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Residency and Cat 2 in Gibraltar

Selwyn Figueras

Part of Gibraltar’s compelling tax environment consists of what is known as the Gibraltar Category 2 tax residency status.  One of the High Net Worth Individual, or HNWI, solutions available in Gibraltar, the  Qualifying (Category 2) Individual Rules 2004 (the Rules) set out the conditions under which applications can be made to obtain a ‘Qualifying Certificate’ under the rules.

The key headlines of the Category 2 residency scheme in Gibraltar are that:

  • Qualifying individuals are liable to tax on worldwide income only on the first £118,000 of ‘assessable income’;
  • Maximum tax payable as a Category 2 individual in 2022/2023 is £44,740
  • This maximum is, however, subject also to the payment of a minimum amount of £37,000 payable in each assessment year, irrespective of a qualifying individual’s income.

As from 1 July 2022, CAT2 individuals are required to make payment of tax in advance of the relevant period. Payment is required by 30 November in the relevant year.

Category 2 is only available to individuals not currently resident in Gibraltar and who have not been resident in any of the previous five years of assessment may apply for a Qualifying Certificate.

Applications lie to the Finance Centre Director of Gibraltar and must be accompanied by two references (one of which must be from a bank) and a non-refundable fee of £1,000.  Applicants will usually be informed that the application has been successful within one or two weeks of the application being made. In order to be successful, the Applicant must have, for the exclusive use of himself and his family, approved residential accommodation in Gibraltar. Qualifying property is typically property at the higher end of the property market in Gibraltar, with many residential estates, in effect, automatically qualifying for the purposes of the rules.

Notwithstanding the residential status acquired by an individual who has obtained a Qualifying Certificate, such individual may make use of certain tax structures to assist in the planning of fiscal affairs.  These tax structures are usually only available to non-residents of Gibraltar.  Therefore, the use of a Gibraltar trust, which (under certain conditions) is not subject to taxation, may be available to such individuals.  These possibilities together with the fact that there is no capital gains tax, inheritance tax or estate duty in Gibraltar make the jurisdiction an attractive proposition to individuals able to fulfil the criteria required.

Advantages of Residence in Gibraltar

The Gibraltar proposition for high net worth individuals and their families is a compelling one.  Gibraltar is a constitutionally independent jurisdiction, offering state-of-the-art legal solutions for private clients, solutions offered against the backdrop of a financially robust, and politically stable environment.

“Gibraltar’s appeal as a place for High Net Worth individuals and their families to establish has been anchored on the security and stability of the Gibraltar proposition since the early 1990’s.  With solid and positive economic growth throughout, Gibraltar’s positioning as a financial services centre of excellence and the opportunities for access to the EU, and now the UK, this article will cover a number of the key areas of doing business in Gibraltar that matter to most.” For further details about all these benefits, visit our Gibraltar Residency – Tax benefits page.

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.

Hassans International Law Firm limited – a leader in Private Client solutions in Gibraltar

As a leader in private client legal services in Gibraltar, Hassans benefits from specialist tax, private client, corporate and commercial teams enjoying extensive experience in the establishing of financing and asset holding corporate structures as well as private wealth and estate planning structures. Our clients include some of the world’s largest and most successful quality businesses and notable families. Hassans frequently acts for large multi-nationals in conjunction with global leading law firms and tax advisers in respect of intricate and complex inter-group restructurings. We also pride ourselves in being trusted advisors to notable ultra-high and high net worth families and individuals. We have excellent working relationships with the local authorities. Most of all, we are continually recognised for understanding our clients’ strategy and needs first, combining careful due diligence with world-class legal skills and professional execution, in order to properly serve your specific needs.

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