Amendment to corporate tax for Insurers & DLT Firms
Posted on 09 Feb 2024
The Government of Gibraltar has introduced a Bill to amend Gibraltar's Income Tax Act 2010, aiming to tax the "interest and similar income" of insurers & DLT firms. Once enacted by Parliament, this Bill will become a part of our tax legislation. Previously, only certain interest income of insurers fell under the taxable category of "Class 1A – intercompany interest." However, with this proposed change, all interest income of insurers & DLT firms would become taxable, aligning them with the taxation principles applied to banks.
The Bill outlines the following key points:
- The amendment is set to take effect for accounting periods starting on or after February 1, 2024.
- It applies to entities authorized under Part 7 of the Financial Services Act 2019 to conduct the regulated activity of "effecting or carrying out contracts of insurance" (i.e., insurance undertakings) and for the "value transmission or storage of digital assets on behalf of others" (i.e., DLT firms).
- Any interest or similar amounts accrued by such entities are to be treated as trading income. Additionally, such income is considered to be accrued in and derived from Gibraltar, making it subject to taxation in Gibraltar.
- "Similar amounts" are clearly defined and encompass profits or gains derived from various sources, including instruments generating recurrent income based on lending transactions, virtual asset lending or advancement, discounts, or any arrangements primarily aimed at evading tax on interest.
- An anti-avoidance provision applies to the disposal of interest-generating assets to connected persons by eligible entities. In such cases, resulting interest is taxed as income for the disposing entity, unless it's proven that tax avoidance wasn't the primary motive, satisfying the Commissioner of Income Tax.
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