Gibraltar Double Tax Agreement

The aim of the agreement is to eliminate double taxation on income and capital and to prevent tax evasion and evasion. Section 22 provides for the elimination of double taxation through a tax credit. The Gibraltar Income Tax Office recently issued guidelines for tax payers on how to apply the treaty mutual agreement procedure. The Double Taxation Agreement between Gibraltar and Great Britain came into force on 24 March 2020. Double taxation agreements (also known as double taxation agreements or conventions) (DBAs) are primarily aimed at reducing double legal taxation. A double taxation agreement is an agreement between (as a general rule) two jurisdictions that assign tax duties to different income and profit elements between them. As a general rule, the DBA reduces double taxation by removing or limiting taxation in the county where income or profits are generated (tax of the source state) or by requiring that the country in which the taxor is established grant, through a credit or exemption mechanism, an exemption for taxation at source. The main effect of the treaty is to eliminate double taxation between residents of Gibraltar and/or the United Kingdom on income and profit taxation. The treaty further strengthens economic relations between the two regions before Brexit and, although it is based on the organisation for economic co-operation and development (OECD) model, some major differences appear, which are highlighted in this article. Anyone usually residing in Gibraltar, who is taxable in Gibraltar, can apply for double taxation assistance for tax paid abroad. With regard to proof of payment made abroad, the applicant is entitled to a credit corresponding to a lower amount: when a person other than a person is established in the two zones, the competent authorities of the territory endeavour, by mutual agreement, to determine the territory whose territory must be considered resident for the purposes of the contract, taking into account their actual place of management, the place where it is registered or otherwise justified, as well as other relevant factors. The 0% interest rate is subject to either the application and obtaining of contractual relief or a double tax passport before the interest is paid.

While Gibraltar has been offering a competitive low tax rate, political independence and good relations with the government through the Gibraltar Finance Centre Council in recent years, transactions between a Gibraltar company and a British company in an international group have been problematic from a tax point of view in the past, as there is no double taxation agreement between the two countries. If double taxation abroad is reduced, the discharge granted to Gibraltar is reduced accordingly. An application for double taxation must be filed within six years from the end of the tax year to which it relates. The period is extended if any adaptation or evaluation carried out in Gibraltar or abroad allows for excessive or insufficient relief beforehand. Under these conditions, a right may be invoked within six years of rectification or assessment. In the absence of double taxation agreements, foreign companies or citizens who pay taxes in Gibraltar can benefit from tax relief in their home country as soon as they have provided evidence to the Gibraltar tax authorities. If a deduction is granted to a foreign company under a double taxation agreement, Gibraltar also grants the deduction. (c) if he has a habitual residence in either or any of the two zones, the competent authorities of the territories resolve the matter by mutual agreement.