Executive summary

New anti-tax-avoidance legislation became effective in Gibraltar as of 11 July 2025. The legislation is based on a bill that the Gibraltar Government published on 10 April 2025, proposing to update the definition of tax avoidance and the Commissioner of Income Tax's powers, as well as adding a limited number of specific anti-avoidance provisions to Gibraltar's tax legislation. For more on the bill, see Global Tax Alert, Gibraltar proposes enhancements to its anti-avoidance provisions, dated 14 April 2025.

Changes to Gibraltar's Income Tax Act 2010 based on the proposals have now been implemented and apply with effect from 11 July 2025. The changes implemented are contained in the Income Tax (Amendment) Act 2025.

Key changes

The key changes made by the new law include:

• The Commissioner of Income Tax may counteract or disregard any tax advantage that a person obtains from a "tax-avoidance arrangement."
• A tax-avoidance arrangement is defined as an arrangement that directly or indirectly shows that its purpose, or one of its main purposes, is to obtain a tax advantage and either:
  • The arrangement results in a tax advantage inconsistent with the legislative intent of the relevant tax provisions.
  • The arrangement undermines the objectives of the Act.
  This definition differs from the one provided in the proposed changes, which defined a tax-avoidance arrangement as an arrangement that "shows or indicates" that any one of the stated conditions is being met, as opposed to requiring that the "primary purpose" of the arrangement meets the conditions.
• The Commissioner of Income Tax may refer any person to their professional or regulatory body if the Commissioner believes the person:
  • Has submitted, or assisted with the submission of a tax return that they know or suspect may be inaccurate and deliberately withheld this suspicion from the Commissioner
  • Is promoting, facilitating or advising on a tax-avoidance arrangement that contravenes the spirit and purpose of the Act
  • Is considered to have acted with a conflict of interest, i.e., providing professional services while having a financial, personal or other interest that impairs their objectivity or duty of care
  In connection with reporting a person to his or her professional or regulatory body, the burden of proof rests with that person to demonstrate that an arrangement was not designed, marketed or implemented for tax-avoidance purposes.

The amendment allows the Commissioner to counteract or disregard a tax-avoidance arrangement or deferral of tax if profits are accumulated in a company and the company voluntarily liquidates. In this case, the proceeds of the liquidation shall be deemed to be dividends that the company paid to the shareholder. This would apply to profits accumulated after the commencement of the proposed change to the Act. This fact pattern is unlikely to affect international structures, as dividends paid between companies, or paid to nonresident persons are not generally taxable in Gibraltar.

The Commissioner may counteract or disregard the "income from occasional presence" exemption in the Act if the Commissioner believes the amount lacks economic reality. This exemption pertains to directors' fees and certain other employment income of nonresidents who are present in Gibraltar for less than 30 days in the tax year.

Implications

Although these measures do not represent a fundamental change in Gibraltar's approach to anti-avoidance, they provide additional clarity as to what constitutes tax avoidance, enhance the tax authority's powers and generally signal an increased focus on tax avoidance and ensuring compliance by multinationals and other taxpayers.