Gibraltar Issues Draft GloBE Law for a DMTT and IIR

On December 10, 2024, Gibraltar issued the Global Minimum Tax Bill 2024 (‘the Bill’) to transpose the OECD Model Rules (and accompanying guidance) into domestic law.

The purpose of the Bill is to give legal effect in Gibraltar to the GloBE Rules to implement:

• an income inclusion rule (IIR) that is intended to be a Qualified IIR;
• a domestic minimum top-up tax (DMTT) that is intended to be a Qualified Domestic Minimum Top-up Tax (QDMTT).

The Bill does not give legal effect in Gibraltar to the under-taxed profits rule (‘UTPR’).

The IIR is to apply to Fiscal Years beginning on or after December 31, 2024, whilst the DMTT applies to Fiscal Years beginning on or after December 31, 2023.

General

The approach taken in the Bill is to incorporate by reference the OECD Model Rules and accompanying Commentary/Guidance to effectively transpose the OECD Rules into domestic law (subject to specified amendments).

It achieves this in a number of ways:

Section 5 of the Bill provides that references in the OECD Model Rules to an implementing jurisdiction are deemed to be references to Gibraltar.

Section 4 of the Bill states that the OECD Model Rules have effect in Gibraltar and for the purposes of interpreting the terms defined in the Model Rules, Gibraltar will have regard to the OECD Commentary including the Safe Harbours. The Commentary is defined as the OECD Consolidated Commentary.

Section 6(1) of the Bill states that amendments made to the OECD Commentary, including through Administrative Guidance, will apply to the interpretation of GloBE rules in Gibraltar for Fiscal Years beginning after the date the amendment is approved by the OECD/G20 Inclusive Framework on BEPS (or such other date as specified by the Minister by Notice, except where specifically made inapplicable by the Minister by Notice).

The GloBE Administrative Guidance is defined in Section 3(1) to include:

• The February 2023 OECD Administrative Guidance;
• The July 2023 OECD Administrative Guidance;
• The December 2023 OECD Administrative Guidance;
• The June 2024 OECD Administrative Guidance; and
• Any other document promulgated by the OECD

IIR

Section 12 of the Bill states that an Ultimate Parent Entity, Intermediate Parent Entity or Partially Owned Parent Entity is liable to pay a Top-up Tax under the Income Inclusion Rule determined in line with the OECD Model Rules The only aspects of the OECD Model Rules that are not applicable for the IIR calculation are the provisions relating to the UTPR (including the exclusion for MNE Groups in the initial phase of their international activity).

Under Section 8 of the Bill, if the Top-up Tax computed in Gibraltar is in a foreign currency, it must be converted into an equivalent sum in sterling using the average exchange rate for the Fiscal Year to which the Top-up Tax relates.

Therefore, all of the OECD Administrative Guidance, including the Safe Harbours and elections will be applicable in Gibraltar (where relevant). 

DMTT

Section 18 of the Bill provides that the amount of top-up tax under the DMTT is based on the calculation of excess profits for GloBE purposes. However, there are a number of adjustments which apply either as they are not relevant or the Bill expressly provides rules that apply these provisions.

It should be noted that (unlike the IIR) the DMTT applies to wholly domestic groups (defined as a group where the Ultimate Parent Entity and all Constituent Entities are located within Gibraltar and the 750 million euro revenue threshold is met).

Investment entities and insurance investment entities are specifically excluded from the DMTT in Section 14 of the Bill.

Section 19 of the Bill states that the following provisions of the GloBE Rules do not apply for QDMTT purposes:

-Chapter 2 (Charging Provisions);

-Article 5.2.3 (Jurisdictional Top-up Tax formula);

-Articles 5.2.4 and 5.2.5 (allocation of Top-up Tax);

-Article 5.4.2 (allocation of Additional Current Top-up Tax in accordance with Article 5.4.1);

-Article 5.4.3 (allocation of Additional Current Top-up Tax in accordance with Article 4.1.5);

-Article 5.4.4 (determination as a Low-Taxed Constituent Entity);

-Article 6.2.1(h) (application of IIR in respect of acquisition of a target Entity);

-Article 6.4.1(b) and (c) (application of IIR and UTPR in connection with Joint Ventures and JV Subsidiaries);

-Article 6.5.1(e) and (f) (application of IIR and UTPR in connection with Multi-Parented MNE Groups);

-Article 7.3 (Eligible Distribution Tax Systems);

-Article 9.3 (Exclusion from the UTPR of MNE Groups in the initial phase of their
international activity)

Section 21 also prevents the pushdown of tax to CFCs, hybrids, PEs and for taxes on distributions (aside from Gibraltar withholding tax on distributions).

Filing

Section 26 includes the standard GIR filing obligation. 

Section 27(1) of the Bill also requires the filing of a GIR for DMTT purposes. A Domestic Constituent Entity, Domestic Joint Venture and/or Domestic JV Subsidiary, must file a DMTT GIR by the standard GIR filing deadline. Under Section 27(2) of the Bill a Designated Local Entity must be appointed to file the DMTT GIR on behalf of all Domestic Constituent Entities, Domestic Joint Ventures and Domestic JV Subsidiaries.