EU Probes Gibraltar Tax Policy

Gibraltar’s online operators claim that a new UK tax on the sector violates EU fairness rules. Now the government of Gibraltar is facing similar scrutiny from the European Commission based on tax policies that Spain and other member states say are discriminatory.

The European Commission is investigating Gibraltar’s tax rules following complaints from other EU member states, namely Spain, which borders the British Overseas Territory, that the rules amount to illicit state aid corporations registered there.

The probe comes as Gibraltar’s online gaming operators lost a bid in UK High Court to overturn a law passed in Parliament earlier this year requiring offshore operators to obtain UK licensing and pay a 15 percent point-of-consumption tax on their British business. The operators contended the requirements are discriminatory violations of EU fairness rules, a charge very similar to the one member states have leveled against their host government.

The EC’s investigation is focusing on Gibraltar’s corporate tax exemption policies, in particular those which enable companies registered in the territory to apply for advance exemptions on profits generated from overseas jurisdictions. The commission said it has concerns that certain tax rulings made in line with the policies amount to state aid for private corporations.

In 2012, Spain filed a complaint with the EC, claiming Gibraltar was granting selective and pre-advanced tax exemptions, thus creating unfair corporate tax conditions, a violation of EU rules.