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EU Court of Justice Considers Gibraltar Part of UK

- June 14, 2017 By Oliver Young -

The Court Decision might have a negative impact on the gambling industry.

For all purposes regarding its EU status, Gibraltar is considered part of the UK.

Gibraltar is one of the leading destinations for international online gambling operators, as this UK overseas territory offers very favourable conditions, low taxes and a perfect environment for all interested parties. That is why a number of operators have decided to move their operations to Gibraltar, either entirely or in part and many of the newly established companies choose Gibraltar as their home.

However, there are few reasons for worry and some fear that Gibraltar might lose its status as a top destination for online gambling operators. UK’s decision to leave the EU which passed on a referendum, despite the fact that more than 95% of the citizens of Gibraltar voted against leaving the EU. Now, it is suspected that Brexit might hurt British operators, but also companies based in Gibraltar.

Gibraltar Operators Required to Pay 15% UK Profit Tax

When Britain introduce amendments to its Finance Act in 2014, according to which all gambling operators were required to pay an annual 15% tax on their profits, it created a perhaps even bigger problem for Gibraltar. Namely, according to the provisions of the act, all operators, included those that have their headquarters in Gibraltar and not on British soil, were required to pay the point of consumption tax.

Authorities in Gibraltar feared that this would be a serious blow for the country’s economy and its reputation of an online gambling mecca.  The Betting and Gaming Association of Gibraltar of which all operators that are based in Gibraltar are members decided to appeal this decision. The appeal was submitted to the High Court, but it was then referred to the European Court of Justice.

The argument used by the Gibraltar Association was that its members shouldn’t be required to pay the point of consumption tax, arguing that thus the Treaty of the Functioning of the EU is violated. The 56th article of the mentioned treaty states that there should be no restrictions for companies that wish to provide services within the EU.

The Decision Will Have an Impact on Brexit

The key issue for the Court of Justice was to determine the status of Gibraltar within the United Kingdom. Many argued that Gibraltar is nor a part of the United Kingdom and that it should be treated as any other member state of the EU. However, the preliminary ruling of the CJEU was that in respect towards their relationship with the EU, Gibraltar should be treated as one with the UK.

This opinion, or a version of it, was initially stated by Maciej Szpunar, who is an Advocate General, and even though the Court doesn’t always repeat the opinions of its AG, this time that was the case. What’s more important is that this ruling will almost certainly have a bearing on how Gibraltar will be treated in the Brexit process. Despite the unexpected outcome of the UK General Election that took place on the 8th of June, it has been announced that the Brexit negotiations will be opened on the 19th of June.

We are yet to see what will be the attitude of Spain towards Gibraltar during the Brexit process. There were some serious problems earlier this year. Online gambling accounts for a quarter of Gibraltar’s GDP.

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