Brussels, 16/10/2013 (Agence Europe) - On Wednesday 16 October, the European Commission opened an in-depth investigation to verify whether the new Gibraltar corporate tax regime selectively favours certain categories of companies, in breach of EU state aid rules.
The new Gibraltar corporate tax scheme was introduced by the Income Tax Act (ITA) 2010. It is based on the territorial principle: all activities deriving from or accrued in Gibraltar are taxed. However, an exemption exists for passive income (i.e. dividends, royalties and certain types of interest), which is no longer subject to tax in Gibraltar irrespective of where the source of the income is located. In June 2012, the Commission received a complaint from Spain about the ITA 2010, claiming that it would continue to grant a selective advantage to offshore companies through the combined effect of the territorial system and the tax exemption for passive income.
After a preliminary investigation, the Commission considers that the tax exemption for passive interest and royalty income may involve state aid because it departs from the general corporation tax system. This could grant a special advantage to the particular group of companies that produce this type of income. Unlike for dividends - the exemption of which can be justified by the need to avoid double taxation - the Commission has, at this stage, found no valid justification for such an exemption. Gibraltar has recently introduced an amendment which, as of 1 July 2013, repeals the exemption for inter-company loan interest, whether from Gibraltar or abroad. Despite this change, the Commission wants to examine whether the passive interest exemption was in breach of the state aid rules during the period when it was in force. (OL/transl.fl)