Gibraltar is seeking to implement a new tax regime for companies within the scope of OECD’s proposed Pillar Two tax rules, and a domestic minimum top-up tax, Chief Minister Fabian Picardo said while delivering the draft Budget for 2023-24.
Picardo said that the harmonization of a minimum global tax rate under the OECD’s Pillar two initiative is a significant and important change to the international tax scene.
The Pillar Two rules, commonly known as GLoBE, ensure large multinational enterprise pay a minimum level of tax on the income arising in each of the jurisdictions where they operate. More specifically, the tax rules provide for a coordinated system of taxation that imposes a top-up tax on profits arising in a jurisdiction whenever the effective tax rate, determined on a jurisdictional basis, is below the minimum rate set at 15 percent.
He reiterated the government’s commitment to implementing a domestic regime that meets the objectives of the Pillar two initiative, while maintaining economic prosperity for both our business community and the jurisdiction at large.
“Our efforts are focused on supporting our largest companies, on continuing to make Gibraltar an attractive jurisdiction for them and to encourage them to continue to invest in us,” he said.
“We are in this together. We have supported you since first setting up in Gibraltar and we will not abandon you now,” he said, referring to large companies.
Picardo said that the government will ensure that domestic implementation of the global minimum tax rules considers recommendations and views from key stakeholders.
Picardo said: “The international implementation of Pillar two is not uniform. Jurisdictions are seeking to implement domestic regimes as best suits their circumstances. Those with large numbers of ultimate parent entities of multinational groups are keen to see implementation rapidly. The UK is an example.”
He said that there are significant considerations and administrative burdens for smaller states that need to be recognized and addressed. “This is why Gibraltar’s implementation will take effect no earlier than accounting periods beginning on or after December 31, 2024,” he said.
Picardo said that allowing this additional time will provide Gibraltar with a window during which international developments can be monitored, allowing the government to adapt to best practices and evolving requirements.