The Tax Information Exchange Agreement (Taxes on Income) (Gibraltar) Order 2006

Statutory Instruments

2006 No. 1453

INCOME TAX

The Tax Information Exchange Agreement (Taxes on Income) (Gibraltar) Order 2006

Made

7th June 2006

At the Court at Buckingham Palace, the 7th day of June 2006

Present,

The Queen’s Most Excellent Majesty in Council

In accordance with section 815C(3) of the Income and Corporation Taxes Act 1988(1) a draft of this Order was laid before the House of Commons and approved by a Resolution of that House.

Accordingly Her Majesty, in exercise of the power conferred upon Her by section 815C of the Act of 1988, and of all other relevant enabling powers, is pleased, by and with the advice of Her Privy Council, to order as follows:—

Citation

1.  This Order may be cited as the Tax Information Exchange Agreement (Taxes on Income) (Gibraltar) Order 2006.

Declaration about exchange of information

2.—(1) It is declared that the arrangements specified in the Agreement set out in the Schedule to this Order have been made with the Government of Gibraltar with a view to the exchange of information foreseeably relevant to the administration or enforcement of—

(a) the domestic laws of the United Kingdom concerning income tax, capital gains tax and corporation tax; and

(b) the laws of Gibraltar concerning taxes imposed by Gibraltar which are of a similar character to any of those taxes.

(2) It is further declared that it is expedient that the arrangements referred to in paragraph (1) should have effect.

Alex Galloway

Clerk of the Privy Council

Article 2

SCHEDULE 1 AGREEMENT ON THE TAXATION OF SAVINGS INCOME BETWEEN GIBRALTAR AND THE UNITED KINGDOM OF GREAT BRITAIN AND NORTHERN IRELAND

Explanatory Note

(This note is not part of the Order)

The Tax Information Exchange Agreement between the United Kingdom and Gibraltar is set out in the Schedule to this Order.

Article 1 of the Order provides for its citation.

Article 2 makes a declaration as to the effect and content of the arrangements set out in the Agreement contained in the Schedule to the Order, and that it is expedient that those arrangements should have effect.

The Tax Information Exchange Agreement constitutes a reciprocal arrangement between the United Kingdom and Gibraltar for the exchange of information on savings income in the form of interest payments made cross-border from one Party to individuals resident in the other Contracting Party. The provisions of the Agreement are the same as the measures contained in Council Directive 2003/48/EC on taxation of savings income in the form of interest payments (“the Directive”), subject to some additional transitional arrangements. The Directive applies to both the territory of the United Kingdom and to the UK overseas territory of Gibraltar as regards cross-border payments of interest made by paying agents in either territory to residents of another EU Member State, but does not apply as regards payments made between the two territories.

As the Agreement encompasses all the measures corresponding to the Directive, it provides not only for the information exchange arrangements between competent authorities but also the details of the mechanisms to be followed by paying agents for the identification of individual owners, and for collecting the information to be exchanged.

For an initial transitional period starting from 1st April 2006 and thereafter corresponding to the transitional period in the Directive, Gibraltar will levy a withholding tax on relevant payments, unless the individual owner opts for the interest to be reported. Income generated by the withholding tax will be shared with the United Kingdom, and relieved in the same manner as withholding tax is to be relieved under the Directive.

The United Kingdom will apply automatic exchange of information from the start of the Agreement. At the end of the transitional period, however, both parties will apply full automatic exchange of information in respect of the information covered by the Agreement.

The detailed provisions of the Agreement are as follows.

Articles 1-4 set out the details of the transitional withholding tax and the categories of information to be exchanged automatically, both during the transitional period and thereafter.

Articles 5-8 and Article 11 provide the definitions corresponding to those in the Directive of beneficial owner, paying agent and interest. Article 12 provides for some additional transitional exclusions from the scope of the Agreement.

Article 9 confirms that Gibraltar will share 75% of the revenue obtained by the withholding tax with the United Kingdom. Article 10 provides that the United Kingdom will make provision to ensure income subject to withholding is not subject to double taxation.

Article 13 provides for a consultation procedure, in the event of any disagreement between the parties as to the interpretation of the Agreement and Article 14 sets out the confidentiality provisions concerning the information.

Article 15 confirms that Gibraltar will move to full, automatic exchange of information at the end of the transitional period, with the option to do so earlier if wished.

Articles 16-18 deal with commencement and the conditions for application of the Agreement.

The Agreement will enter into force on 1st April 2006.

(1)

1988 c. 1. Section 815C was inserted by section 146(1) of the Finance Act 2000 (c. 17) and amended by section 88(2) of the Finance Act 2002 (c. 23) and section 198 of the Finance Act 2003 (c. 14).