The European Commission found on Wednesday 19 December that a corporate tax exemption scheme and five advance tax decisions ('rulings') in force in Gibraltar were incompatible with EU State Aid rules and called on the UK authorities to recover around 100 million euros in this respect.
This decision follows two in-depth investigations, one opened in October 2013 concerning the corporate tax exemption scheme applied from 2011 to 2013 to interest and royalty income (see EUROPE 10944), the other in October 2014 concerning 165 tax rulings issued over the same period.
The Commission first noted that the exemption from corporation tax had favoured several companies belonging to multinational groups, in particular through intra-group loans.
It then considered that five tax rulings, issued in 2011 and 2012 to Dutch limited partnerships, had allowed the companies in question not to be taxed on interest and royalty income generated at the level of Dutch shareholders established in Gibraltar.
It considered that these tax rulings and the corporate tax exemption scheme, abolished in July 2013 for interest income and in January 2014 for royalty income, had given the entities an undue advantage and were therefore contrary to EU State Aid law rules. The institution has therefore ordered Gibraltar to recover the sums corresponding to the infringement, that is approximately 100 million euros. (Original version in French by Lucas Tripoteau)