GIBRALTAR Law and Practice Contributed by: Stuart Dalmedo, Adrian Pilcher and Louise Anne Turnock, ISOLAS LLP
4.7 Transfer Pricing Disputes and Mutual Agreement Procedures At this moment in time, it is too early to tell whether any international transfer pricing disputes will be resolved through double tax treaties and mutual agreement procedures, as Gibraltar’s tax treaties were entered into relatively recently (see 4.2 Key Treaty Jurisdic- tions for Inbound Investment ). 5. Taxation of Non-Local Corporations 5.1 Compensating Adjustments Gibraltar has limited application of specific transfer pricing mechanisms, so the compensating adjust - ments allowed/made when a transfer pricing claim is settled are unclear. 5.2 Local Branches and Local Subsidiaries Local branches of non-local corporations are not taxed differently to local subsidiaries of non-local corporations – the local branch or subsidiary would be liable to tax in Gibraltar on any assessable income that is accrued in and derived from Gibraltar (see 2.1 Taxable Profits ). 5.3 Capital Gains of Non-Residents Gibraltar does not have any capital gains tax. 5.4 Tax Implications of Change of Control A change of control of a local entity that owns Gibral - tar real estate would trigger stamp duty and property fees (see 2.8 Other Taxes on Transactions ). A change in control could result in tax losses not being available for set-off against future profits, provided there is also a major change in the nature and conduct of the busi - ness (see 2.4 Loss Relief ). 5.5 Formula-Based Income Attribution This is not applicable in Gibraltar. 5.6 Deductibility of Intra-Group Management and Administrative Charges The Commissioner of Income Tax does not apply a specific standard in allowing a deduction for payments by local affiliates for management and administrative expenses by a non-local affiliate. However, if the Com - missioner regards a company’s expenses with a con -
nected party as a means to reduce the company’s tax liability, they may apply restrictions on the deduction of said expenses. This restriction may be imposed against 5% of the gross turnover of the company or 75% of the pre-expenses profit, whichever is lower. There is also a restriction on head office expenses incurred for the common purpose of a branch, at 5% of the branch turnover. 5.7 Restraints on Related-Party Borrowing There are no specific rules regarding financing opera - tions between related parties, but limits on interest payments could be made (see 2.5 Deduction of Inter- est ). 6. Taxation of Foreign Income of Local Corporations 6.1 Foreign Income Exemptions Subject to the CFC rules (see 6.5 Controlled Foreign Corporation-Type Rules ), Gibraltar follows the terri - toriality principle, meaning that only Gibraltar sourced income is subject to taxation in Gibraltar (see 2.1 Tax- able Profits ). 6.2 Non-Deductible Local Expenses Local expenses attributable to exempt foreign income would not be deductible for tax purposes. 6.3 Dividends From Foreign Subsidiaries Dividends received by a company from another com - pany are exempt from tax. 6.4 Taxation of Intangibles Developed by Local Corporations Generally, intangibles developed by local companies can be used by non-local subsidiaries in their busi - ness without incurring corporate tax in Gibraltar. How - ever, if the Gibraltar company is in receipt of income in respect of the non-local subsidiaries’ use of such intangibles, it may be deemed royalty income and would be subject to taxation in Gibraltar.
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