We welcome the EC Court of Justice ruling against the European Commission argumenting that Gibraltar’s corporate tax reform constitutes illegal state aid.
The Judgement from the Eight Chamber of the Court of First Instance says: “It follows from all of the foregoing that the Commission has not established the existence of selective advantages stemming from the three aspects of the tax reform that are at issue. Therefore, by classifying those aspects as State aid, the Commission made an error of law in the application of Article 87(1) EC.”
As reported by Down Jones Deutschland, ” Gibraltar’s tax regime must be considered as Gibraltar’s only and not as a part of the UK.’s, the Court of First Instance said. The court ruling means Gibraltar won’t have to match UK. tax rates and it won’t lose the fiscal independence that is key to its ability to attract businesses seeking favorable tax treatment within a sovereign British territory.
The commission investigated the Gibraltar tax reforms after the UK notified it in 2002 of Gibraltar’s plans. Gibraltar is seen as part of the UK for the purposes of EU membership.
The reform aimed to abolish the 35% corporate tax rate and replace it with payroll tax and a business property occupation tax – both capped at 15% of profit. This, the commission said in a 2004 statement, meant “offshore companies with no physical presence in Gibraltar won’t incur any tax liability at all.”
The commission found the tax reform violated EU state aid rules as it resulted in a lower corporate tax rate (15%) for Gibraltar companies than for UK. companies and favored certain sectors over others.”
Tags: Double Tax Treaty