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Pillar Two Qualified Domestic Minimum Top-Up Tax OECD/G20 Base Erosion and Profit Shifting Project - 878/2023

December 19, 2023

Ministerial Statement to Parliament on Corporate Tax Reform by the Hon. Nigel Feetham KC MP, Minister for Justice, Trade and Industry


Gibraltar takes an important step in international tax reform, as part of its adoption of the OECD’s Pillar Two Global Anti-Base Erosion (GloBE) Rules, with a firm commitment to introduce a Pillar Two compliant Qualified Domestic Minimum Top-Up Tax. This is a stepping stone to the full implementation of Pillar Two for financial periods beginning after 31st December 2024 as announced by the Chief Minister in his 2023 Budget Speech. This progressive move reinforces Gibraltar’s position as a compliant and cooperative tax jurisdiction aligning to global standards on base erosion and profit shifting.

This harmonisation of a minimum global tax rate is undoubtedly the most significant and important change to the international tax system since the 1920s. As a member of the OECD’s Inclusive Framework, Gibraltar joined the international consensus of 137 other jurisdictions committing to implement tax base erosion and profit shifting standards and to ensure that policy objectives are met, including that large multinational businesses pay their fair share of taxes. The introduction of this top-up tax in Gibraltar promotes these global efforts and underscores our commitment to international cooperation on tax matters.

Under our two-stage implementation of Pillar Two, firstly, this top-up tax will be introduced consistently with the OECD Model Rules for those in-scope in relation to fiscal years commencing on or after 31 December 2023. Companies in scope include those belonging to multinational enterprise groups with an annual revenue of €750 million or more in the Consolidated Financial Statements of the Ultimate Parent Entity in at least two of the four immediately preceding accounting periods. This top-up tax shall apply to subsidiaries or permanent establishments of such groups where the Ultimate Parent Entity is in a jurisdiction that has introduced the Pillar Two rules.

This step is a strategic initiative driven by the need to safeguard Gibraltar’s tax base. It protects the right to tax the income generated by those subsidiaries or permanent establishments resident in Gibraltar and shield their revenue from being taxed in the jurisdiction of tax residence of their Ultimate Parent Entity under those Pillar Two rules. Gibraltar’s top-up tax will be consistent with the OECD’s Model Rules, Commentary and other relevant guidance issued as at 31 December 2023. Our aim is to reduce the risk of interpretive errors and mismatches between jurisdictions and most importantly ensure that this top-up tax is consistent with the Pillar Two adoption in other countries and in meeting the standards to qualify for the Qualified Domestic Minimum Top-up Tax.

The OECD Secretariat has been consulted on our proposal and they welcome the approach taken by Gibraltar. Further consultation with their Pillar Two expert team will be maintained as our implementation continues. We are therefore confident that our approach is consistent with a proper implementation of the Pillar Two initiative and meets the criteria to be classified as qualifying and creditable for the purposes of the wider application of the Model Rules.

This proposal will not seek to reform our domestic tax system for the vast majority of taxpayers. In the coming year this proposal will be subject to the ongoing Pillar Two consultations which will consider and shape our full implementation and protect our tax base as we continue in full collaboration with stakeholders and interested parties. It is a logical and important step to bridge Gibraltar’s full Pillar Two implementation. This step is in-line with the evolving international tax landscape. HM Government of Gibraltar firmly believes that this approach positions Gibraltar as an active participant and early adopter in international efforts to address tax challenges and, as the first phase of our Pillar Two implementation, demonstrates our commitment to meeting international standards and collaborating with the global community on such tax matters.