Tolley's Worldwide Tax Guide 2023-24

Gibraltar

Key tax points

·  •     A company is taxed on profits which accrue, or are derived, in Gibraltar for a financial year at a rate of 12.5%, increased from 10% with effect from 1 August 2021 (although the rate can be 20% in some cases).

·  •     Profits of foreign companies including branches in Gibraltar are taxed at the same rate as resident companies.

·  •     There is no capital gains tax in Gibraltar.

·  •     There is no VAT in Gibraltar.

·  •     The tax year runs from 1 July to 30 June and tax is payable on the actual taxable profits for the year. For tax purposes, individuals can elect between the Allowance and Gross Income Based Systems. The standard rate of tax for individuals is 20%.

·  •     As from 1 August 2022, Gibraltar minimum wage increased from GIP 7.50 to GIP 8.10 per hour.

·  •     For accounting periods ending on or after 1 July 2022, the turnover audit threshold will increase from GIP 1,250,000 to GIP 1,500,000.

Basic facts

Full name:	Gibraltar
Capital:	Gibraltar
Main language:	English
Other language:	Spanish
Population:	33,974 (2023 estimate)
Monetary unit:	Gibraltar Pound (GIP)
Internet domain:	.gi
Int dialling code:	+350

A. Taxes payable

Company tax

The standard rate of Gibraltar corporation tax is 12.5%, an increase from 10% with effect from 1 August 2021. For utility companies and companies that enjoy and abuse a dominant position, there is a higher rate of tax applied which is 20%. The utility companies are classified as Telecommunications, Petroleum, Water and Sewage. Companies are taxed on profits for the financial year on income accrued or derived in Gibraltar.

Capital gains tax

There is no capital gains tax in Gibraltar. The Commissioner of Income Tax may refer to case law to judge whether a benefit is of a capital or trading nature.

Inheritance tax

There is no inheritance tax in Gibraltar.

Branch profits tax

Profits of foreign companies are taxed at the same rate as resident companies.

Sales tax/Value added tax

There is no VAT in Gibraltar.

Customs and excise duties

Goods imported into Gibraltar are subject to import duty at varying rates.

Fringe benefits tax

Perquisites or benefits in kind are taxed as gains from employment. There is specific detailed legislation on how to tax benefits and the allowances available, particularly with respect to:

·  •     expense payments; vouchers and credit tokens;

·  •     living accommodation; removal benefits and expenses;

·  •     cars, vans and related expenditure;

·  •     loans to: employees, directors, shadow directors or connected persons.

The Commissioner for Income Tax can tax benefits not specifically covered in the legislation. Where the benefits to an employee are less than GIP 250 in total for any year of assessment, no tax is payable in respect of those benefits. The employer may opt to pay the tax on the benefits on behalf of an employee. When the annual value of these benefits is between GIP 250 and GIP 15,000, the tax under this Schedule shall be paid at the rate of 20%. When the annual value of the benefit is above GIP 15,000 tax shall be paid at the rate of 29%.

Local taxes

General rates

General rates are levied on all properties in Gibraltar.

Stamp duty

Stamp duty is payable on the transfer or sale of any Gibraltar real estate or shares in a company owning Gibraltar real estate (on an amount based on the market value of the said real estate) at the following guidance rates:

First or second time buyers as defined by section 19A of the Act:

Value of property	Stamp Duty
First GIP 260,000	0%
From GIP 260,001 to GIP 350,000	5.5%
Above GIP 350,000	3.5%
Non-qualifying Purchasers	Stamp Duty
Not exceeding GIP 200,000	0%
From GIP 200,001 to GIP 350,000	2% on first GIP250,000 and 5.5% on balance
Above GIP 350,000	3% on first GIP350,000 and 3.5% on balance

Stamp duty is also payable on mortgages secured on Gibraltar real estate at the following rates:

Mortgages up to GIP 200,000	0.13%
Mortgages over GIP 200,000	0.20%

Special Stamp Duty

As from 2 July 2018, a duty of 7.5% applies to the sale of property which classify as affordable home for and on behalf of the government in the preceding four years.

From 1 July 2021, a special stamp duty rate of 5% is introduced on the purchase of berths at the Small Boats Marina.

Stamp duty on transfers of properties between spouses is nil.

Capital duty

Capital duty of GIP 10 is payable on the nominal share capital or any increase thereof with respect to limited liability companies.

Gaming tax

As from 1 April 2018, the licence fees are fixed at GIP 100,000 for B2C licensees and GIP 85,000 for B2B licensees per annum. Gambling tax is payable by the B2C operators on their gross receipts, both gaming receipts and betting receipts, at the rate of 0.15%.

Royalties

Royalties received or receivable by a Gibraltar company are chargeable to tax.

Other taxes

There are no capital gains, wealth, inheritance or gift taxes in Gibraltar.

COVID charge for companies

As from 1 August 2022, Companies House will collect GIP 25 per week for the next two years, as part of the company's annual return for all trading companies. However, at the date of publication of this booklet the proposed charge has yet to be enacted.

B. Determination of taxable income

Individuals

An individual who is ordinarily resident in Gibraltar is chargeable to tax on his/her worldwide income in accordance with tables A to C of Schedule 1 to the Income Tax Act 2010.

Individual ordinary resident

An individual ordinarily resident is a person who is resident in Gibraltar for a period (or accumulated period) totalling at least 183 days in any year of assessment or is present in Gibraltar in any year of assessment which is one of three consecutive years in which the total of the days during which the individual is present in Gibraltar exceeds 300 days. Non-residents who undertake activities in Gibraltar which are ancillary to their employment or self-employment elsewhere and the duration of the activity is less than 30 days in aggregate in any year of assessment or such other number of days that the commissioner may by prior written agreement in his discretion allow, will not be liable to income tax in Gibraltar. This also covers directors' fees.

Corporations

A company is taxed on profits which accrue or are derived in Gibraltar. The Act defines accrued or derived by reference to the activities that generate the profit. A company is considered ordinarily resident in Gibraltar if management and control as defined are exercised in Gibraltar.

A regulated company's profit deriving from its regulated activities is subject to tax irrespective of where this income is accrued or derived.

Stock options

The granting of an option or share to an employee is an event which is taxable. When the option is exercised and there is a disposal of the shares and capital gains arise, the capital gain is not taxable on the individual as there is no capital gains tax in Gibraltar.

Capital allowances

100% First year allowances: As from 1 July 2021 to 30 June 2023, the capital allowances deduction will be based on the higher of the first GIP 60,000 (capped at GIP 30,000 up to 30 June 2021) of qualifying expenditure on fixtures and fittings, plant and machinery and the first GIP 100,000 (capped at GIP 50,000 up to 30 June 2021) of computer equipment acquired in a year of assessment or 50% of the qualifying expenditure incurred.

Annual allowances: There is an additional annual allowance on the surplus balance of the pooled amount at the rate of 25% per annum on a reducing balance basis (15% for accounting periods ended 30 June 2021 or prior). For motor vehicles not qualifying as plant and machinery, there is an allowance at the rate of 25% per annum on a reducing balance basis (15% for accounting periods ended 30 June 2021 or prior). For unincorporated entities and companies on the higher 20% rate of income tax, there is a 30% allowance on the pooled balance (20% for accounting periods ended 30 June 2021 or prior). For capital allowances on entertainment centres, hotels, mills, factories or other similar premises (excluding the cost of the land), there is an allowance at the rate of 4% per annum on a straight-line basis.

·  •     As from 1 July 2021 to 30 June 2023, there is a wear and tear allowance for properties which are used for the purpose of trade, business, profession or vocation at the rate of 1% per annum on a straight-line basis.

·  •     As from 1 July 2021 to 30 June 2023, the Commissioner shall allow up to a maximum of 50% of any allowance or deduction claimed by any person in relation to a fully electric vehicle used partly in the ordinary course of the trade, business, profession or vocation.

·  •     Where the balance of qualifying expenditure is less than GIP 1,000, the full amount is allowed as a deduction in that year.

·  •     If the accounting period is less than 12 months, the pool allowance is prorated.

·  •     Newly established businesses can claim 100% of their capital allowances in the first year of trading.

Capital gains and losses

Capital gains are not subject to tax therefore capital losses are not allowable deductions.

Dividends

There is no charge to tax on the receipt by a Gibraltar company of dividends from any other company, whether it is a Gibraltar resident or non-resident. There is no tax on a dividend paid by a Gibraltar company to a non-resident of Gibraltar. There is also no withholding tax on dividends paid, but when a dividend is declared to a Gibraltar resident person, individual or company, a dividend return must be filed with the tax authorities.

Interest deductions

There is no withholding tax on interest payments.

Withholding tax – payments to subcontractors

Payments made to subcontractors (in the construction industry) without a valid tax exemption certificate issued by the Commissioner of Income Tax are subject to 25% withholding tax on that portion of the payment which is not for materials used in construction.

Losses

A trading loss incurred can be carried forward and set off against future trading profit. Non-trading losses are not allowable deductions. If within any period of three years, there is both a change in ownership of a company and there is a major change in the nature or conduct of a trade carried on by the company no relief shall be given in respect of any losses brought forward from the period beginning before the change of ownership against any profits or gains. There is no provision for the carrying back of losses.

Foreign source income

Income tax is charged on income accruing in or derived from Gibraltar. Residents of Gibraltar are taxed on their worldwide income.

Incentives

Deduction of approved expenditure on premises

Resident taxpayers whether individuals or companies (although there is a different approach to each category) who have an interest in a building situated in Gibraltar have a special allowance for approved expenditure on the repair or enhancement of the façade of the building. This allowance is in addition to any normal allowance given. The taxpayer will have to comply with the requirement contained within the special provisions to be able to reap its advantages. For individuals whose assessable income is based on the Gross Income Based System, the allowance is restricted to GIP 5,000 per annum.

Development aid

The Development Aid Act is aimed at private development in Gibraltar. There are conditions to be met in order to take advantages of the incentives offered. Application for development aid must be made to the minister responsible.

New start-up incentive scheme

Businesses setting up in Gibraltar between 5 July 2016 and 30 June 2017 are entitled to a tax credit equal to tax due up to a maximum of GIP 50,000 per annum over each of the first three financial years of trading. This incentive is subject to the following conditions:

·  •     it must be a new business setting up in Gibraltar and not the transfer of an existing business already in Gibraltar;

·  •     the business must employ at least five people in the first year;

·  •     the business must be a company or limited partnership but not an individual trading in its own name.

The tax credit does not carry forward from one year to the next.

Deduction for improvement in energy performance certificate rating

A deduction is available for the investment made by an individual, company or business that makes a significant improvement to the Energy Performance Certificate (EPC) rating. The percentage is subject to the discretion of the Commissioner of Income Tax.

Training costs

Training costs for employees working towards a qualifying qualification are allowable as an expense at a rate of 150%. From 1 July 2021 to 30 June 2023, this is increased to 160%. A self-employed individual undertaking qualifying training may also claim the 50% deduction. 'Qualifying training' means any qualification and training as approved by the Commissioner.

Employment Incentive

Up until 30 June 2023, a further deduction is available based on 50% of the fixed salary cost of new employees employed after 1 July 2021.

Marketing incentive

Up until 30 June 2023, a 50% deduction is available for marketing Gibraltar as a destination and jurisdiction as defined in legislation.

Property investment incentive

Proprietors of property constructed in Gibraltar in the subsequent 30 months from 1 July 2016 and rented for residential purposes will receive a tax credit equal to the tax payable on the profits earned on the first 24 months of rent occurring in the first five years after the completion of construction of that property.

Disabled access to property

A company or business shall be entitled to claim a deduction in computing its income chargeable to tax where it has a legal title to a property in Gibraltar from which a trade, business, profession or vocation is carried out and has incurred expenditure for works carried out no later than 30 June 2022 for the modification and improvement of access and inclusion for disabled individuals to that property. The deduction will be limited to a maximum of GIP 15,000 or the cost of the modifications.

Gift aid

The amount eligible for registered charities to claim from the Commissioner of Income Tax in respect of donations under Gift Aid rules is GIP 10,000.

Pension Schemes

Pensions received from an approved pension scheme imported from another country (QROPS) shall be taxed at the rate of 2.5% insofar as it forms part of the taxable income of the individual.

C. Foreign tax relief

Any person ordinarily resident in Gibraltar can claim unilateral tax relief on tax paid abroad subject to providing the necessary evidence of the payment to the Commissioner of Income Tax, the taxpayer is entitled to a tax credit equivalent to the lesser of the tax payable on that income in Gibraltar; or the tax payable abroad in respect of that income. If relief from the double taxation must be made abroad then the relief allowed is reduced accordingly.

D. Corporate groups

There is no group relief available in Gibraltar.

E. Related party transactions

Anti-avoidance provision

The Income Tax Act 2010 introduced several anti-avoidance clauses which can be invoked to set aside arrangements that can be seen to be fictitious or artificial. Also, the promoters of a tax planning scheme must notify the Commissioner of Income Tax within 30 days of any schemes which result in the payment of less tax. There are several clauses that specifically consider and address anti-avoidance arrangements that can lead to the reduction or elimination of tax payable as follows:

Thin capitalisation rules

This is aimed at the loan capital to equity ratio is greater than 5 to 1. The interest paid will be deemed to be a dividend by the company and received by the connected part and not shareholder or connected persons and refers to interest paid on a loan by a company to related parties (which is not itself a company) or loans where security is provided by related parties and where at any time in an accounting period deductible on the company in computing the profits for the period.

Transactions with connected persons

When it appears that transactions with connected persons in the course of the business are arranged with a view to make no profit or reduce profits or increase losses any excess will be deemed to be a dividend paid and not deductible on the company in computing the profits for the period. When expenses incurred in favour of a connected person the expense allowed shall be the least of the expense incurred; 5% of the gross turnover of the person for the accounting period or 75% of the pre-expense net of profit of the person for the accounting period.

Non-deductibility of interest paid on certain secured loans

This refers to interest payable and back-to-back loans. Where a loan is made by a lender at an arm's length and all or part of the loan is secured by a cash deposit, or an investment as defined by the Act of any connected person over which the lender has taken security the loan interest will not be deductible when computing the profit or gain.

Chargeability of dual employment contracts

Where an employee of an employer ordinarily resident in Gibraltar has one or more other contracts with that or another employer whether resident in Gibraltar or elsewhere who is a connected person to the employer ordinary resident in Gibraltar the income derived shall be subject to tax. If it can be proved to the Commissioner that the purpose of the transactions is not to avoid tax this is a mitigation circumstance that will be considered.

Transfer of assets abroad

This is to prevent the transfer of assets abroad by an ordinarily resident individual with the purpose of avoiding taxation in Gibraltar and the income becomes payable by persons resident outside Gibraltar.

When the person affected can demonstrate to the Commissioner that the intention is not to avoid tax the provisions do not apply.

Hybrid mismatch

Payments under hybrid instruments and payments to associated hybrid entities will be disregarded where the deduction or payment benefits from a tax deduction in the payer jurisdiction and is not taxed in the jurisdiction where the payment is received.

Controlled foreign company (CFC) rule

This rule does not apply to companies where their annual accounting profits are (1) less than EUR 750,000 (and non-trading income is less than EUR 75,000) or (2) less than 10% of their operating costs. The rule attributes to a Gibraltar company's undistributed profits of a CFC (ie, Gibraltar entity has at least 50% of either the voting rights, the capital or is entitled to receive 50% of the profits and the actual tax paid is less than 50% of the tax that would have been paid in Gibraltar on the same income) from non-genuine arrangements where the purpose is to gain a tax advantage.

Interest limitation rule

The interest limitation rule provides that exceeding interest expenses are deductible up to the greater of (1) 30% of EBITDA and (2) EUR 3 million.

F. Exchange control

There are no exchange controls in Gibraltar.

G. Personal income tax

Individuals and partnerships

The tax year runs from 1 July to 30 June and tax is payable on the actual taxable profits for the year. Individuals can elect between the Allowance and Gross Income Based Systems

Allowance Based System

Under the Allowance Based System, the individual will be taxed on their income less allowances (see below). The main allowances (which are reduced by one-twelfth for each complete calendar month that the individual is not resident in Gibraltar during the year of assessment) for the tax year 2022/2023 are as follows:

Type of allowances	GIP
Personal allowance	3,455
Spouse allowance	3,455
Child allowance – first child only	1,190
Child studying abroad allowance (each child)	1,375
Maternity grant	700
Apprentice allowance	380
Nursery allowance	5,480
Single parent allowance	5,800
Blind person allowance	5,475
Dependent relative (non-resident) allowance	250
Dependent relative (resident) allowance	400
Disabled individual allowance	10,000
House purchase allowance	13,000
House purchase (special deduction) allowance	4,000 (GIP 1,000 max pa)
Medical allowance	5,395
Social insurance (employee) allowance	335
Social insurance (self-employed)	432

'Topping-up' allowances

Individuals with allowances amounting to less than GIP 4,343 will have their allowances topped up to that amount. For elderly individuals (men over 65 and women over 60), the allowances are topped up to GIP 12,645.

Low incomes earners allowance

Taxpayers with assessable income of GIP 11,450 or less will be brought out of the taxation system altogether and will pay no income tax. This applies to taxpayers in both the Allowance Based System and the Gross Income Based System.

Under the Allowance Based System, the minimum allowance of GIP 4,343 will be tapered for taxpayers whose earned income for the tax year is between GIP 11,451 and GIP 19,712.

Tax credit

A tax credit equal to the higher of GIP 300 or 2% of the tax payable is available for the year.

For employed individuals aged 60 and over who are in receipt of an occupational pension or annuity income below GIP 6,000 are entitled to a tax credit amounting to GIP 4,000.

Students

The earnings of a full-time student are exempt from tax.

Life assurance Relief

Premiums allowed up to 1/7th of assessable income or 7% of capital sum assured. Relief is granted at the rate of 17%.

Personal pension schemes or retirement annuity contracts

The lesser of 20% of the earned assessable income or GIP 35,000.

Occupational pension schemes

Relief is restricted to one-sixth of the assessable income.

Health insurance

Premiums paid for the purpose of an approved health insurance for an individual, spouse or his dependent children. The deduction is limited to GIP 5,395 in aggregate.

Installation of solar energy for boilers and renewable energy

Up to a maximum of GIP 6,000 (GIP 6,000 for 2021/22) over two years in respect of expenditure incurred towards the installation of renewable energy systems and of solar energy for boilers, including photovoltaic panels or wind turbines for the supply of electricity to a property.

Approved expenditure on premises

A deduction from their assessable income in respect of approved expenditure incurred on the enhancement of the frontage of their property.

Mortgage Interest Relief

Interest payable on a loan taken by an individual to acquire or improve a Gibraltar property to be used as a taxpayer's principal residence is allowable on loans up to a value of GIP 350,000.

Electric vehicle charging installation

A deduction against tax liabilities for the first GIP 2,000 of the cost of installing a mechanism for the purpose of charging electric vehicle in the taxpayer's home, garage or parking space, subject to approval.

Disabled individuals tax exemption

An additional earned income allowance exempts individuals in employment from tax if they are recipients of disability allowance paid by the Department of Social Security.

Tax bands under the allowance bases system for ordinary resident taxpayers

Taxable Income	Tax Rate
First GIP 4,000	16%
Next GIP 12,000	19%
The remainder of taxable income	41%

Tax bands under the allowance bases system for non-resident taxpayers

Taxable Income	Tax Rate
First GIP 16,000	19%
The remainder of taxable income	41%

Standard rate of tax

The standard rate of tax for individuals is 20%.

Tax bands under the Gross Income Based System

Ordinary residents with taxable income of up to GIP 25,000 opting for GIB system:

Taxable Income	Tax Rate
The first GIP 10,000	8%
The next GIP 7,000	22%
The remainder of taxable income	30%

Ordinary residents with taxable income of more than GIP 25,000 opting for GIB system:

Taxable Income	Tax Rate
The first GIP 17,000	18%
The next GIP 8,000	21%
The next GIP 15,000	27%
The next GIP 65,000	30%
The remainder of taxable income	27%

Persons under the Gross Income Based System may also benefit from:

·  •     a deduction from their assessable income up to a maximum of GIP 1,500 in respect of mortgage interest payments;

·  •     a deduction from their assessable income of GIP 1,500 per annum in respect of pension contributions;

·  •     a deduction from their assessable income of up to GIP 3,000 per annum in respect of medical insurance premiums;

·  •     a deduction from their assessable income up to a maximum of GIP 5,000 in respect of approved expenditure incurred on the enhancement of the frontage of their property;

·  •     first-time buyers: a deduction from their assessable income up to a maximum of GIP 7,500 in respect of approved expenditure incurred towards the purchase of their home during the year available for purchases after 1 July 2019;

·  •     up to a maximum of GIP 6,000 (GIP 6,000 for 2021/22) over two years in respect of expenditure incurred towards the installation of renewable energy systems and solar energy for boilers including photovoltaic panels or wind turbines for the supply of electricity to a property;

·  •     for the next three years commencing 1 July 2018, a deduction is available against tax liabilities for the first GIP 2,000 of the cost of installing a mechanism for the electric charging of a vehicle in their home, or in a parking space or garage owned by them, subject to approval.

Tax incentives for high-net-worth individuals

Qualifying (Category 2) Individual Rules 2004

Individuals may apply to the Finance Centre Director to acquire Category 2 status and on successful application will be issued a certificate to this effect. The conditions to become a Category 2 individual are as follows:

·  •     must have not been resident of Gibraltar within a period of five years immediately preceding the year of assessment in which the application is made or have been resident for 183 days in any one of those years or an average of 90 in any three of those years;

·  •     not have been engaged in any trade or employment in Gibraltar other than on incidental duties.

The application form to become a Category 2 individual must be supported by two character references from recognised and established professionals; copy of passport; a curriculum vitae and proof is worth a minimum of GIP 2 million; must also prove that they have approved accommodation in Gibraltar for their and their family use. The application fee is GIP 1,000.

The advantages associated with becoming a Category 2 is that the individual can engage in certain commercial activities and as from 1 July 2022 their tax payable will be limited to the first GIP 118,000 (GIP 105,000 for 2021/22) of taxable income. The minimum tax payable will be GIP 37,000 (GIP 32,000 for 2021/22) and the maximum GIP 44,740 (GIP 37,310 for 2021/22).

Any Category 2 individual with a valid certificate must make an advance payment of tax equal to the maximum amount of GIP 44,740 by not later than 30 November 2022.

High Executive Possessing Specialist Skills Rules 2008

This scheme for executives possessing specialised skills (HEPSS) will only tax the first GIP 160,000 per annum of income under the Gross Income Based System which currently amounts to a maximum tax payable of GIP 43,140 (GIP 39,940 for 2021/22).

They must also comply with the following criteria:

·  •     must have approved residential accommodation in Gibraltar for their exclusive use and families;

·  •     not have been occupied or resident in Gibraltar for the past three years;

·  •     must earn more than GIP 160,000 per annum of income in Gibraltar.

The application fee is GIP 1,100.

Social security contributions

Social insurance is payable on earning by all individuals working in Gibraltar either as employees or self-employed. Employees' contributions to social insurance are made up of a proportion payable by the employer and another paid by the employee. Self-employed only pay their share. The rates applicable up to 31 July 2022 are as follows:

Contributions payable by:	Rate Payable on Gross earnings	Minimum payable per week/month	Maximum payable per week/month
Employees	10%	GIP 12.10/GIP 52.44	GIP 36.30/GIP 157.30
Employers	20%	GIP 28.00/GIP 121.34	GIP 50.00/GIP 216.66
Self-employed	20%	GIP 25.00/GIP 108.34	GIP 50.00/GIP 216.66

The rates applicable from 1 August 2022 to 30 June 2023 are as follows:

Contributions payable by:	Rate Payable on Gross earnings	Minimum payable per week/month	Maximum payable per week/month
Employees	10%	GIP 12.50/GIP 54.17	GIP 36.70/GIP 159.03
Employers	19%	GIP 28.50/GIP 123.50	GIP 50.50/GIP 218.83
Self-employed	20%	GIP 28.50/GIP 123.50	GIP 50.50/GIP 218.83

Individuals with a second job, working pensioners and individuals employed in essential services will be exempt from employee social insurance and the employer will also be exempt from employer social insurance.

Employees still in employment aged 60 and over are exempt from paying social insurance contributions.

Social insurance contributions are payable by every employee or self-employed person in any week in which they work.

A social insurance credit of GIP 100 per employee applies to companies with ten or less employees, and to new companies with up to 20 employees in their first year of operation.

There is also an exemption from both the payment of employer and employee social insurance contributions in the case of payments received whilst on maternity leave.

H. Treaty and non-treaty withholding tax rates

Countries that do not have a double taxation treaty with Gibraltar can enjoy unilateral relief for foreign taxes paid that are also subject to tax in Gibraltar.

The Government of Gibraltar has negotiated tax treaties with both the United Kingdom and Spain and these have already been ratified.