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Gibraltar ends distinction between onshore and offshore business

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The government of Gibraltar has published the text of the new, amended and consolidated Income Tax Act, which ends all distinction between “onshore” and “offshore” business.

The Act lays the foundations for the reduction of company tax in Gibraltar from 22 per cent to ten per cent from 1 January 2011, to coincide with the definitive abolition of the historical tax exempt company regime.

This legislation ends all distinction between “onshore” and “offshore” business. Together with the tax information exchange agreements being entered into by the government, and Gibraltar’s integration in the EU and compliance with EU financial services regulation, money laundering and cooperation rules, the Act aims to complete Gibraltar’s 14 year transition from tax haven to mainstream European financial services centre.

The Act introduces tough anti-avoidance measures and default financial and legal penalties to help ensure that all pay the taxes that are due.

The legislation also introduces severe criminal consequences, as well as personal liability, for directors and managers of companies that withhold tax from workers’ pay and then fail to pay it over to the government promptly.

To level the playing field between PAYE payers and companies and self employed people, the latter will, in future, have to pay tax during the tax year on account of that year’s tax bill. This brings to an end the historical position whereby PAYE payers suffer tax at source, while companies and the self employed could delay paying their tax for several years.

The legislation also introduces a system of self assessment and hefty financial penalties for defaulting on payment or returns.

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