European Commission accepts Gibraltar’s arguments on Tax

On 1 June 2012, the Spanish Government filed a complaint with the European Commission claiming that the Income Tax Act 2010 (the “ITA 2010”) as whole constituted unlawful State aid. In particular, the Spanish Government considered that the aim of the ITA 2010 was to maintain the offshore tax regime that the Gibraltar Government had put an end to when it abolished the legislation on exempt and qualifying companies. 

After examining the numerous allegations made by Spain and hearing extensive submissions from the Gibraltar Government, on 16 October 2013 the Commission opened a formal investigation.

However, it did so only in relation to two discreet aspects of the ITA 2010, namely, a tax exemption given to certain interest and royalty income. The Commission’s concerns with respect to these two matters were addressed, on a without prejudice basis, by the Gibraltar Government through amendments made to the ITA 2010 back in July 2013 (interest) and in January 2014 (royalty income).

Commenting on today’s decision, Chief Minister Fabian Picardo QC MP said: “I am absolutely delighted by today’s decision. Although it is a negative decision, its effect is minor whilst at the same time it vindicates our view that there is nothing fundamentally unlawful or wrong with our Income Tax Act 2010. Indeed, considering that the entirety of the Act was under examination by the European Commission, the result of the investigation, which in total has taken over 6 years, is a remarkable success for Gibraltar and a massive blow for all those who seek to denigrate Gibraltar as a tax jurisdiction. The entire investigation has required us to only make minor amendments to the Act on interest and royalties and to place on a more solid legal footing the practice of tax rulings in Gibraltar. The net result of this investigation is that the Income Tax Act now enjoys a full clean bill of health from the Commission. This is great, great news indeed. I will be studying further the dense decision with my legal team and shall make any further announcements that may emerge from that analysis”.