Gibraltar’s new tax laws became effective on 1 January 2011. These laws, together with thevarious exchange of information treaties entered into by the Government, ensure Gibraltar’s position as a key European financial services centre.
The new tax laws provide that all companies, however owned, will be taxed on profits earnedin or derived from Gibraltar, thereby preserving the territorial basis of taxation. However, companies licensed and regulated under Gibraltar law are taxed on their total profits, except for any income from a branch or permanent establishment outside Gibraltar.
In addition to a favourablefiscal environment, Gibraltar offers a high-quality legal and regulatory infrastrcture underpinned by a stable government and the availability of a well-qualified labour force. Gibraltar’s attraction is enhanced by its status within the EU and particularly from passporting opportunities (see below).
Gibraltar is within the EU (unlike Jersey, Guernsey and the Isle of Man), by virtue of Para (4) of Article 355 (3) of the Treaty of Rome, which provides that the treaty will (with certain exceptions) apply to “European territories for whose external relations a member state is responsible.” In general, therefore, Gibraltar is treated as a part of the United Kingdom of Great Britain and Northern Ireland. Gibraltar must therefore comply with whatever community agreemets are adopted by the UK, as the European Commission will not afford special treatment to separate parts of a member state. The Government of Gibraltar does, however, make representations to the UK Government to safeguard Gibraltar’s interests when the UK is considering new EU edicts.
Gibraltar’s special circumstances were taken into account on accession and Article 28 of the Act of Accession granted three derogations. Gibraltar does not have to apply community rules on:
The detailed provisions of the various EU treaties were adopted in Gibraltar by passing of the European Communities Act 1972. Enabling legislation has been enacted to give legal effect to all EU directives. As a result, for instance, Gibraltar can take advantage of the Single European Passport for banking, insurance and investment services.
Gibraltar’s success as a finance centre is underpinned by its commitment to ensuring highest standards of regulation, business ethics and mainstream international consensus. Tax transparency has become a focal point in recent years for the G20 and the wider international community, as countries have sought to underpin confidence in the fairness and effectiveness of their tax systems and to bolster their tax revenues.
Gibraltar is fully committed to the tax transparency agenda and the fight against tax evasion and fraud. It is on the G20 -instigated OECD “White List,” having signed a total of 27 tax information exchange agreements (TIEAs) to date (25 of which are in force). The Gibraltar Government has committed to entering a Foreign Accounts Tax Compliance Act (FACTA) agreement with the US and a similar arrangement with the UK. In addition, Gibraltar has volunteered to take part in the pilot multilateral exchange of information announced by G5 countries (UK, France, Germany, Italy and Spain).
It has requested that the UK extend to Gibraltar the Multilateral Convention on Administrative Assistance in Tax Matters. Its updated requirements provide for the introduction of standard forms for exchange of information on request and channels for exchanging information, as well as the introduction of automatic exchange of information on request in respect of five categories of income and capital gains. Gibraltar’s transposition of this EU directive means that since 1 January 2013, it has had TIEA-equivalent arrangements in place with all EU member states that have transposed the directive.
In addition, Gibraltar has been assisting other EU jurisdictions under the Mutual Legal Assistance (EU) Act 2005. It is doing so by exchanging information since July 2005 with EU member states under the EU Savings Directive as transposed locally and providing judicial assistance under the Evidence Act 1948 in response to Commissions Rogatoires or Letters of Request.
In June 2013, the European Council of Economic and Finance Ministers (ECOFIN) for the 27 EU member states endorsed Gibraltar’s Income Tax Act, as amended, as being compliant with the EU Code of Conduct for Business Taxation.