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EU Commission conclusions on State aid investigations: Gibraltar corporate tax regime and tax rulings

Gibraltar corporate tax regime and tax rulings

The European Commission on 19 December 2018 announced its final decision on the state aid investigations into Gibraltar’s corporate tax regime.


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On 19 December 2018 the European Commission announced its conclusions on the State aid investigations into Gibraltar’s corporate tax regime and tax rulings.

The conclusions confirmed the Commission’s preliminary view that Gibraltar’s non-taxation of interest and royalties under the Income Tax Act 2010, which came into force on 1 January 2011, constituted State aid by providing selective tax benefits to certain categories of companies and this was incompatible with the EU State aid rules. However, only 5 of the 165 tax rulings that underwent an in-depth review by the Commission were considered to constitute State aid by providing the companies and undue and selective advantage.

As a result, and consequent upon the Commission’s findings, the Government of Gibraltar must recover the alleged aid from the companies that benefited but it is now open to both the Government of Gibraltar and the companies concerned to appeal the decisions before the General Court (and possibly later the Court of Justice of the European Union (CJEU)).

During the course of the Commission’s investigations, the Government of Gibraltar made amendments to the Income Tax Act 2010, which were welcomed by the Commission, so that inter-company loan interest and royalties received or receivable by Gibraltar registered companies became subject to tax from July 2013 and January 2014 respectively. In 2018, further legislative amendments enhanced the Gibraltar tax ruling procedure and guidance notes were issued by the Gibraltar’s tax authorities in relation to be both these procedures and also in determining whether income is “accrued in and derived from” Gibraltar. 

Read a December 2018 report [PDF 125 KB] prepared by KPMG’s EU Tax Centre.

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KPMG International Cooperative (“KPMG International”) is a Swiss entity.  Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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