©2008 Deloitte Private and Confidential
The Secret is out!EU Benefits and Obligations and Taxation Developments
Stephen Reyes18th November 2008
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Today’s Main Objective
Dispel the myth
Gibraltar is not a tax haven
Gibraltar is awell-regulated, low tax
European Financial Services Centre
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Agenda
Gibraltar
Gibraltar and the EU
Corporate Taxation developments
Personal Taxation developments
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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
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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
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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
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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
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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
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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)
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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
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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
Gibco or EUor SwissCo
Gibco or EUor SwissCo
>=25%>=25%
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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
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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
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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
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