UK residents with savings in Gibraltar will see those savings taxed at a rate of 15% from 1 April next year, rising to 35% after 2011 according to a deal just announced by paymaster general Dawn Primarolo and Peter Caruana, chief minister of Gibraltar.
The deal follows others structured between the UK government representing Great Britain and Northern Ireland, and financial authorities in former colonies or Crown dependencies such as Jersey and Guernsey, which have different legal standing with regard to their position in the European Union.
Causing these negotiations is the directive on taxation of savings income, with HM Treasury and its ilk in other EM member states keen to ensure that citizens do not place savings in other EU member states to avoid income tax.
However, offshore centres such as Jersey, non-EU states such as Switzerland which have negotiated trade agreements with the EU, and even EU member states such as Luxemburg have objected to passing on detailed information on account holders, citing traditional client secrecy and other laws.
Accordingly, Gibraltar has agreed to apply a “withholding tax”, which over a transitional period is set at 15% until 30 June 2008, 20% for the three subsequent years, and 35% thereafter on accounts whose owners do not wish to be identified to UK tax authorities.
Account holders can avoid paying the witholding tax by agreeing to have their financial details passed on to UK tax authorities.
Some 75% of the revenue collected this will be subsequently forwarded to the “competent authority of the UK” where it is known that the account holder is a resident of the UK.
Also announced today has been a new "passporting" deal for Gibraltar-based funds into the UK market, which will come into effect in March 2006.
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