Gibraltar To Challenge EU Corporate Tax Decision

by Ulrika Lomas, for LawAndTax-News.com, Brussels

05 April 2004

The government of Gibraltar on Wednesday pledged to challenge the European Commission's rejection of its planned corporate tax reforms.

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.

The EC therefore rejected the reforms, effectively suggesting that for taxation purposes, Gibraltar should be considered part of the United Kingdom.

The Rock's government on Wednesday argued that the ruling was "wrong both as to material selectivity and as to regional selectivity, and announced that "accordingly, it will be challenged in the European courts".

Chief Minister, Peter Caruana has reportedly slammed the EC for suggesting that the jurisdiction is fiscally part of the United Kingdom, pointing to its 1969 constitution, which gives the territory fiscal autonomy.

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