Gibraltar

Corporate - Significant developments

Last reviewed - 22 December 2020

Mandatory disclosure regime (DAC 6)

On 30 January 2020, the Gibraltar government published the Income Tax (Amendment) Regulations 2020, which amend the Income Tax Act 2010 for the purpose of implementing Council Directive (EU) 2018/822 of 25 May 2018 ('the Directive') amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements.

The legislation imposes a new obligation on European Union (EU)-based 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.

The hallmarks cover a range of structures and transactions, including certain deductible cross-border payments, conversion of income into capital, inter-company transactions that meet specific transfer pricing hallmarks, and specific hallmarks concerning automatic exchange of information and beneficial ownership.

Gibraltar has exercised the deferral option in relation to time limits for filing and exchange of information in relation to DAC 6. The reporting deadlines are revised as follows:

  • The start date for the 30-day reporting period for cross-border arrangements moves from 1 July 2020 to 1 January 2021.
  • The date for the reporting of historical cross-border arrangements (those reportable between 25 June 2018 and 30 June 2020) moves from 31 August 2020 to 28 February 2021.
  • The date for the first periodic report for marketable arrangements by intermediaries moves from 31 October 2020 to 30 April 2021.

The DAC 6 requirements are expected to continue to apply in Gibraltar even though it has left the European Union together with the United Kingdom (UK). 

Exit tax

On 30 January 2020, the Gibraltar government published the Income Tax (Amendment No. 3) Regulations 2020 transposing the provisions of Article 5 of the Council Directive (EU) 2016/1164 of 12 July 2016 into Gibraltar law.

The new legislation, which closely follows the Article 5 provisions, applies from 1 January 2020 and imposes an exit tax of 10% on the difference between the market value of the transferred assets that would otherwise produce assessable income under the provisions of the Gibraltar Income Tax Act 2010 at the time of exit of the assets and their value for tax purposes in any of the following circumstances where a taxpayer transfers:

  • assets from its Gibraltar head office to its permanent establishment (PE) outside Gibraltar and Gibraltar no longer has the right to tax the transferred assets
  • assets from its Gibraltar PE to its head office or PE outside of Gibraltar and Gibraltar no longer has the right to tax the transferred assets
  • its tax residence outside of Gibraltar and acquires tax residence in another jurisdiction (excluding assets that remain effectively connected to the Gibraltar PE), or
  • the business carried on by its Gibraltar PE to another jurisdiction and in doing so the taxpayer:
    • ceases to have a taxable presence in Gibraltar
    • acquires a presence elsewhere without becoming tax resident, and
    • Gibraltar loses the right to tax the transferred assets due to the transfer.

Hybrid mismatches

On 30 January 2020, the Gibraltar government published the Income Tax (Amendment No. 2) Regulations 2020 transposing the provisions of Council Directive (EU) 2017/952 amending Council Directive 2016/1164 ('2016 Directive') as regards hybrid mismatches with third countries into Gibraltar law.

As part of the Organisation for Economic Co-operation and Development (OECD) base erosion and profit shifting (BEPS) measures, the 2016 Directive contained rules against tax avoidance, including, in particular, a framework to tackle hybrid mismatches.

The new legislation expands the provisions relating to hybrid mismatches so that they cover those involving third countries, the interaction between corporate tax systems of different member states, PEs, hybrid transfers, imported mismatches, and a fuller range of double deduction outcomes; it also makes other miscellaneous amendments to the 2016 Directive regime.

UK Double Taxation Agreement

On 17 October 2019, it was announced in the United Kingdom Parliament the signing of a Double Taxation Agreement ('the Agreement') between the governments of the United Kingdom and Gibraltar. The Agreement, which is based on the OECD Model Tax Convention, was signed in London on 1 October 2019 and in Gibraltar on 15 October 2019. The Agreement entered into force on 24 March 2020.

Spain Tax Agreement

On 4 March 2019, an International Tax Agreement between the United Kingdom (which retains constitutional responsibility for Gibraltar’s external relations) and the Kingdom of Spain was signed, but it has not yet been ratified.

The Tax Agreement principally seeks to improve cooperation in the field of taxation and assist in the resolution of disputes as to the proper tax residence of companies and individuals where their place of residence between Gibraltar and Spain may be in issue.

The Agreement also provides for Gibraltar to keep legislation equivalent with EU law on matters related to transparency, administrative cooperation, harmful tax practices, and Anti-Money Laundering after Gibraltar has left the European Union.

The Treaty has been going through various steps in the ratification process in Spain and the United Kingdom and is expected to come into force in 2021.

COVID-19 measures

A one-off capital allowance deduction has been introduced and is available to businesses in all sectors against assessable profit up to a maximum of 50,000 British pounds (GBP) for COVID-19 related expenditure.

A number of other temporary measures were introduced, details of which can be found on PwC's COVID-19 updates page.