EU Rules On Gibraltar's Corporate Tax Reform Plans

by Ulrika Lomas, Tax-News.com, Brussels

01 April 2004

The European Commission on Tuesday rejected corporate tax reforms planned by the Gibraltar government, effectively suggesting that for taxation purposes, the jurisdiction should be considered part of the United Kingdom.

The proposed reforms aimed at abolishing the current 35% corporate tax rate and replacing it with a payroll tax and a business property occupation tax - both capped at 15% of profit.

However, the Commission argued that this would give companies domiciled in Gibraltar an unfair advantage over their counterparts in the UK. It also took issue with the fact that since the taxes are based on payroll and the occupation of business premises, offshore companies registered in Gibraltar would be unlikely to incur any tax liability.

Speaking following the publication of the Commission's decision on the matter, Competition Commissioner Mario Monti announced somewhat controversially that:

"The Commission suggests that Gibraltar develop a real economy with real companies that create real employment. The Commission already approved such regional development schemes for the Azores and the Canary Islands in the past."

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