GIBRALTAR Law and Practice Contributed by: Stuart Dalmedo, Adrian Pilcher and Louise Anne Turnock, ISOLAS LLP
4.2 Key Treaty Jurisdictions for Inbound Investment Gibraltar and the UK signed a tax treaty (based on the OECD model) in October 2019, which came into force in April 2020. An international tax agreement between the UK and Spain concerning Gibraltar (with the UK acting in its position as the recognised state responsible for Gibraltar’s external relations) was signed in March It is too early to comment on whether local tax authori - ties will challenge the use of treaty country entities by non-treaty country residents, as the two agreements listed in 4.2 Key Treaty Jurisdictions for Inbound Investment only came into force relatively recently. 4.4 Transfer Pricing Issues for Inbound Investors The general anti-avoidance rule in the Income Tax Act should be interpreted in the manner that best secures consistency with the OECD Transfer Pricing Guide - lines for Multinational Enterprises and Tax Administra - tions and other documents designated as comprising part of the transfer pricing guidelines. 4.5 Challenges to Related-Party Limited Risk Distribution Arrangements At present, there is no legislation in Gibraltar that gov - erns the use of related-party limited risk distribution arrangements for the sale of goods or provision of services. 4.6 Local Transfer Pricing Rules and OECD Standards The general anti-avoidance rule in the Income Tax Act should be interpreted in the manner that best secures consistency with the OECD Transfer Pricing Guide - lines for Multinational Enterprises and Tax Administra - tions and other documents designated as comprising part of the transfer pricing guidelines. 2019 and came into force in March 2021. 4.3 Tax Authority Scrutiny of “Treaty Shopping” Practices
Act 2024, the Commissioner may now counteract or disregard any tax avoidance arrangement involving the accumulation of profits in a closely held company where the purpose or effect is to defer shareholder- level tax. In particular, where income or profits are accumulated in a company and subsequently distributed to share - holders via a voluntary liquidation, the GAAR provides that the liquidation proceeds will be deemed to be dividends received by the shareholder if the Commis - sioner considers the arrangement to be tax avoidance. This applies regardless of the form of the distribution and is designed to prevent the use of corporate reten - tion of earnings as a tax deferral tool. 3.4 Taxation of Individuals on Shares in Closely Held Corporations Individuals in Gibraltar are generally taxed on divi - dends they receive from Gibraltar companies at their normal individual income tax rates, subject to a credit for any Gibraltar corporation tax already paid on the underlying profits. Dividends are not taxable where: • the individual is not ordinarily resident in Gibraltar; or • the dividend is paid out of profits on which no Gibraltar tax has been charged, and only to the extent the dividend represents the distribution of such untaxed profits. 3.5 Taxation of Individuals on Shares in Public Corporations Dividends are not taxed in Gibraltar if they are paid by a company whose shares are listed on a recognised stock exchange. 4. Taxation of Inbound Investments 4.1 Application of Withholding Taxes Gibraltar does not apply any withholding tax to inter - est, dividends and royalties.
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