The Secret is out!882fe31f29e7fd8c9ada-b447e7f1eed2117ba41e7c09f22d2c1c.r12.cf3.rackcdn.… · ©2008 Deloitte Private and Confidential The Secret is out! EU Benefits and Obligations

©2008 Deloitte Private and Confidential

The Secret is out!EU Benefits and Obligations and Taxation Developments

Stephen Reyes18th November 2008

.© Deloitte 2008. All rights reserved.Gibraltar Government Seminar - Prague (18/11/2008)2

Today’s Main Objective

Dispel the myth

Gibraltar is not a tax haven

Gibraltar is awell-regulated, low tax

European Financial Services Centre


Agenda

Gibraltar

Gibraltar and the EU

Corporate Taxation developments

Personal Taxation developments


Gibraltar Facts

British territory since 1704

UK Overseas Territory

Self-governing

New Constitution in 2006 (UK onlyresponsible for defence and foreignaffairs)

Located at the southern tip of Spainat the entrance to the MediterraneanSea

Part of European Union

Languages: English & Spanish(bilingual)

English common law jurisdiction


Gibraltar and the EU

Gibraltar is part of the EU by virtue of UK’s membership - Article299(4) of the Treaty of Rome (1973)

Specific exemptions granted from:

VAT

Customs Union

Common Agriculture Policy

Otherwise all EU directives must be transposed into Gibraltar law(i.e. Financial Services and Tax Directives)

Gibraltar achieves EU standards of regulation

Gibraltar entities can take advantage of EU directives, e.g.parent/subsidiary directive and interest & royalties directive

Gibraltar entities have access to the Single European Market

EEA nationals do not need work permit in Gibraltar


The European Economic Area (EEA)The European Economic Area (EEA)

A single market in financial servicesA single market in financial services

The Single market gives Gibraltar companies, in the areasof Insurance, banking and investment services :

freedom of establishment(i.e. to establish a branch operation elsewhere in the EEA)

freedom of services(i.e. to provide services directly in the “host” EEA state)

without having to go through separate licensing procedures(i.e. “passporting”)

Gibraltar is the only UK Overseas Territory that hasfull access to the European Single Market


Move towards low tax model (10% by 2010)

Driven by compliance with EU State Aid Rules

Pending judgement from European courts

Regionality (Gibraltar tax system distinct from UK) – precedent set

Materiality (Specific tax measures)- now defunct

All Ordinarily resident Gibraltar companies subject to Income Tax Act

Transitional provisions in respect of existing Tax Exempt Companies(“TEC’s”)

Standstill effective 30 June 2006

TEC’s phased out by 31 December 2010

Existing TEC’s may opt out of regime anytime prior

Change of control/business activity = loss of status

Corporate Taxation Developments


Corporate Taxation in Gibraltar

Only income “accruing in, derived from …Gibraltar” isassessable to tax

Depends on where profit making activity is carried out(supported by the Privy Council decision in the case of Hang Seng (1990) STC 733)

Advance Ruling possible to provide certainty

Standard corporate tax rate is 27%

Reduced to 20% for small companies (with profits < £35,000)

Corporate tax rate expected to reduce further in July 2009before settling at a flat rate of 10% from July 2010

Expenses incurred “wholly and exclusively” can be deducted


Corporate Taxation in Gibraltar (Cont’d)

Other exemptions:

Savings income (bank interest and income from listedinvestments)

Income from relevant participations under the EU ParentSubsidiary Rules

Dividend income from one Gibco to another Gibco

No withholding taxes on the payment of dividends

No capital gains tax

No V.A.T.

No inheritance taxes or death duties

No Wealth taxes

No stamp duty (only for Gibraltar real estate transactions)

No Capital duty (other than £10 nominal charge)


Parent Subsidiary Rules

Provisions of EU Parent Subsidiary directive transposed into local law

Dividends exempted from taxation when “parent” company receivesdividends from “relevant participations”

“Parent” = company that has a “relevant participation” in a company ofa Member State (which includes EU and Switzerland)

“Relevant participation” = interest in at least 15% of the voting sharecapital (reduced to 10% in December 2008)

As long as at least one relevant participation is in an EU or Swisscompany all other non-EU “relevant participations” benefit from theexemption

Use of Gibco subsidiary qualifies as an EU company.

Availability of Advance Rulings


Interest & Royalties Rules

Provisions of EU Interest & Royalties directive transposed intolocal law

Interest and royalties exempt from taxation if beneficial owner ofinterest or royalty is

a company in another EU member state or Switzerland,

an associated company (25%) of the payer of the interest or royalty, and

the Commissioner of Income Tax has issued an exemption certificateunder the Rules

Gibco or EUor SwissCo



>=25%>=25%


No VAT or capital gains tax

No wealth or inheritance tax

No transfer tax nor exchange controls. Nominal stamp duty

No withholding taxes on dividends

No tax on externally sourced income

No tax on certain types of investment income

Application of EU Parent/Subsidiary directive and Interest &Royalties directive

Commitment to low corporate tax – 10% by 2010

Collective Investment Funds are tax exempt

In summary..

A Powerful Tax Package


Personal Tax Developments

Move towards fixed rate of personal tax with noallowances - Gross Income Based System (“GIB”)

£ 0 - £ 25,000 20%£ 25,001 - £ 100,000 30%Over £ 100,000 40%

Introduction of HEPSS status - Tax will be capped to thefirst £100,000

Extension of allowable activities for Cat 2 – investmentactivities or activities that do not compete with Gibraltarbusinesses


Gibraltar – Gateway to Europe

Political & Economic Stability

British Jurisdiction

Member of EU

Cordoba Agreement

Professional Services

Well Regulated Finance Centre

Experienced Professionals

Common Law (UK Precedents)

Cost effective

Fiscal advantages

Powerful tax package

Effective fiscal vehicles

Attractive Residence Options

EU Directives

Quality of Life

300 days of sunshine

Mediterranean Lifestyle

On Spain’s doorstep


For further information visit our website at www.deloitte.gi

In this publication references to Deloitte are references to The Gibraltar firm, Deloitte Limited. Deloitte Limited is a member firm ofDeloitte Touche Tohmatsu. Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms, and theirrespective subsidiaries and affiliates. Deloitte Touche Tohmatsu is an organization of member firms around the world devoted toexcellence in providing professional services and advice, focused on client service through a global strategy executed locally in over140 countries. With access to the deep intellectual capital of approximately 150,000 people worldwide, Deloitte delivers services in fourprofessional areas – audit, tax, consulting, and financial advisory services – and serves more than 80 percent of the world’s largestcompanies, as well as large national enterprises, public institutions, locally important clients, and successful, fast-growing globalcompanies. Services are not provided by the Deloitte Touche Tohmatsu Verein, and, for regulatory and other reasons, certain memberfirms do not provide services in all four professional areas.

As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms have any liability for each other’s acts oromissions. Each of the member firms is a separate and independent legal entity operating under the names “Deloitte,” “Deloitte &Touche,”“Deloitte Touche Tohmatsu,” or other related names.

This publication has been written in general terms and therefore cannot be relied upon to cover specific situations; application of theprinciples set out will depend upon the particular circumstances involved and we recommend that you obtain professional advicebefore acting or refraining from acting on any of the contents of this publication.

Deloitte Limited would be pleased to advise readers on how to apply the principles set out in this publication to their specificcircumstances. Deloitte Limited accepts no duty of care or liability for any loss occasioned to any person acting or refraining fromaction as a result of material in this publication.

© Deloitte Limited 2008. All rights reserved.

Deloitte Limited is a company registered in Gibraltar with registration number 97704. A list of directors is available at Merchant House,22/24 John Mackintosh Square, Gibraltar, the firm’s principal place of business and registered office. Tel +350 200 41200. Fax +350 20041201. Email [email protected]

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The Secret is out!882fe31f29e7fd8c9ada-b447e7f1eed2117ba41e7c09f22d2c1c.r12.cf3.rackcdn.… · ©2008 Deloitte Private and Confidential The Secret is out! EU Benefits and Obligations