In a statement, Picardo stressed that the result of the investigation, which has taken more than six years, is a "remarkable success" for the Rock and "a great blow for all those who seek to denigrate Gibraltar as a tax jurisdiction."
Despite being a "negative decision", the main minister of Gibraltar has stressed that the scope of it "is minor" and has emphasized that it vindicates in the same vision of his Executive that "there is nothing fundamentally illegal or wrong with our Income Tax Act 2010). "
"The complete investigation has only required us to make minor amendments to the Law on interest and royalties and place the practice of tax rulings in Gibraltar on a more solid legal basis." The net result of this investigation is that the Law on Income Tax (Income Tax Act) now enjoys approval by the Commission This is really excellent news, "said Picardo.
In a statement, the Government of the Rock has reiterated that its approach "has been fully vindicated" by the decision of the European Commission, allowing them to "continue with the practice of tax rulings." In addition, he recalled that of the 165 tax resolutions that the Commission has been investigating, it has only found errors in relation to five of them, all related to transactions involving Dutch limited partnerships that have also been controversial in other EU jurisdictions. .
Brussels opened in October 2013 an investigation against the regime of Gibraltar corporation tax introduced in 2010 in the face of "serious doubts" that it could infringe the Community rules on public aid by including exemptions in this tax for interest payments and royalties.
The community executive extended the file in October 2014 to also include a total of 165 tax agreements or 'tax rulings', on the suspicion that they were not based on sufficient information to ensure that the benefited companies were taxed under the same conditions as other companies that generated or derived income from Gibraltar.
With respect to the first pillar of the investigation, Brussels has determined that the companies that benefit from interest or royalties were exempt from paying the tax "without there being a valid justification". Consequently, the measure "significantly favored" a group of companies belonging to multinational groups that focus their activity, for example, in the granting of intra-group loans.
"This selective tax treatment favorable to multinational companies gave these companies an advantage over other companies and distorted competition in the EU's single market, contrary to the provisions of EU state aid rules," says the European Commission.
Gibraltar, in any case, abolished the tax exemption on interest income in July 2013 and the income from royalties in January 2014.
With regard to the investigation on fiscal agreements, the Community Executive has concluded that 5 of the 165 'tax rulings' evaluated constituted illegal State aid. The five refer, in particular, the tax treatment of Gibraltar to certain income generated by limited partnerships in the Netherlands.
On the other hand, the European Commission has not detected any selective advantage with respect to the other 160 tax agreements evaluated.
Consequently, Gibraltar must now recover the taxes not paid by the companies that benefited from the exemption from corporate tax regime for interest and royalties between 2011 and 2013 and by the firms that benefited from the illegal tax treatment thanks to the five 'tax rulings' declared illegal.
The Peñón authorities must now determine the exact amounts they must recover from each of the affected companies, but the Competition Services of the European Commission calculate that the unpaid taxes amount to approximately 100 million euros.