Gibraltar: Domestic Corporate Taxation
In Gibraltar there is no capital gains tax, sales tax or VAT. The main tax for companies is corporation tax; there are also withholding taxes, stamp duties on certain transactions and property taxes (known locally as 'rates'). Assessment and collection of tax is administered by the Commissioner of Income Tax. The tax year runs from 1st July to the following 30th June.
However, in April, 2004, the Europrean Commission argued that the new rules would give companies domiciled in Gibraltar an unfair advantage over their counterparts in the UK, under a principle known as 'regional selectivity'. The Commission also took issue with the fact that since the taxes were 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.
Gibraltar dissolved its qualifying companies tax regime in January 2005, as negotiations continued in Brussels. In a move that cost the Gibraltar government an estimated GBP1.5 million in annual tax revenues, the remaining qualifying companies, of which there were about 80, switched to the 'exempt' companies regime.
Later that month, it was announced that Gibraltar had been given until 2010 (2007 for new companies) to phase out its exempt company tax regime after the European Commission ruled that the scheme violated EU state aid rules.
The Situation in 2010 and beyond
The rate of corporation tax was 22% in 2010. But with effect from 1 January 2011 the new rate of 10% applies to all companies except energy and utility providers who pay a 10% surcharge and thus suffer a rate of 20%. These include electricity, fuel, telephone service and water providers. A start-up rate of 10% applies to all businesses established in Gibraltar after 1 July 2009. Tax is assessed on an actual year basis.