A significant aspect of the deal is Gibraltar's transition from a VAT-free regime to a higher import duty known as a 'transaction tax,' a key demand from Spain.

The UK and Spain have reached a historic agreement on Gibraltar's post-Brexit status, effectively removing hard border checks while maintaining British sovereignty.

Despite the progress made, concerns linger that the deal could collapse due to opposition from Conservative factions in both the UK and Spain during final negotiations.

Ursula von der Leyen, President of the European Commission, praised the agreement for safeguarding the integrity of Schengen and promoting regional stability.

Prime Minister Keir Starmer's government views the deal as a crucial step towards resetting UK-EU relations five years after Brexit.

A cooperation framework for information exchange, a consultation mechanism, and a financial mechanism for economic development were also established as part of the agreement.

A UK government official emphasized that the negotiations are serious, indicating potential sticking points that remain to be resolved.

Chief Minister Fabian Picardo announced this conclusive political agreement following extensive negotiations that culminated on June 11, 2025.

The full legal text of the agreement is pending finalization and will undergo necessary internal ratification processes by the involved parties before implementation.

The agreement addresses various critical areas, including taxation, labor rights, environmental protections, and sustainable development, aiming to prevent market distortions and enhance shared economic benefits.

Provisions for cooperation on visa arrangements, police, and judicial collaboration are included to ensure security and facilitate smooth movement across the border.

The agreement introduces a customs model for goods to avoid extensive checks, which would have led to severe congestion at the only border crossing.