Govt outlines measures to help businesses

Chief Minister Fabian Picardo outlined a package of measures in Parliament on Tuesday aimed at supporting wholesale and retail businesses during the transition phase of the provisional implementation of the UK/EU treaty for Gibraltar, envisaged from April 10.

Mr Picardo said the measures were designed to assist businesses without breaching regulatory hurdles.

They apply to taxpayers operating in the retail and wholesale sectors, whether incorporated or unincorporated, including companies, partnerships and sole traders.

Eligibility is limited to businesses employing fewer than 250 people.

For incorporated entities, this reflects the definition of a medium-sized company in the Companies Act 2014, with the same headcount test applying to unincorporated businesses.

TRANSACTION TAX DEDUCTION

A tax deduction will be available to qualifying taxpayers in the financial year in which the treaty enters into force, intended to reduce the impact of Transaction Tax during the first 90 days after the treaty takes effect, described as the “Initial Period”.

The deduction will be calculated by reference to the additional Transaction Tax costs incurred during the Initial Period and will be applied against corporation tax or income tax liabilities for the financial year in which the Initial Period falls.

Mr Picardo said the Commissioner of Income Tax will issue guidance on how the calculation will be made, what evidence will be required to support a claim, and the process for applying the deduction.

To qualify for the Transaction Tax deduction and the rates relief set out in the package, businesses must be fully up to date with statutory obligations on the date the treaty enters into force.

This includes all filings and payments for corporation tax or income tax, PAYE, and Social Insurance contributions.

Where a taxpayer is not fully compliant at the relevant date but regularises its position within 30 days, the Commissioner of Income Tax may, at his discretion, treat the taxpayer as having satisfied the requirement.

RELIEF

Qualifying retail and wholesale businesses will be entitled to relief from business rates for the six-month period immediately before the date the treaty enters into force.

Where rates for that period have already been paid, the relief will be applied as a credit against future liabilities or, if the taxpayer chooses, a refund.

The relief will be calculated as an additional 25% reduction on top of the 50% reduction received for paying on time.

All fees for registering a vacancy will be waived for businesses operating in retail or wholesale for a period of 36 months from the date the treaty enters into force.

Mr Picardo said this was intended to support employment and recruitment in sectors expected to be among those most directly affected by the introduction of Transaction Tax.

A moratorium on rent increases will apply for 24 months from the date the treaty enters into force for leases of premises used principally as retail shops or wholesale storage.

During that period, landlords will not be able to increase rent above the level payable immediately before the moratorium began, whether through a rent review clause, a break and re-grant or other mechanism.

Mr Picardo said that where a landlord increases rent in breach of the moratorium, the Government will introduce a surcharge on the landlord’s rental income from the affected premises.

He said the surcharge would be set at a level to offset the full financial benefit of the increase, leaving the net additional income “reduced to nil”.

The Commissioner of Income Tax will publish the surcharge rate and the mechanism for assessment and collection, Parliament was told.

STATE AID ASSESSMENT

Mr Picardo said the Government had sought preliminary advice on whether the measures were compatible with EU state aid rules.

Any measure found to be incompatible following analysis would be modified to the minimum extent necessary to achieve compliance.

Subject to confirmation of compliance, the Government also reserved the right to extend the duration of any of the measures for an additional period if it considered it appropriate.

Mr Picardo also told Parliament that fuel supply companies will now pay the standard corporate rate of taxation.

He said the Government expected companies to pay their “fair share of tax”, adding this included bunkering companies, and would “assiduously pursue” that all pay their fair share.

The Chief Minister said the Government would continue working with business representative organisations to monitor the effect of the Transaction Tax on Gibraltar’s businesses.

He told Parliament that business organisations had a shared belief that the treaty was “the right, long term, deal for Gibraltar”, while acknowledging there would be “short term pain” because of the speed required to implement it.