The Government has announced a package of measures designed to support retail and wholesale businesses during the early implementation phase of the UK–EU treaty for Gibraltar. The measures were outlined by the Chief Minister in Parliament and are aimed at helping firms manage the transition when the treaty is provisionally expected to take effect from 10 April.

We’d love your views on the measures announced, keep scrolling for feedback so far…

The big picture

The package is focused on businesses expected to feel the most immediate impact from the introduction of Transaction Tax and related changes to import arrangements. The support measures apply to retail and wholesale operators employing fewer than 250 people, including companies, partnerships and sole traders.

The Government said the proposals were designed to provide targeted assistance while remaining compliant with regulatory and state aid requirements.

Transaction Tax deduction

A temporary tax deduction will be introduced to offset additional Transaction Tax costs incurred during the first 90 days after the treaty enters into force. This period has been described as the “Initial Period”.

The deduction will be calculated based on the extra Transaction Tax paid during that period and applied against the business’s corporation tax or income tax liability for the relevant financial year. Detailed guidance on calculations, required evidence and application procedures will be issued by the Commissioner of Income Tax.

To qualify for the deduction, businesses must be fully up to date with statutory obligations including corporation tax or income tax filings, PAYE and Social Insurance contributions. Businesses that regularise outstanding obligations within 30 days may still be treated as compliant at the Commissioner’s discretion.

Business rates relief

Retail and wholesale businesses will receive additional business rates relief covering the six months immediately before the treaty enters into force. The relief will provide an additional 25% reduction on top of the existing 50% discount for timely payment of rates. Where businesses have already paid their rates for that period, the relief will be credited against future liabilities or refunded.

Recruitment support

To support employment in sectors likely to be affected by the new trading framework, the Government will waive vacancy registration fees for retail and wholesale businesses for 36 months after the treaty comes into force. The measure is intended to encourage hiring and reduce recruitment costs during the adjustment period.

Commercial rent moratorium

A two-year moratorium will apply to rent increases for premises used primarily as retail shops or wholesale storage.

During the 24-month period following the treaty’s entry into force, landlords will not be able to increase rent above the level payable immediately beforehand, whether through rent review clauses or lease restructuring mechanisms.

If a landlord breaches the moratorium, the Government intends to impose a surcharge on the landlord’s rental income equal to the financial benefit gained from the increase. In effect, this would neutralise any additional income generated from the breach.

State aid compliance

The Government said it had sought preliminary advice on whether the measures comply with EU state aid rules.

If any element is found to be incompatible following detailed assessment, it will be modified to the minimum extent necessary to ensure compliance. The Government also reserved the right to extend some of the measures beyond their initial duration if appropriate.

Other fiscal changes

The Chief Minister also confirmed that fuel supply companies, including bunkering operators, will now be subject to the standard corporate tax rate. The Government said it expects companies across sectors to pay their “fair share of tax”.

So, what happens next

The Government said it will continue working with business representative organisations to monitor the impact of Transaction Tax and the treaty transition on Gibraltar’s economy. While ministers believe the treaty represents the right long-term outcome for Gibraltar, the Chief Minister acknowledged that businesses may experience “short-term pain” during the speed of implementation required.

What do YOU think?
The GFSB is currently gathering members’ views on the measures announced, and we are keen to hear from you. As you may be aware, we have written to Government requesting direct financial support for businesses. We are also seeking clarification as to whether any such support will be made available in addition to the measures already announced.

Feedback from members so far
A consistent theme emerging from members is the difficulty in assessing the precise financial value of some of the measures, and how they will offset the clear and quantifiable impact of the increased Transaction Tax. Many members have indicated that the Transaction Tax could increase their former import duty liability from tens of thousands of pounds to hundreds of thousands of pounds per annum. If that proves to be the case, the only meaningful way to address the shortfall may be through some form of direct financial assistance, alongside the enhanced measures introduced by Government.

Some landlords have welcomed the Government’s intention to support businesses through measures such as temporary rates relief, although they note that waiving vacancy registration fees may have limited impact for many family-run firms. However, they warn that a blanket 24-month rent freeze could distort the market, arguing that rents are best set through direct negotiation so they reflect the financial realities of both tenants and landlords.

Have Your Say
If you have a view or wish to share your concerns, please get in touch. To understand precisely what the GFSB has asked of Government, we encourage you to read:

• Our open letter to Government
• Government’s formal response