduct the Gibraltar tax paid on that income, limited to the lower of the Gibraltar tax and the Spanish tax attributable to the same income. Because Spanish rates are generally higher than Gibraltar's at most income levels, many frontier workers owe Spain a top-up. Keep your Gibraltar payslips and P60-equivalent tax certificates as evidence.
The 2019 International Tax Agreement
The International Agreement on Taxation and Protection of Financial Interests between the UK and Spain regarding Gibraltar entered into force on 4 March 2021. It sets tie-breaker rules where someone could be resident in both places: an individual is treated as resident only in Spain if, for example, they spend more than 183 overnight stays in Spain, their only permanent home is in Spain, or at least two-thirds of their net assets are in Spain. Spanish nationals who moved their residence to Gibraltar after 4 March 2019 remain Spanish tax resident. It also provides for exchange of information between the two tax authorities, so undeclared Gibraltar salaries are increasingly visible to the Agencia Tributaria.
The 2026 treaty
The opening of the frontier on 15 July 2026 did not change tax residence rules. You still pay tax according to where you live.
The article 7p IRPF exemption for work performed abroad has specific conditions and is not generally relied on by frontier workers; take advice from a Spanish asesor fiscal before claiming it.

If I live in Spain and work in Gibraltar, where do I pay tax?

Short answer

Detailed answer

Gibraltar

Spain

Double taxation relief

The 2019 tax agreement