EC to investigate Gibraltar’s corporate tax system

The European Commission is set to open an investigation into Gibraltar’s corporate tax system, introduced in 2010, citing “serious concerns” about the possibility that it could provide unwarranted benefits to companies that have no physical presence on the British territory.

The investigation, to be handled by the EU’s Directorate General for Competition, headed by Spaniard Joaquín Almunia, is in response to a complaint lodged by Spain n June 2012.

Brussels will pay particular attention to so-called passive deposits, such as royalties and certain types of interest, which are not subject to Gibraltar’s corporate tax laws. Preliminary investigations suggest that these passive deposits may constitute state aid to the companies that generate them, and that there is no valid reason for their existence.

The Commission declared Gibraltar’s previous corporate tax system illegal in 2004, and in 2011 the European Court of Justice upheld the ruling, noting that the system provided benefits for companies that have neither offices nor employees on the Rock.

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