Gibraltar gets a reprieve EU backs down

After months of legal wrangling, the European Commission has ruled that a key part of Gibraltars offshore tax regime can stay for the moment.

In a ruling in mid-January, the European Commission said that a scheme under which non-Gibraltarian companies can apply for corporate tax exemption upon a payment of 225-300 falls foul of state aid rules and creates harmful and distorting tax competition. In mid January the Commission

Gibraltar was initially threatened with the immediate removal of its tax system, a move likely to have had severe consequences for the Rocks fiancial viability. Under the recently signed agreement, the tax regime can remain in place for existing exempt companies until 2010. Crucially, the dual tax system can remain in place for new companies until 2006.

Commenting on the agreement, Chief Minister Peter Caruana said: Given the hostility to any such agreement by powerful sections of the EU Commission, and the extremely tough and difficult negotiation that has been required, this represents a reasonably good arrangement which avoids the worst consequences for Gibraltar. It is an excellent agreement which delivers absolute legal certainty to exempt companies compared to what the position would be if we had not reached any agreement.