As a specialist onshore finance centre, with full fiscal autonomy arising from Gibraltar’s modern constitutional relationship with the UK, Gibraltar has always been able offer advantageous tax conditions to businesses and families alike.  Gibraltar’s strong economic performance over the last 30+ years has enabled Gibraltar to offer competitive tax rates in respect of core areas of income for corporates whilst offering extremely competitive rates on personal income tax too.  Gibraltar does not levy tax on a variety of sources of income, details of which are set out below.

Basis of taxation in Gibraltar

Tax in Gibraltar for ordinarily resident individuals includes all income generated by a trade business or vocation on a worldwide basis. Companies, however, are taxed on a territorial basis, that is only income which is accrued and derived in Gibraltar (with some exceptions) is taxed in Gibraltar. Gibraltar only taxes income. It has no wealth taxes, gift taxes, inheritance tax, capital gains tax, or tax on bank interest.

Income Tax

Income tax in Gibraltar is governed by the provisions of the Income Tax Act 2010. Tax is charged on the income on a worldwide basis of an individual ordinarily resident in Gibraltar from employment or self-employment activities.

For individuals there are currently two systems in place for the assessment of income tax in Gibraltar. The two systems are a traditional allowance-based system and what is referred to as the Gross Income Based System or ‘GIBS’.

What does ‘ordinarily resident’ mean in the context of Gibraltar Income Tax?

For individuals, ‘ordinarily resident’ means an individual who, in any year of assessment is present in Gibraltar for a period of at least 183 days in aggregate or is present in Gibraltar in excess of 300 days in three consecutive years. Non-resident means any person other than a person ordinarily resident.

There is no bar to non-Gibraltar domiciled individuals being tax resident in Gibraltar.

Computation of Tax

The income tax year in Gibraltar runs from 1 July to 30 June and is assessed on the actual basis of income. Assessable income is the aggregate of the taxpayer’s income (other than non-chargeable income). Taxable income is the calculation of assessable income minus allowances as allowed by the chosen scheme as set out above.

Deductions for Personal Relief in 2019/2020

The following allowances are available under the Allowance Based System:

Life Assurance and contributions to pensions, etc

An allowance for premiums paid to approved life assurance schemes/pensions, is available in any assessment year up to a maximum of:

the lesser of 20% of the assessable income or £35,000;

To a Personal Pension Scheme or a Retirement Annuity Contract – one seventh of the total assessable income or £35,000;

To an Occupational Pension Scheme – one sixth of the total assessable income; and

To a policy securing a capital sum on death – 7% of the capital sum excluding bonuses.

Mortgage Interest Relief

An allowance is available for all mortgage interest payments incurred for mortgages taken out for the purchase or improvement of property used for a taxpayer’s own personal residential occupation.  The allowance is limited to interest payable on the principal sum of a loan and to a maximum of £350,000 pa.

Income Tax rates in Gibraltar

Gross Income Based system tax rates

Taxpayers on the Gross Income based system will be charged the following on their assessable income:

Individuals with gross assessable income not exceeding £25,000:

• the first £10,000 of assessable income @ 6%
• the next £7,000 @ 20%
• balance @ 28%

Individuals with gross assessable income exceeding £25,000:

• the first £17,000 of assessable income @ 16%
• the next £8,000 @ 19%
• the next £15,000 @ 25%
• the next £65,000 @ 28%
• the next £395,000 @ 25%
• the next £200,000 @ 18%
• balance @ 5%

Allowance Based System tax rates

Taxpayers on the Allowance Based Income will be charged the following rated on their taxable income (assessable income minus non-chargeable income):

• the first £4,000 of taxable income @ 14%
• the next £12,000 of taxable income @ 17%
• balance @ 39%

Tax on Pensions

Pensions received by an ordinarily resident individual are also taxable in Gibraltar. Where pension income is sourced outside Gibraltar and taxed in the country of source but is not received in Gibraltar, the income is not taxable in Gibraltar.

Pensions received from pension funds approved by the Commissioner of Income Tax are taxed at 0% in respect of individuals aged 60 or over.

Tax on Dividends

The taxation of dividends is a matter of several provisions. In accordance with the general principles of Gibraltar taxation dividends are taxable in the hands of ordinarily resident individuals unless they are issued by:

1. A company quoted on a recognised stock exchange; or
2. by companies which do not generate Gibraltar taxable income.

Therefore, a dividend from a quoted company or a company which does not generate income in Gibraltar or pay tax in Gibraltar will be tax free in the hands of an ordinarily resident individual.

Rents, Premiums and other Property Interests

All relevant income arising in respect of property in Gibraltar will be liable to tax in Gibraltar.

Special Statuses

Gibraltar offers two forms of special tax statuses;

Qualifying (Category 2) Individuals

In order to satisfy the criteria to become a Category 2 individual an individual must comply with the following conditions:

• have available to him/her for his exclusive use approved residential accommodation in Gibraltar for the whole of the year of assessment;
• must provide evidence of sufficient wealth (at the present time £2,000,000);
• must not be resident in Gibraltar and has not been in the previous five years; and
• has applied to the Finance Centre Director and has been issued with a certificate qualifying him as a Category 2 individual.

A CAT 2 individual shall be liable to income tax on the first £80,000 of assessable income only, subject to a minimum payment of £22,000 pa. Locally sourced income will not form part of the special Category 2 status treatment.

High Executive Possessing Specialist Skills ‘HEPSS’ individual

Established to attract talent and top flight executives to Gibraltar, the HEPSS regime requires the Finance Centre Director to be satisfied that the appointment of a HEPSS will ‘promote and sustain economic activity of a particular economic value to Gibraltar and that he/she will earn more than £120,000. Approved HEPSS individuals will pay tax only on the first £120,000 of assessable income, under the Gross Income Based Scheme

Corporate Tax

Corporate tax is charged on the income accruing in or derived from Gibraltar, on the profits or gains of a company or trust from any trade or business.

The Gibraltar corporate tax rate is a flat of 10%, subject to exceptions that apply in respect of utilities and/or companies enjoying a dominant position in the local market– these entities pay income tax at 20%.

Startup incentive schemes are available which enable to companies to make significant savings in the first three financial years of operation.

Interest and Dividends

Interest from institutional deposits is not subject to tax, however, intercompany interest is taxable if annual interest from a single loan (subject to anti-avoidance measures) exceeds £100,000.

Company to company dividends are free of tax.

Capital Gains Tax

There is no Capital Gains tax in Gibraltar.

Estate Duty/Inheritance Tax

No Estate Duty or Inheritance tax is payable in Gibraltar.

Wealth Tax

There is no Wealth tax in Gibraltar for either individuals or companies.

Unilateral relief on Foreign Taxes paid

The Gibraltar Government offers unilateral relief on income in respect of which tax has been paid in another jurisdiction, on condition such income is sourced in the other jurisdiction.

Double Tax Treaties

Gibraltar has a Double Taxation Agreement with the UK– further details of the impact and consequences are available as Grahame Jackson discusses the UK Gibraltar Double Taxation Agreement.

Gibraltar-Spain Tax Treaty

In 2018, the UK and Spain entered a Tax Treaty in respect of taxation between Gibraltar and Spain which was subsequently ratified during 2020 in UK, Gibraltar and in Spain. The treaty contains rules as to the residence of individuals and companies located in Gibraltar that interact with Spain. Tax Partner, Grahame Jackson, discusses the detail of the Gibraltar Spain Tax Treaty here.

Gaming Duty

Gaming Duty is currently charged at the following rates in accordance with the Gambling (Duties and Licensing Fees) regulations 2018

VAT and Customs Duties in Gibraltar

No VAT is levied in Gibraltar. Import Duty is applicable to goods entering Gibraltar at varying rates. Specific advice should be taken if you plan to import goods to Gibraltar.

Get Expert Advice

Talk to our expert Gibraltar tax lawyers today and find out more about how we can help you to make the most of the Gibraltar regime. Find out more here.