A new, amended and consolidated Income Tax Act is to be introduced in Gibraltar, ending all distinction between “onshore” and “offshore” business.

The new Act completes the jurisdiction's 14-year transition from that of a so-called tax haven to mainstream European financial centre, according to an official announcement on the Gibraltar authority's website. The Act adds to OECD tax information exchange agreements, full integration in the EU and compliance with EU financial services regulation, money laundering and co-operation rules, it said.

The new legislation also introduces tough anti-avoidance measures and default financial and legal penalties, including severe criminal consequences, as well as personal liability, for directors and managers of companies that withhold tax and then fail to pay it over promptly, the jurisdiction said.

There is also a system of self assessment and hefty financial penalties for defaulting on payment or returns.

The New Act also paves the way for cuts to Company Tax in Gibraltar from 22 per cent to 10 per cent from 1 January 2011, to coincide with the definitive abolition of the historical tax exempt company regime.

“Many previously tax exempt banks, insurance, investment, gaming and other companies will begin to pay profit tax in Gibraltar for the first time on the same basis as all other companies. These companies are vital to our economy. Gibraltar is more than about just tax: it is also about political and economic stability, good regulation and high standards and safe business environment, high quality of personal lifestyle, good professional services and communications, and availability of well educated staff," according to a statement by the Chief Minister, Peter Caruana.

“The climate of compliance sought to be created by the new Act is also intended to enable the government to continue and proceed further with its long established programme of tax cutting for individuals as well. Low tax must come hand-in-hand with an end to our historically benign tax administration and enforcement system," the minister said.