EU To Ask Gibraltar To Change Company Tax Regime

by Ulrika Lomas, Tax-News.com, Brussels

27 November 2002

Gibraltar's finance centre has been thrown into turmoil by reports in the Spanish and international media suggesting that EU Competition Commissioner, Mario Monti will today ask the jurisdiction to phase out its Exempt company regime by 2005, despite Gibraltar's announced plans to reform its tax regime.

Speaking to the Associated Press this week with regard to the Gibraltar's Exempt company regime - which means that although local firms are taxed at a rate of 35%, foreign companies based in Gibraltar which provide services outside of the jurisdiction pay a low, flat, annual fee - spokesman for the EU's head office, Tilman Lueder explained:

'This is a selective tax relief that benefits only few companies. As such it violates EU state aid rules.'

This, coupled with reports in the Spanish El Pais newspaper suggesting that the Competition Commissioner is ready to pounce, led the Opposition to release a statement earlier this week. In it, they announced that:

'The Opposition is concerned at reports that European Competition Commissioner Mario Monti is set to recommend to the Commission on Wednesday the abolition of the Gibraltar Tax Exempt Company by 2005. This will only serve to add to the uncertainty already surrounding the sector.'

The statement continued: 'In the circumstances, the Government should explain whether certificates for new tax exempt companies are still being issued. Moreover, it is also important to know what will happen to the existing tax exempt company in place already which has a twenty-five year exemption guarantee if these have to be phased out by 2005.'

The Opposition explained that: 'According to reports in the industry, recently the Government has refused requests for companies seeking Qualified status. However, in the House of Assembly the Government stated that they continued to authorise the setting up of Qualifying and Exempt companies. If there has been a change of policy this should also be stated publicly so that everybody knows where they stand.'

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