EU May Approve Transitional Tax Regime For Gibraltar In New Year

by Jason Gorringe, Tax-News.com, London

27 December 2004

Gibraltar’s Chief Minister, Peter Caruana, revealed earlier this week that the European Union is close to agreeing to accept revised proposals for a transitional tax regime whilst the EU Court of Justice decides over the validity of the jurisdiction’s long-term corporate taxation structure.

Responding to a question raised by parliamentarian Fabian Picardo, Caruana confirmed that the EU Commission has not yet formally approved revised arrangements recently negotiated with DG Competition (the EU’s directorate overseeing competition within the community).

However, Caruana told the House of Assembly that he expects EU Commissioners to approve the new arrangements early in the New Year.

Caruana declined to divulge any further details as to the complexion of the agreement.

Gibraltar has been attempting to overhaul its company taxation system by introducing a new regime which will replace the mainstream 35% corporate tax and tax-exempt company forms with a payroll tax and a business property occupation tax, both of which will be capped at 15% of profit.

However, this plan has been blocked by the EU’s decision that the jurisdiction effectively constitutes part of the UK, and therefore such a tax regime would breach EU state aid rules; Gibraltar wants a transitional regime to apply while its appeal against the state aid ruling is heard by the European Court of Justice, a process which could take years.

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