Gibraltar Abolishes Qualifying Companies Tax Regime

by Jason Gorringe, Tax-News.com, London

03 January 2005

Gibraltar’s qualifying companies tax regime was dissolved on Friday, as the jurisdiction awaits a decision by the European Union on transitional tax arrangements, expected in the New Year.

Outlining this course of action in an interview with the Gibraltar Chronicle last week, Chief Minister Peter Caruana confirmed that legislation revoking the qualifying status rules would be published on December 31.

“The qualifying status regime simply ceases to exist as of midnight on 31st December,” declared Mr Caruana.

In a move that will cost the Gibraltar government an estimated £1.5 million in annual tax revenues, the remaining qualifying companies, of which there are about 80, will switch to the ‘exempt’ companies regime, according to the Chronicle.

“Each qualifying company has been dealt with on an individual basis and alternative arrangements made,” Caruana added.

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. The government of Gibraltar has announced that it 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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