The European Commission has published its contingency action plan in the event of a ‘no-deal’ Brexit scenario and has specifically excluded Gibraltar from the arrangements.
The British territory has also been found by the European Commission to have given €100m (£90m $114m) of illegal tax advantages to multinational companies.
No-deal Brexit
The EC said in a statement that according to their no-deal Brexit contingency plan, “all applicable EU law will cease to apply to the UK and to Gibraltar [on March 30]. As a consequence, contingency measures addressing the United Kingdom will not apply to Gibraltar”.
However, the government of Gibraltar said it was “not surprised” by the Commission’s statement to exclude the British overseas territory in its ‘no-deal’ Brexit plan.
No surprise
“The government is not surprised by this latest situation which reflects the position only of the EU27 and not of the UK” the Gibraltar government said in its statement.
“The Gibraltar and UK governments continue to work closely as we prepare for every eventuality in order to mitigate the impact of a possible no deal Brexit. This is the reasonable thing for responsible Governments to do given the absence of an agreed Withdrawal Agreement at this time.
“This latest development serves to demonstrate, however, the importance of leaving the European Union with a Withdrawal Agreement in place for Gibraltar, which some appear not to have appreciated.”
The EU started preparing for a no-deal scenario for all the possible affected sectors as well. In regard to the financial services, the Commission adapted several contingency measures.
These measures include a 12-month “temporary and conditional equivalence decision” to avoid disruption in the clearing of derivatives; a 24-month temporary and conditional equivalence decision for EU operators using UK operators; and two 12-month delegated regulations for “over-the-counter derivatives contracts” to be transferred from the UK to one of the 27 EU country members.
Illegal tax advantages
Following the no-deal Brexit announcement, the European Commission also announced it had found Gibraltar’s corporate tax exemption regime for interest and royalties, and as many as five tax rulings, to be illegal under EU state aid rules.
The tax exemption regime facilitated multinational companies to receive €100m in illegal tax advantages from Gibraltar.
“Our investigation has found that Gibraltar gave unfair and selective tax benefits to several multinational companies, through a corporate tax exemption scheme and through five tax rulings” said Margrethe Vestager, European commissioner in charge of competition policy.
“This preferential tax treatment is illegal under EU State aid rules and Gibraltar must now recover the unpaid taxes. At the same time, I very much welcome the significant actions taken by Gibraltar to remove the illegal tax exemptions, streamline its tax ruling practice, and reinforce its transfer pricing rules – this should help ensure that these issues remain in the past.”
