Mandatory disclosure regime (DAC6)
Council Directive (EU) 2018/822 of 25 May 2018 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements was introduced into Gibraltar law on 30 January 2020 and imposes an obligation on tax consultants, banks, lawyers, and other intermediaries to disclose any cross-border arrangement that contains one or more features or 'hallmarks' if they are identified as intermediaries for the purposes of the Directive.
On 21 January 2021, the Gibraltar Competent Authority for the exchange of information for tax purposes announced that Gibraltar is limiting the scope of reporting under DAC6. Following the approach adopted in the United Kingdom, reporting in Gibraltar will be limited to cross-border arrangements falling within Category D Hallmarks (CRS avoidance arrangements and opaque offshore structures). The Income Tax Act 2010 has been amended to reflect this change. However, note that the International Agreements on Taxation Matters (Spain) Regulations 2021 have introduced equivalent reporting requirements to DAC6 in relation to reportable cross-border arrangements involving Gibraltar and Spain.
'Arrangements', which are defined broadly to include an agreement, scheme, plan, transaction, etc. or series thereof, can involve several parts or stages of implementation or execution.
There is no requirement to report on purely domestic arrangements, and VAT, customs, and excise duties are also outside the scope of the new reporting regime.
The DAC6 reporting obligations focus on cross-border tax planning arrangements that meet certain hallmarks intended to highlight potential risk of tax avoidance. The reporting obligation only arises if one or more of these hallmarks is triggered.
The hallmarks introduced by the Regulations follow those contained in the Directive. No additional hallmarks are introduced.
In line with the Directive, certain hallmarks trigger reporting obligations only where obtaining of a tax advantage is the main benefit or one of the main benefits of the arrangement. However, other hallmarks trigger reporting in all cases, regardless of whether obtaining a tax advantage is the main benefit or not.
As a result of the change in scope of DAC6 reporting requirements in Gibraltar, in practice:
- For cross-border arrangements not involving Spain, only Hallmark D needs to be considered for reporting purposes.
- For cross-border arrangements involving Spain and Gibraltar, all Hallmarks (A-E) need to be considered for reporting purposes.
The reporting obligation falls on the intermediary or the taxpayer according to detailed rules regarding the parties and jurisdictions involved.
Where bound by professional (legal) privilege, an intermediary will be exempt from the reporting obligation. An intermediary exempt from reporting obligations will nevertheless have to notify other intermediaries or if there is no such intermediary the relevant taxpayer of their reporting obligations.
The reporting obligations started to apply from 1 January 2021.
Intergovernmental agreements (IGAs)
Gibraltar has entered into Model 1 IGA reciprocal agreements with both the United States (US) and United Kingdom. The Gibraltar/UK agreement was signed 21 November 2013 and the Gibraltar/US agreement was signed 8 May 2014. Legislation in the form of regulations have been passed.
Information will be exchanged by the Competent Authorities nine months after the year-end. The first due date for exchange by the Competent Authorities was 30 September 2016 for the years ended 31 December 2015 and 2014 for UK reportable accounts and was 30 September 2015 for the year ended 31 December 2014 for US reportable accounts. The reporting deadline for reportable accounts is 31 July.
The Gibraltar government was an early adopter of the OECD Common Reporting Standard (CRS). The legislation was enacted on 22 December 2016. The first date that information was exchanged by the Competent Authorities was 30 September 2017 for the period ended 31 December 2016. The reporting deadline for reportable accounts is 31 July.
The Country-by-Country Reporting Regime was introduced into Gibraltar in 2017 as part of Article 13 of the OECD Base Erosion and Profit Shifting (BEPS) Action Plan.
Under this regime, where a Gibraltar tax resident company is the ultimate parent entity of a multinational enterprise (MNE) group with consolidated revenue of at least EUR 750 million, it will be obligated, for fiscal years commencing on or after 1 January 2016, to file, within 12 months of the end of the fiscal year, a CbC report containing the following information with regards to each jurisdiction in which the group operates:
- Profit or loss before tax.
- Income tax paid.
- Income tax accrued.
- Stated capital.
- Accumulated earnings.
- Number of employees.
- Tangible assets other than cash or cash equivalents.
The report also requires identification of each constituent entity of the group, setting out for each entity the jurisdiction of tax residence (where different also the country of registration) as well as the nature of the main business activity.
The regulations also impose a requirement for a Gibraltar constituent entity to report in cases where it is not the ultimate parent entity, these are either where (i) the ultimate parent entity is not required to provide a report in its jurisdiction of residence, (ii) the jurisdiction of residence of the ultimate parent entity does not have a qualifying competent authority agreement with Gibraltar at the date the report is required, or (iii) there has been a systematic failure by the jurisdiction of tax residence of the ultimate parent entity and the Commissioner has notified the Gibraltar constituent entity that the failure has occurred. In these cases, the first reporting period is for fiscal years commencing on or after 1 January 2017.
There are notification requirements in the regulations. A Gibraltar constituent entity must notify the Commissioner if it is an ultimate parent entity, a surrogate parent entity, or in cases where it will be filing a CbC report because there has been a systematic failure by the jurisdiction of tax residence of the ultimate parent entity and the Commissioner has notified the Gibraltar constituent entity of this. A notification must also be made by a Gibraltar constituent entity who does not fall into the above mentioned categories. This type of notification must provide the identity and the jurisdiction of tax residence of the constituent entity required to file the CbC report on behalf of its MNE group. These notifications must be made in writing no later than nine months after the year-end of the Gibraltar constituent entity.
Gibraltar has also signed Tax Information Exchange Agreements (TIEAs) with a number of jurisdictions.