Gibraltar will lose its favourable tax status if the European Court of Justice accepts arguments made by the European Commission.
Loss of its special tax status could see a mass exodus of insurance firms.
The European Commission rejected Gibraltar's proposed reforms last year aimed at abolishing the current 35% corporate tax rate and replacing it with a payroll tax and a business property occupation tax - both capped at 15% of profit.
The Commission said these reforms would give companies domiciled in Gibraltar an unfair tax advantage over the UK. It said it must be brought in line with the UK as Gibraltar should be treated as a region of Britain.
Peter Caruana, Gibraltar's chief minister, argued: "Gibraltar is not part of the UK. We are British, but we are not part of the union of the United Kingdom."
Gibraltar currently has 45 insurance companies mainly comprised of motor insurers and a small but growing number of captives equating to a total worth of £391m.
