New tax era on the Rock

GIBRALTAR (GibChronicle) Gibraltar’s finance centre moves into a new era this year as the Rock’s new taxation regime enters into force. The new framework will mark the end of the tax exempt company structure that underpinned much of Gibraltar’s economic success over the past decade, but which fell foul of EU rules.
The key element of the new Income Tax Act is a reduction in company tax from 22% to 10% as from January, 2011. The act ends all distinction between “onshore” and “offshore” business. Coupled to the tax information exchange agreements being entered into by the government, the new act completes Gibraltar’s 14 year transition from tax haven to mainstream European financial services centre.>
When he announced the move earlier this year, Chief Minister Peter Caruana said it was vital for Gibraltar to find a competitive tax model to replace the tax exempt company.

“Thousands of local jobs, much Government revenue and thus our public services, depend on Gibraltar having an internationally competitive tax system,” he said.

“Many previously tax exempt banks, insurance, investment, gaming and other companies will begin to pay profit tax in Gibraltar for the first time on the same basis as all other companies.”

ONLINE GAMING

News that online gaming companies are to pay more tax has caused a marked ripple in the specialist media that covers that industry.

Online gambling companies currently pay just 1% tax in Gibraltar with a ceiling of £425,000, but starting tomorrow they will pay the same 10% tax rate as other Gibraltar businesses pay.

But while the specialist press is all excited about this change, gaming companies appear – in public at least – largely indifferent.

Party Gaming, which recently released details concerning its merger with online gambling giant bwin, said in a statement that it would keep its headquarters in Gibraltar while bwin continued to operate in Austria. For now, the tax change has had little impact on that decision,

“We’ve known about this for some time and we’ve factored it in,” Party Gaming spokesman John Shepherd told a poker website, www.pokernewsdaily.com.

“The tax is still going to be very low.”

A similar assessment was offered by industry veteran Victor Chandler in an interview with El Pais recently.

Asked whether the tax hike could prompt some companies to move on, he replied: “Nobody will leave, although we’ll all complain about the tax going up.”

NEW BUSINESS

Even before they fully kicked in, some local businessmen reported new trade on the back of the forthcoming tax changes.

The new regime comes at a time of when governments around the globe are toughening up on taxation in the face of public spending austerity.

In practical terms, that means fiscal authorities around the globe are looking at means to increase tax revenues and ensure citizens pay their fair share.

For corporations and wealthy individuals alike, it means they have to pay closer attention to how their tax affairs are structured.

“It’s people waking up to the fact that they’ve got to take tax seriously,” said Mike Nicholls, managing director of both Chesterton estate agents and MN Associates, a consultancy firm.

“Countries around the world are going bust and every chancellor wants money.”

He said Gibraltar’s new fiscal regime offered attractive, well-regulated options for wealthy fiscal nomads to reduce their tax bills.

The appeal is further bolstered by Gibraltar’s success in dynamic sectors including funds, insurance and e-gaming.

Success in the finance centre has a knock-on impact in town.

Mr Nicholls originally came to Gibraltar to work in a senior role on the team that developed Ocean Village.

But he settled here and saw a gap in the market that would allow him to move on. He bought the local franchise of the well-known UK estate agent Chesterton last year and has not looked back since.

These days, he focuses on finding residential and business properties for the incoming wealthy and corporate markets, working closely with Gibraltar’s law and accountancy firms.

“All our sales [to individuals] are tax-led sales,” Mr Nicholls said. “They don’t have a tax address and this is what they’re looking for.”

Based on anecdotal evidence from the Chesterton database, Mr Nicholls said Gibraltar’s fiscal regime is proving increasingly attractive in both segments.

The 10% corporate tax rate, in particular, holds great promise.

“As a headline rate, it is beyond fantastic,” he said. “It’s a really good selling tool.”

“For those of us selling Gibraltar as a jurisdiction, it could not be a better marketing tool.”