The European Commission has extended the scope of an ongoing investigation opened in October 2013 to verify whether the new Gibraltar corporate tax regime selectively favours certain categories of companies, in breach of EU state aid rules. The Commission will now also examine the Gibraltar tax rulings practice. The new Gibraltar income tax act introduced, among other changes, a tax rulings practice which allows companies to ask for advance confirmation of whether certain income, generated by companies incorporated in Gibraltar or that carried out an activity which generates income, are subject to taxation in Gibraltar.

The Commission has assessed 165 tax rulings granted by the Gibraltar tax authorities to different companies in 2011, 2012 and up to August 2013. Based on the information submitted by the UK authorities, it appears that the Gibraltar tax authorities grant formal tax rulings without performing an adequate evaluation of whether the companies’ income has been accrued in or derived from outside Gibraltar and therefore is exempted from taxation in Gibraltar.

The Commission has concerns that potentially all assessed rulings may contain state aid, because none of them are based on sufficient information so to ensure that the level of taxation of the activities concerned is in line with the tax paid by other companies, which generate income that is to be considered accrued in or derived from Gibraltar.