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Feb 09 - Proposed new tax regime
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The European Union (EU) had made a challenge to the Gibraltar tax regime and this was of considerable interest to Spain, UK and Gibraltar.
Without going into technical details, in essence the European Court of Justice (ECJ) needed to determine whether Gibraltar fulfilled the requirements through its autonomy and parliamentary process, to determine its own tax regime or whether it should be considered as a region of the United Kingdom.
The outcome of the decision was in favour of Gibraltar and after consideration of the facts, the ECJ came to the conclusion that Gibraltar was not part of the United Kingdom and had sufficient autonomy to decide its domestic policies. This has now paved the way for the Government to propose radical changes to the local corporate tax regime.
Historically Gibraltar had two corporate tax systems, one for domestic business, subject to local corporation tax which is presently 27% and one for international business. That is businesses not locally owned which could set up business in Gibraltar and apply for exempt status which meant that notwithstanding the company was resident in Gibraltar for tax purposes it was exempt from all taxes and for this privilege paid a small registration fee to the Government. This regime in another EU decision was considered discriminatory and the exempt company is to be phased out. No new exempt companies can be incorporated and existing ones cease to have such status by 31 December 2010.
The government is obviously keen to retain and attract new business to the territory and the new ECJ ruling provides for Gibraltar without hindrance to introduce a new tax system to encourage new business and investment to the economy.
Whilst the current corporation tax rate as previously mentioned is 27%, the Chief Minister has proposed that a new 10% corporate tax rate is to be introduced, probably with details in the next budget speech in June and likely to take effect from 1 July 2010.
This prepares the way for Gibraltar to change its image from a tax haven to having a corporate tax model in line with other EU countries. Since the fundamental principles of membership of the EU are that there should be no discrimination between EU states, the rate of 10% should be acceptable to the EU since Cyprus an EU member state currently has a corporation tax of 10% and the Republic of Ireland has a rate of 12.5% for trading companies.
These changes should also allow Gibraltar to be removed from any tax haven black lists and enable it to negotiate mutual beneficial double taxation treaties between the territory and other countries.
The obvious area where Gibraltar would benefit is if could agree a double taxation treaty with Spain.
Gibraltar has a lot to offer the region as a finance centre as it has a well developed professional infrastructure, lawyers, accountants and investment advisors together with legalisation for collective investment schemes experienced investor funds and insurance.
Unfortunately at this moment in time we do not have exact details of how the new corporate tax regime will work and how chargeability to corporation tax will be determined but will update you once this becomes available.
Regardless of changes to the corporate tax regime which are being proposed, there are no changes to taxation of individuals or for the tax status of high net worth individuals wishing to take up tax residence in Gibraltar. There are special rules which allow wealthy individuals to become resident in Gibraltar and have their tax on worldwide income capped to an annual figure in the region of £20,000.
Gibraltar is also a good jurisdiction for persons whose income is solely derived from interest from licensed banks and building societies, dividends from companies on a recognised stock exchange or from an occupational pension scheme. These sources of income are not taxable in Gibraltar.
This makes Gibraltar particularly attractive for the English speaking community who wish to retire in a tax friendly jurisdiction.
Without going into technical details, in essence the European Court of Justice (ECJ) needed to determine whether Gibraltar fulfilled the requirements through its autonomy and parliamentary process, to determine its own tax regime or whether it should be considered as a region of the United Kingdom.
The outcome of the decision was in favour of Gibraltar and after consideration of the facts, the ECJ came to the conclusion that Gibraltar was not part of the United Kingdom and had sufficient autonomy to decide its domestic policies. This has now paved the way for the Government to propose radical changes to the local corporate tax regime.
Historically Gibraltar had two corporate tax systems, one for domestic business, subject to local corporation tax which is presently 27% and one for international business. That is businesses not locally owned which could set up business in Gibraltar and apply for exempt status which meant that notwithstanding the company was resident in Gibraltar for tax purposes it was exempt from all taxes and for this privilege paid a small registration fee to the Government. This regime in another EU decision was considered discriminatory and the exempt company is to be phased out. No new exempt companies can be incorporated and existing ones cease to have such status by 31 December 2010.
The government is obviously keen to retain and attract new business to the territory and the new ECJ ruling provides for Gibraltar without hindrance to introduce a new tax system to encourage new business and investment to the economy.
Whilst the current corporation tax rate as previously mentioned is 27%, the Chief Minister has proposed that a new 10% corporate tax rate is to be introduced, probably with details in the next budget speech in June and likely to take effect from 1 July 2010.
This prepares the way for Gibraltar to change its image from a tax haven to having a corporate tax model in line with other EU countries. Since the fundamental principles of membership of the EU are that there should be no discrimination between EU states, the rate of 10% should be acceptable to the EU since Cyprus an EU member state currently has a corporation tax of 10% and the Republic of Ireland has a rate of 12.5% for trading companies.
These changes should also allow Gibraltar to be removed from any tax haven black lists and enable it to negotiate mutual beneficial double taxation treaties between the territory and other countries.
The obvious area where Gibraltar would benefit is if could agree a double taxation treaty with Spain.
Gibraltar has a lot to offer the region as a finance centre as it has a well developed professional infrastructure, lawyers, accountants and investment advisors together with legalisation for collective investment schemes experienced investor funds and insurance.
Unfortunately at this moment in time we do not have exact details of how the new corporate tax regime will work and how chargeability to corporation tax will be determined but will update you once this becomes available.
Regardless of changes to the corporate tax regime which are being proposed, there are no changes to taxation of individuals or for the tax status of high net worth individuals wishing to take up tax residence in Gibraltar. There are special rules which allow wealthy individuals to become resident in Gibraltar and have their tax on worldwide income capped to an annual figure in the region of £20,000.
Gibraltar is also a good jurisdiction for persons whose income is solely derived from interest from licensed banks and building societies, dividends from companies on a recognised stock exchange or from an occupational pension scheme. These sources of income are not taxable in Gibraltar.
This makes Gibraltar particularly attractive for the English speaking community who wish to retire in a tax friendly jurisdiction.
