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Govt rejects ban on working from home due to tax treaty

Johnny Bugeja

The decision of a locally based gaming company to ban its employees from working from home if they live in Spain has nothing to do with the new tax treaty, the Gibraltar Government has insisted despite drawing flak from the GSD.
This latest development is an example of commercial entities reminding employees to act in keeping with long established principles of management and control if they are resident outside of Gibraltar and has nothing to do with anything new in the tax treaty, a Government spokesman said yesterday.
This comes after a major gaming company based in Gibraltar informed its employees that they are prohibited from working from home if they reside in Spain.
According to GBC the decision is a precautionary measure against the potential tax liability which companies may incur if employees who are considered ‘decision makers’ are deemed to be working for a Gibraltar-based company, while in Spain, by Spanish authorities.
But, the Government insisted that the Tax Treaty regularises and sets out the reality of Spanish tax law as it existed before the treaty.
The relevant tax legislation north of the border has always had a potential to impact entities operating in Gibraltar if individuals and corporations do not observe tax rules properly.
This position has long been the advice given to those residing in the UK with structures in Gibraltar, it added.
The spokesman added: “The clarity the treaty provides allows companies to remind their employees, in a measured manner, to regularise their own positions as we move forward in a new environment of cross-border tax certainty, but where the rules as to management and control remain unchanged.”
But, the GSD Opposition insisted that the gaming company’s decision was a direct effect of the “negative and harmful” Tax Treaty entered by the Government.
The GSD flagged how it has been warning for several months that the Treaty was bad for jobs and bad for business.
“It is a disincentive to doing business from Gibraltar and to the attraction of inward investment,” the GSD said in a statement.
“It has been reported that the action taken by this major gaming company is only “one of several locally based companies which are taking action in response to the Tax Treaty signed with Spain.”
GSD Leader Keith Azopardi said: “These developments are not surprising as businesses will be taking advice as to how to adapt to the negative effects of the Tax Treaty. The Government brushing this aside as not changing traditional tax rules is nonsensical.”
“The Tax Treaty with Spain does not apply international tax laws in a standard, neutral or fair way. It is very far removed from the international norm which would be found in the OECD Model Convention.”
“The Tax Treaty with Spain is nothing like the recent agreement announced between the UK and Gibraltar or indeed the Tax Treaty that the UK signed with Spain for itself in 2013.”
He added: “To dismiss the negative effects on business, our economy or on ordinary Gibraltarians on the basis that these rules are normal is to completely try to pull the wool over people’s eyes.”
“The Government needs to defend its position from a position of reality. Anyone comparing the Gibraltar Tax Treaty with other international OECD Model arrangements can see they are nothing like it. This is not about preserving the status quo or applying management and control issues in a standard internationally accepted way.”
But the Government quickly hit back yesterday evening as the Chief Minister Fabian Picardo insisted that the tax treaty with Spain does not change the existing rules on management and control.
He said: “What the treaty has served to do is to highlight these issues and companies and firms are right to point out how easy it is to trip on the existing, unchanged rules if key employees become lax. Mr Azopardi is being politically dishonest to suggest the opposite.”
"In fact, the tax treaty with Spain will also create new business opportunities as it provides clarity for businesses and unlocks Gibraltar's membership of the OECD BEPs Inclusive Framework.”
"That is the reality that Mr Azopardi does not want to face. It's the reality that is turbo-charging opportunities to do business in Gibraltar.”
“It's the reality that the electorate saw through when they confined Mr Azopardi to the worst result by a Party leader in the history of our democracy and his Party to their worst result in over twenty-five years.”
“The fact that he is now telling people, dishonestly, that Gibraltar is not an attractive place from which to do business simply adds to the reasons why Mr Azopardi is not the people’s choice even to lead the Opposition."