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 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. View tax calculators here.
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:
|Child Educated Abroard||£1,355 pa|
|Dependent Relative||£335 pa|
|Disabled Individuals||£9,475 pa|
|Single Parent||£5,690 pa|
|Nursery School||£5,400 pa|
|Medical Insurance||£5,395 pa|
|Home Purchase (Special Deduction) £1,000 max pa||£4,000|
|Home Purchase Allowance||£13,000|
The deductions currently allowed in respect of taxpayers under the Gibraltar Income Based System are as follows:
|Mortgage Interest Payments||Up to £1,500 pa|
|Home Purchase Allowance||Up to £7,500 pa|
|Pension Scheme Contributions||£1,500 pa|
|Medical Insurance||£3,000 pa|
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:
- A company quoted on a recognised stock exchange; or
- 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.
Gibraltar offers two forms of special tax statuses;
Qualifying (Category 2) Individuals, also referred to as CAT2 Status
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 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 corporation 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 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.
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 is currently charged at the following rates in accordance with the Gambling (Duties and Licensing Fees) regulations 2018
|General Betting Duty||0.15%||The first £100,000 of the operator’s gross betting profit on bet receipts in each year|
|Betting Intermediary Duty||0.15%||The first £100,000 of the operator’s gross profit on betting event revenues in each year|
|General Gaming Duty||0.15%||The first £100,000 of the operator’s gross gaming yield on gaming receipts in each year|
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.
- Is Gibraltar a Tax Haven?
No. Gibraltar is a specialist onshore finance centre which has, for many years now, complied with all its international obligations on compliance and tax information exchange. Gibraltar is an OECD white-listed jurisdiction which, in addition, was deemed ‘largely compliant’ by the OECD Global Forum in the latest Peer Review of tax information exchange carried out by a team of expert assessors from the Forum. This places Gibraltar on a par with the USA, Germany, the UK and Spain. The review included an on-site visit to Gibraltar by a Global Forum assessment team in 2019. Further information on this can be reviewed here. In addition to the international obligations, Gibraltar was and will remain fully compliant with all relevant European Directives on financial services despite its departure from the EU. Gibraltar, its government and the professional fraternity, remains committed to the adoption and implementation of the highest standards of regulation in financial services, as it has always done, and will continue to do so post-Brexit.
- Is Gibraltar tax free?
Gibraltar is not a ‘no-tax’ jurisdiction – it is a ‘low-tax’ jurisdiction. Gibraltar is a self-governing overseas territory with full constitutional power to levy taxes. Gibraltar offers a competitive tax environment in both the personal and the corporate context. Personal taxes are low across the board, with an effective rate of income tax of only 25% on all incomes up to £50,000. All companies in Gibraltar pay only 10% tax on profits. However, Gibraltar has no wealth tax, no inheritance tax, no capital gains tax and no tax is payable on what is deemed ‘passive income’.
- Do you pay tax if you work in Gibraltar?
Yes. If you work and you generate income in Gibraltar, that income is subject to tax calculated on rates relevant to the particular tax payer. Gibraltar levies tax based on where the income arises and not on the basis of residency. Where a cross-border worker works in Gibraltar and lives in Spain, for example, the recent Treaty between the U.K. and Spain in relation to tax in Gibraltar now applies such that Spanish tax residents working in Gibraltar will be required to pay the difference between the tax payable in Gibraltar and the tax payable in Spain.
- Does Gibraltar tax foreign income?
No and Yes. Gibraltar only taxes income that accrues in or derives from Gibraltar. Non-Gibraltar source income is therefore not generally payable in Gibraltar, and that extends to non-residents who may generate some income in Gibraltar, as long as they do not trade in Gibraltar for more than 30 days a year.
Those deemed ordinarily resident in Gibraltar, pay tax in Gibraltar on their worldwide income.
- How do I become a tax resident in Gibraltar?
As a general rule, for the purposes of income tax in Gibraltar, ‘ordinarily resident’ means an individual who, irrespective of whether such an individual is domiciled in Gibraltar or otherwise, 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.
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.