Spain to challenge Gibraltar's Tax Regime in Europe

The Spanish Government has been keeping quiet about the appeal, because of the ongoing fishing dispute.William Hague and José Manuel García-Margallo in London - Photo EFE Spain has denounced the new fiscal regime in Gibraltar to the European Union. The Spanish Government has turned to the European Union saying the new tax regime on the Rock, the Gibraltar Income Act 2010, which came into effect on Jan 1 2011,is incompatible with community legislation. Spain made the complaint on June 1 to the General Direction of Competition of the European Commission, but has been quiet about it so as not to complicate the talks between Gibraltar and Spanish fishermen. Spain says the Gibraltar fiscal regime covers a system of State help which is incompatible with European treaties. The company tax on Gibraltar has been reduced from 22% to 10%, compared to the average 30% in Spain, but it applies only on income generated in or proceeding from Gibraltar. It means that companies registered in Gibraltar but which carry out their business in Spain are benefitting. The Gibraltar Authorities say the Rock is no longer a financial haven, but the new regime is encouraging the practice known as ‘fiscal dumping’. The EU First Instance Court ruled in Gibraltar’s favour in 2002, but the sentence was overruled by the EU High Court of Justice in November 2011. The higher court considered that Gibraltar has the capacity to set its own fiscal policy. Spain’s Foreign Minister, José Manuel García Margallo, told his British counterpart, William Hague, during his visit to London on May 29, of Spain’s intention to appeal against the Gibraltar fiscal regime.