GIBRALTAR IN THE EUROPEAN UNION THE BENEFITS, THE OBLIGATIONS AND TAXATION DEVELOPMENTS November 2008 Brendan Murphy TSN LAW FIRM (TRIAY STAGNETTO NEISH) BURNS HOUSE TOWN RANGE GIBRALTAR Tel: 00350 200 79423 Fax: 00350 200 71405 Email: bam@tsnlaw.com 1
PRESENTATION OVERVIEW -EU Membership benefits and obligations (a) general EU principles applicable to Gibraltar (b) specific points of focus for Gibraltar - Taxation Developments - Some structuring possibilities 2
GIBRALTAR within the European Union -Extensive self-government (UK responsible for defence and foreign affairs) -Economy based largely on financial services, tourism and international trade - Membership since 1973 -Unique status Article 299 (4) -Part of EU save for VAT, Common Agricultural Policy and the Customs Union 3
EU Benefits and obligations (General principles) - Freedom of movement, of residence and of employment - Freedom of provision of services and right of establishment - EU standard of regulatory compliance and corporate governance framework -EU standard customer protection framework - Implementation of EU compatible tax system (non discriminatory/eu State Aid rules) 4
EU Benefits and obligations (Gibraltar-specific focus) EU Passporting rights for (a) Banking (b) Insurance (c) Investment Services - Notification procedure through Financial Services Commission for passporting of services 5
GIBRALTAR TAXATION DEVELOPMENTS - Current corporate tax regime and transition to low rate (proposed at 10%) - Main features of the tax model (a) Investment income exempted (interest on deposits, quoted share dividends) (b) No withholding tax on non-gibraltar situs loans (c) Mitigation of headline rate may be possible (d) Parent-subsidiary flows facilitated (adopting the EU directive) 6
BUT - European Court of Justice ruling pending on Gibraltar tax model. - Regional selectivity and material selectivity are key issues (September 2007 Azores case and 2008 UGT-Rioja case are helpful on regional selectivity) 7
GIBRALTAR TAXATION DEVELOPMENTS - Current personal tax regime (a) Gross income based system (b) Allowance based system (c) Category 2 individuals (capped tax liability) (d) Higher Executives Possessing Specialist Skills ( HEPSS ) 8
GIBRALTAR TAXATION DEVELOPMENTS - Other features of Gibraltar s taxation model (a) No Capital Gains Tax (b) No Capital Duty save for 10 charge (c) No VAT (d) No Stamp Duty (unless Gibraltar real estate) (e) No Inheritance Tax (f) No Wealth Tax 9
Structuring Gibraltar features (a) low tax, (b) favourable tax arrangements, and (c) EU market access 10
(1) Private Client Gibraltar Trust Gibraltar Company Investment Portfolio Property Portfolio - No Capital Gains Tax - No tax on investment income - If non-resident settlor and non-resident beneficiaries of trust then not taxed 11
(2) Parent/Subsidiary Shareholders - non-gibraltar resident Gibraltar company EU Subsidiary Non-EU Subsidiary 12
- No tax in Gibraltar company on dividends from non- EU subsidiary - If required participation in EU subsidiary - then no tax in Gibraltar company on dividends from EU Subsidiary - Provided the shareholders of Gibraltar company are non-resident then no withholding tax on dividends 13