Under Gibraltar’s territorial tax system, income of a company is only taxable if it is “accrued in or derived from” Gibraltar. This is determined by the location of the activities giving rise to the income. In certain cases, income is deemed to be accrued in and derived from Gibraltar, for example, intercompany loan interest and royalty income of a company registered in Gibraltar.

HM Government of Gibraltar has published guidance setting out the principles that the Income Tax Office (ITO) will apply in determining whether income is accrued in and derived from Gibraltar.

The guidance states that the ITO will apply principles derived from jurisprudence of the Privy Council in three specific cases which were previously accepted as being authoritative in Gibraltar. These cases concern the interpretation of tax law in Hong Kong; the Hang Seng¹ case, the HK-TVB International Ltd² case and the Orion Caribbean³ case. The reference to Hong Kong tax law arises as Hong Kong applies territorial principles that are akin to those of Gibraltar and Hong Kong’s case law is significantly more extensive than that of Gibraltar.

A number of specific examples are included in the Guidance, covering areas such as income from property, charter of vessels, intercompany interest, consultancy services, manufacturing, trading and supply of equipment.

This guidance re-affirms the position that was previously taken by the Income Tax Office, and which was generally recognized by tax professionals in Gibraltar.

Endnotes

1. Commissioner of Inland Revenue v Hang Seng Bank Ltd.

2. Commissioner of Inland Revenue v HK-TVB International Ltd.

3. Commissioner of Inland Revenue v Orion Caribbean Ltd.

For additional information with respect to this Alert, please contact the following:

EY Limited Gibraltar

• Neil Rumford | neil.rumford@gi.ey.com 

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