The HM Government of Gibraltar has recently declared a significant amendment to its taxation policy, particularly impacting insurers and Distributed Ledger Technology (DLT) enterprises. From the 1st of February, these entities will now see their interest income being subject to tax.

As it stands, the taxation of interest income is limited to specific circumstances:

When a company receives interest income from another company, taxation applies if this interest exceeds £100,000 annually, whether from a single company or a collective group of connected companies.

For entities like banks or similar institutions, which are essentially money lenders or deposit-takers, their interest income is regarded as trading income. This is outlined in paragraph 15 of Schedule 3 of the Income Tax Act.

The recent development extends paragraph 15 of Schedule 3, categorising the interest income of insurance and DLT firms as trading income. Consequently, this income will now be taxed in the same manner as other trading profits.

The announcement was made in a Ministerial Statement to Parliament by The Hon. Nigel Feetham. The Minister explained that:

“In the intervening years since the Income Tax Act was first introduced in 2010, the landscape of financial services and related businesses has changed radically. The invention and wide-adoption of crypto has revolutionised the industry and a number of crypto-based financial businesses have evolved globally.

In addition, insurance companies now more frequently utilise and rely on debt instruments to fund their operations and also invest to ensure that claims may be paid from adequate resources and sustainable returns; it is a significant and fundamentally integral part of their trade.”

Additionally, Mr. Feetham informed the Parliament about the inclusion of both general and specific anti-avoidance measures in the new rules. “ensuring that arrangements and transactions entered into by in-scope taxpayers are not constituted in a manner that seek to circumvent tax on the resulting interest by reference to both the main purpose of the arrangement or transaction or the disposal of any interest-bearing asset to connected persons.”

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