EU opens tax evasion probe over Gibraltar's corporate taxation following Spanish complaint

BRUSSELS – The European Commission has opened a probe of Gibraltar’s corporate tax regime on suspicion it might selectively favour some businesses such as offshore companies.

The Commission, the 28-nation bloc’s executive arm, said Wednesday it will examine whether a corporate tax exemption for income stemming from royalties or interest payments introduced in 2010 constitutes a breach of EU state aid rules.

Spain last year complained that Gibraltar — a tiny British domain on the Mediterranean over which Madrid claims sovereignty — favours offshore companies by not taxing some forms of income regardless of where they were earned. That, it claims, allows companies to shift income to Gibraltar to evade taxes in Spain and elsewhere.

The Commission says Gibraltar changed some exemptions this year, but that the probe will go ahead.