GIBRALTAR TAX

Page last updated: 29th October 2024

Key Points Summary:

• Gibraltar has a favourable tax regime with a low corporation tax of 15% and no taxes on VAT, capital gains, inheritance, wealth, or dividends
• Individuals who are “ordinarily resident” in Gibraltar are taxed on their worldwide income, while companies are taxed only on income accrued or derived in Gibraltar
• Gibraltar offers special tax statuses for “Qualifying (Category 2) Individuals” and “High Executive Possessing Specialist Skills (HEPSS)” individuals to attract foreign talent
• There is no capital gains tax or inheritance/estate tax in Gibraltar
• Gibraltar has double tax agreements with the UK and Spain to provide clarity for international businesses
• Gibraltar does not have VAT but does have import duties and stamp duty on property transactions

Page Contents:

• Introduction
• Basis of Taxation
• Income Tax rates
• Capital Gains Tax
• Estate and Wealth Taxes in Gibraltar
• Gibraltar Double Tax Agreement (‘DTA’) network
• Gaming Duty
• Value-added Tax (VAT)
• Customs Duties
• Stamp Duty
• Corporation Tax
• Gibraltar Tax FAQs

Introduction

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 to offer advantageous tax conditions to businesses and individuals alike.

Gibraltar companies pay a low corporation tax; just 15% of their profits. And it is only the income that accrues in or is derived from Gibraltar that is subject to corporation tax.

Some of the key advantages of the favourable Gibraltar tax regime include the fact that there is no:

• Value-added tax (VAT)
• Capital gains tax
• Tax on interest or gains made from bank investments or investments in any financial institutions
• Inheritance tax
• Wealth tax
• Gift tax
• Withholding tax
• Tax on liquidation distributions
• Tax on dividends paid by any company or to a non-resident individual

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. 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 residents 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 2020/2021

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 – 2023/2024

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 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%
• balance @ 25%

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 the 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 that 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, 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 £118,000 of assessable income only (under the Allowance Based system), subject to a minimum payment of £37,000 pa. Locally sourced income will not form part of the special Category 2 status treatment. At current rates of tax, the maximum tax payable is currently £42,380

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 the economic activity of a particular economic value to Gibraltar and that he/she will earn more than £160,000. Approved HEPSS individuals shall be chargeable to tax for a year of assessment in the amount of £160,000 exactly, under the Gross Income Based scheme of calculation. At current rates of tax, the annual tax liability of a HEPSS individual is currently £43,440 per annum, or £3,620 payable for every month during which a HEPSS certificate is issued (as at October 2024).

Tax on passive income for non-Gibraltar nationals resident in Gibraltar

In June 2022, the Chief Minister of Gibraltar announced that from 1 July 2022, non-Gibraltar nationals resident in Gibraltar, not in possession of a CAT 2 or HEPSS certificate, or in ‘true third party employment’ would pay tax on all savings, pension and other passive income.  This measure was admitted to being in the nature of a penalty designed to tackle those ‘not paying their way’. On that basis then, all those affected can apply for CAT 2/HEPSS status to avoid the application of this new measure.

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 and Wealth Taxes 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.

Gibraltar Double Tax Agreement (‘DTA’) network

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. The Gibraltar UK double tax treaty entered into force on 24 March 2020, following ratification.  The framework of this, and other treaties, provides greater clarity for international businesses structuring their tax affairs and allows them to do so in a manner that is wholly transparent and aligned to international tax principles.

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 in 2020 in the 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.  The Tax treaty between the UK and Spain in relation to Gibraltar came into force on 4 March 2021. The first reciprocal exchange of information contemplated by the Treaty was conducted in June 2021.  Further, as contemplated by the Treaty, the Government of Gibraltar confirmed (during the Chief Minister’s budget address on 20 July 2021) that certifications issued by the Gibraltar Tax Authorities had already been recognised by a regional tax court in Andalucia, formally accepting thereby that tax paid in Gibraltar can be set off against tax due in Spain.

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.

Gaming Duty

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

Digital Tax Office Services

The development of the services offered digitally by the Gibraltar Income Tax Office has been accelerated by the impact of the Covid pandemic, allowing for greater digital interaction in the context of the administration of tax in Gibraltar.  The rollout of a Digital File Management System assists the Income Tax Office and facilitates the retrieval and review of documents.  Payments of tax are now managed via an online user portal which is helping to streamline the process.  As of July 2021, the Government is up to date with tax year 19/20 in the context of tax refunds.

Value-added Tax (VAT)

There is no VAT in Gibraltar. Gibraltar is a completely VAT-free jurisdiction. When this is combined with other features such as no wealth tax, no inheritance tax and no capital gains tax, it is easy to see why the Gibraltar tax system is one of the most favourable in the world.

Customs Duties

Import Duty is applicable to goods entering Gibraltar at varying rates. Specific advice should be taken if you plan to import goods to Gibraltar.

Stamp Duty

Stamp duty is payable in Gibraltar on both real property and in respect of capital transactions.

Capital Transactions

The stamp duty payable on transactions relating to either share or loan capital is levied at a flat rate of £10 (ten pounds sterling).

Transfer and/or sale of property in Gibraltar

In relation to transactions relating to real property in Gibraltar, stamp duty is payable in respect of transfers and/or sales of the property in Gibraltar and in respect of mortgages secured on property in Gibraltar:

First and second-time buyers

All other buyers

Stamp duty on transfers of property between spouses is NIL

Stamp Duty on Mortgages

Stamp duty on sale or transfer of ‘affordable housing’

The sale or transfer of property originally developed as affordable housing by the Government of Gibraltar is subject to the payment of stamp duty at a flat rate of 7.5% where the sale/transfer occurs during the first ten years following the original purposes. Payment of the affordable housing stamp duty may be waived by Government, on application, in circumstances of a forced sale, divorce of the property owners and other extenuating circumstances.

Corporation Tax

Corporation tax in Gibraltar 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 corporation.

The Gibraltar corporation tax rate is 15%

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

Gibraltar Tax FAQs

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.