Closer EU scrutiny on Gibraltar’s tax rulings

GIBRALTAR’S tax rulings practice is to be examined by the European Commission in a widening of pre-existing investigations into the Rock’s application of tax provisions.

The peninsula’s corporate tax regime, which often comes under fire from Spanish critics, is to come under intense scrutiny by the European Commission. The Commission has misgivings as to whether or not Gibraltar is misapplying its tax ruling practice, and whether or not the lenient application of the law amounts to ‘state aid’ in all but name.

During the investigations, interested third parties will also be given the opportunity to express their opinion and submit comments on the tax measures.

Reforms to Gibraltar’s tax system came into effect in 2010, and since then the tax ruling practice has allowed companies to assess if income is susceptible to taxation or not, depending upon where the money was made.

One hundred and sixty five tax rulings have so far been examined by the Commission, which has expressed concern as to how the law is being applied. It has been suggested that tax rulings are being made without a thorough investigation into where the income was generated.

The European Commission suspects that Gibraltar’s tax rulings may not be compatible with the Union’s own laws. Investigations which began a year ago in October 2013 have therefore been extended.