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Income Tax

The taxation of income of companies and individuals is governed by the Income Tax Act. Income tax is charged on most classes of income accruing in, derived from or received in Gibraltar. The year of assessment runs from 1 July in any year to 30 June of the next year. Taxation in any year of assessment is normally levied on income derived from the preceding year except in the case of income from employment that is subject to deduction on an actual basis via a pay-as-you-earn system.

There are currently no double-tax treaties in force between Gibraltar and any other country. However, tax relief is available in respect of income tax paid or payable in another jurisdiction and chargeable to Gibraltar tax up to the lower of that tax or tax in the other jurisdiction. In certain cases, income earned, taxed and retained overseas is not taxable in Gibraltar.

Who is liable to taxation in Gibraltar?

Income tax is charged on income accruing in, derived from or received in Gibraltar. It is likewise charged on certain income, accruing in, derived from or received in any place other than Gibraltar by any person ordinarily resident in Gibraltar. Ordinarily resident refers to an individual who, irrespective of whether such individual is domiciled in Gibraltar or otherwise, resides in Gibraltar except for reasonable temporary absences. An individual that is a British subject or citizen of the Republic of Ireland who is employed in Gibraltar and resides in the surrounding area is also considered ordinarily resident.

Gibraltar has introduced a number of tax incentives that allow certain categories of resident individuals to limit the total tax payable in any tax year, subject to certain criteria being met.

Tax Year & Basis of Assessment

Tax is currently charged for the year of assessment (running from 1 July in one calendar year to 30 June in the next) on the basis of the income of the preceding year except for income from employment that is charged on the basis of the income for that year.

The preceding year basis of assessment will be abolished in favour of an actual basis as from 1 January 2011. Commencement provisions will be abolished and there will be transitional rules introduced.

The following special rules apply for the first three years following the commencement of trade and the last two years preceding the cessation of trade:

• The tax payer has the option to make an election in the second and third tax years to be assessed on an actual basis if this results in a lower tax charge for the tax payer and there has been no cessation.

• The tax office needs to be advised of this no later than twelve months after the end of the third tax year and the option is for both years and cannot be exercised separately for each year.

Partnerships

An assessment is made on the partners in respect of the partnership profits split between the partners according to the proportion in which they share profits. The income is assessed on a prior year basis after adjustments.

Branches

The basis for taxation of branches of foreign enterprises is the same as for companies i.e. assessed on a prior year basis after adjustments.

Dividends

Except in the case where the income forms part of the company’s trading receipts, dividend income from companies listed on a recognised stock exchange is not taxable in Gibraltar. There is no withholding tax on dividends paid. However, a company must submit a return of any dividend paid within 30 days following the year end of each year of assessment. There is no liability to tax for dividends paid to a person who is not resident in Gibraltar. There is no tax on dividends paid by one Gibraltar Company to another.

Dividends received from participating interests or from any subsidiaries in the participating interest group are not liable to taxation in Gibraltar. A participating interest exists where there is a direct or indirect shareholding of at least 10%, as from 1 January 2009, in a company registered in the EU (or a company that is registered in a country that has a bilateral agreement with the EU).

What income is taxable in Gibraltar?

Income tax is charged on:

• Gains or profits from any trade, business, profession or vocation

• Gains or profits from employment

• Discounts, dividends and interest (except dividends arising from investments quoted on a recognised stock exchange, and interest paid by banks, building societies, or other financial services institutions that are exempt)

• Rents, royalties, premiums and any other profits arising from property

• The income of any person from the occupation of premises for residential purposes

• Dividends, interest, or emoluments of office accruing in, derived from or received in any place other than Gibraltar by a resident


With the exception of dividends, interest, pensions or emoluments of office, income which is not accrued in or derived from Gibraltar is not taxed in Gibraltar. Specifically, income derived from the following categories will not accrue in or derive from Gibraltar for the purposes of the Income Tax Act:

• The letting of property where that property is outside Gibraltar
• Trading in future delivery contracts for the purchase and sale of commodities in markets outside Gibraltar with parties outside Gibraltar
• Salvage operations taking place outside the jurisdiction
• The oversight of a construction operation outside Gibraltar
• The lending of money outside Gibraltar

Deductions Allowed

For the purpose of ascertaining the assessable income, there will be deductions on all outgoings and expenses wholly and exclusively incurred in the production of the income. No deduction, however, shall be allowed in respect of:

• Domestic or private expenses
• Expenses not incurred wholly and exclusively in the generation of income
• Any expenses of a capital nature
• Any sum recoverable under an insurance contract or contract of indemnity
• Property expenses not incurred for the purposes of producing income
• Any tax charged under the Income Tax Act
• Depreciation of assets (although capital allowances are available)

Employee remuneration not accompanied by a certified statement of names, addresses and amount of remuneration

Capital Allowances


Assets Initial Allowance Additonal Allowance

Plant & Machinery (including fixtures and
fittings)

100% on first £30,000
balance

At  15% p.a*
IT Investment 100% on first £50,000   
At 15% p.a. on
reducing balance
Industrial buildings (including factories and   
similar premises)
- 4% p.a. straight line on cost  

 

Assets are pooled for the purposes of calculating allowances and reduced by the proceeds of any disposals.

* The annual capital allowance is given at 20% of the pool value for any company taxable at 20% on profits i.e. utility, energy companies, etc.


Personal Taxation

Gibraltar has a dual tax system, whereby taxpayers are free to elect between a Gross Income Based System and an Allowance Based System.

The Commissioner of Income Tax will nonetheless calculate the final assessment on the basis of the system which is the most beneficial for the taxpayer, irrespective of the system that is chosen by the taxpayer at the beginning of the year. Additionally, where a taxpayer opts for the gross income based system and the spouse does not, the availability of allowances to the spouse is restricted.

For further information, please contact the Income Tax Office, PAYE Section, St Jago’s Stone Block, 331 Main Street, Gibraltar, Tel: +350 20074924, Fax: +350 20040020, This e-mail address is being protected from spambots. You need JavaScript enabled to view it , or refer to the Government website, www.gibraltar.gov.gi

Allowance Based System

Individuals who have opted to be taxed under the Allowances Based System will be taxed at the following rates (less the deduction of allowances and/or reliefs):

 

Taxable Income Bands  
Rates  
Tax on Band    
£0 - £4000 17% £680
£4001 - £16,000
30% £3600
Over £16,000 40% 
-

 


Main Income Tax Allowances & Reliefs
Personal Allowance £2812   
Spouse Allowance £2632
Nursery School Allowance (per child) £1023
Child Relief in respect of first child only £997
Child Relief in respect of each child educated abroad £1105
Disabled Person £2724

Dependent Relatives (maximum for Resident)
£190
Dependent Relatives (maximum for Non-resident) £139
Blind person £627
Apprentice £380
Single parent £2632
Home Purchase Allowance (deduction) £11,500

Home Purchase (Special - £1000 maximum p.a.)
£4000
Social Insurance (Employee) £335
Social Insurance (Self-employed) £432


Other Allowances & Reliefs

• Low Income Earners Allowance – Individuals earning less than £8000 per tax year will not be subject to any taxation. An additional tax allowance is also given to taxpayers whose earned annual income is less than £19,500. 

• Students – Earnings during school or university vacations are exempt from tax.

• Mortgage Interest Relief – This is interest fully allowable on loans to finance residential property in Gibraltar occupied by the taxpayer. The allowance is restricted on loans issued on or after 1 July 2008 to a maximum of £300,000. Conversely, loans of over £300,000 issued before this date will be grandfathered with the amount over the limit that
is allowable being reduced by 1/10th per annum.

• Life Assurance Premiums – These are premiums fully allowable provided they do not exceed 1/7th of assessable income or 7% of the capital sum assured at death. In respect of policies issued on or after 3 June 2008, the allowance is limited to a basic tax rate of 17%.   

• Working Pensioners’ Relief – Anyone that is over the age of 60 that is not in receipt of an occupational pension scheme and continues to work is entitled to a tax credit of £4000.

• Medical Insurance Allowance – The first £1120 of eligible premiums paid in the tax year by an individual for personal health insurance cover or for the benefit of that individual’s spouse or dependent children is fully allowable.

• ‘Topping-up’ Allowances – Individuals whose total allowances are less than £3700 will have their allowances ‘topped up’ to this amount. In the case of elderly people (men aged over 65 and over; women aged 60 and over), the allowances are topped-up to £10,887.       

• Pension Contributions and withdrawal of capital (tax-free) – Contributions to approved personal or occupational pension schemes are allowable subject to certain limits. There is no requirement to buy an annuity. Additionally, pensioners may withdraw the whole of the capital tax-free. With effect from 25 June 2009, the possibility to ‘carry back’ excess contributions to earlier tax years was abolished. Furthermore, with effect from 1 July 2009, tax relief on contributions to retirement annuity contracts and personal pension schemes is limited to the lower of 20% of earned income or £35,000.

• Income from occupational pensions – Income from occupational pensions is generally taxed at 0% for those aged 60 and over.

• Savings Income – Income from qualified investments, such as interest from bank and building society deposits and income from quoted investments, is tax-free. 

• Gibraltar Government Debentures – Investments in various Government debentures are exempt from Income Tax.

• Tax Relief on Facade Improvements – Expenditure incurred up to 31 December 2012 on painting, decorating, repairing and, in general, enhancing the appearance of the facades of buildings is fully allowable as a business expense and, if eligible, also entitles the claimant for a further equal deduction in computing the income chargeable to tax. In order to claim this tax relief, the expenditure must be certified by the Town Planner. For more information, please contact the Town Planner, Department of Enterprise & Development, Suite 631, Europort, Gibraltar, Tel: +350 20075483, Fax: +350 20074086, This e-mail address is being protected from spambots. You need JavaScript enabled to view it     

Gross Income Based System


Taxpayers under the Gross Income Based System receive no allowances, but pay tax on Gross Income as follows:

1. Income bands and tax rates for income up to £25,000

Taxable Income Bands  
Rates   
£0 - £10,000 6%
£10,001 - £17,000 20%
Balance 28%


2. Income bands and tax rates for income above £25,000

Taxable Income Bands   
Rates   
First £17,000 16%
£17,001 - £25,000 19%
£25,001 - £40,000 25%
£40,001 - £105,000 28%
£105,001 - £500,000 25%
£500,001 - £700,000 18%
£700,001 - £1,000,000 10%
Balance 5%

 

All taxpayers will pay tax at an effective rate of less than 25%.

Qualifying Individuals

Qualifying individuals are non-residents who derive no income from Gibraltar. Tax is charged at a rate not less than 2% on worldwide income subject to a maximum taxable amount of £20,000 per annum.

The exact rate payable is determined by the Finance Centre Director, Suite 761, Europort, Gibraltar, Tel: +350 20050011, Fax: +350 20051818, This e-mail address is being protected from spambots. You need JavaScript enabled to view it

High Net Worth (Category 2) Individuals (HNWI)

Only the first £80,000 of assessable income is taxable subject to a minimum tax payable of £22,000 and a maximum of approximately £30,000.

Conditions on residential accommodation and previous residence and/or activities in Gibraltar apply. A Category 2 individual cannot ordinarily engage in a trade, business or employment locally.

High Executive Possessing Specialist Skills (HEPSS)


The tax payable by a HEPSS is limited to the first £120,000 of earned income. The relevant skills must be deemed to be of exceptional economic value to Gibraltar. HEPSS are taxed under the Gross Income Based System. Conditions on residential accommodation and previous non-residency apply. 

Residency

From 1 January 2011, persons become ordinarily resident in Gibraltar if they visit the jurisdiction either:

•  183 days or more a year; or

•  More than 300 days in three consecutive tax years

An ordinarily resident individual is liable to tax in Gibraltar on their worldwide income, subject to double-tax relief. 

Non-resident Directors and Ancillary Income

If an individual is not ordinarily resident in Gibraltar and is also present for less than 30 days in a tax year, no tax is charged on income from director’s fees. There is a similar exception for non-resident employees and self-employed individuals whose duties and/or activities are exclusively undertaken outside Gibraltar, except for any duties and/or activities that are ancillary to that work.

Trusts

As from 1 January 2011, a Trust is resident in Gibraltar if one or more of the beneficiaries are ordinarily resident in this jurisdiction (excluding Category 2 individuals) or the class of beneficiaries may include an ordinarily resident individual.

A non-resident trust would only be liable for tax on income accrued in or derived from Gibraltar.

Partnerships

An assessment is made on the partners in respect of the partnership profits split between the partners according to the proportion in which they share profits. The income is assessed on a prior year basis after adjustments.

Branches

The basis for taxation of branches of foreign enterprises is the same as for companies i.e. assessed on a prior year basis after adjustments.

Dividends

Except in the case where the income forms part of the company’s trading receipts, dividend income from companies listed on a recognised stock exchange is not taxable in Gibraltar. There is no withholding tax on dividends paid.

However, a company must submit a return of any dividend paid within 30 days following the year end of each year of assessment. There is no liability to tax for dividends paid to a person who is not resident in Gibraltar. There is no tax on dividends paid by one Gibraltar Company to another.

Dividends received from participating interests or from any subsidiaries in the participating interest group are not liable to taxation in Gibraltar. A participating interest exists where there is a direct or indirect shareholding of at least 10%, as from 1 January 2009, in a company registered in the EU (or a company that is registered in a country that has a bilateral agreement with the EU).

Corporation Tax

Prior to 1 January 2011, companies were generally taxed on a prior-year basis. From 1 January 2011 onwards, all companies with income taxable in Gibraltar are taxed on an actual basis with the intention that the tax period of assessment is the same as the financial year of the company, in order to move from ‘prior year’ from ‘actual’ special transition rules apply.

With effect from 1 January 2011, the standard rate of Corporation tax is 10%, or 20% in the case of utility companies and companies enjoying and abusing a dominant market position. Companies are taxed on profits accrued in or derived from Gibraltar i.e. territorial basis of taxation.

Regarding companies licensed and regulated in Gibraltar, the profits are deemed to accrue in or derive from Gibraltar, except for activities carried on outside Gibraltar by a branch or permanent establishment.  

Benefits in Kind

Under the new Act, benefits-in-kind are extensively listed and defined. Specific taxable benefits provided to employees and/or their families comprise:

•  Cash and non-cash vouchers
•  Credit tokens
•  Living accommodation
•  Cars, vans and related benefits
•  Employment-related loans

In addition, the new Act includes a catch-all provision for benefits not specifically covered under the legislation. Benefits received by an employee of less than £250 in a year of assessment are not taxable. Employers may opt to pay the tax on benefits on behalf of the employee. If the total of benefits received by an employee amounts to between £250 and £15,000 in the year of assessment then the tax payable thereon is at a rate of 20%. If the benefits exceed £15,000, the tax is payable at the rate of 29%.

Penalties

The new Act incorporates an extensive range of punitive penalties and surcharges including the following:

•  Late payment of tax

•  Late or incomplete returns

•  Incorrect returns or information

•  Tax evasion

•  Non-payment of PAYE or Social Insurance

•  Failure to report notifiable arrangements

•  Non Compliance with Information Requests

The Commissioner has the power, in his absolute discretion, to waive, reduce or discharge any penalty incurred if satisfied that the act or failure to act, which incurred the penalty, was purely inadvertent.

The penalty regime is subject to an eighteen month moratorium from 1 January 2011. However, the moratorium does not extend to surcharges which therefore apply as from the date of commencement of the Act.

Anti-avoidance

The new Act empowers the Commissioner to disregard part or all of any arrangements that deemed to be artificial and/or fictitious and whose purpose is to reduce or eliminate the tax payable in Gibraltar.

The new Act includes specific anti-avoidance provisions in areas such as thin capitalisation, transactions with connected persons and back-to-back loans. Promoters of a scheme are required to notify the Commissioner of any arrangements or proposals that will reduce the tax due by a taxpayer.

Due Dates for Payment of Tax


Taxable Entity
Due Dates
Employment Income Tax paid via PAYE
Companies Advance payment of 50% by 31 August
Advance payment of 50% by 28 February
Any remaining balance within six months of end of accounting period
Self-employed or other  
On account payment of 50% by 31 December
On account payment of 50% by 30 June
Any remaining balance by 30 November following the end of the tax year   

Submission of Accounts and Tax Returns

 

Taxable Entity   
Due Dates
Self-employed Accounts by 30 June
Tax Return and accounts by 30 November
Companies Accounts* per financial year end
Tax Return and accounts six months after financial year end  
Resident Trusts Accounts to 30 June
Tax Return and accounts by 30 November

 

* Audited accounts unless turnover is less than £500,000. There is an additional three months allowed to submit audited accounts though unaudited accounts are still required within six months of financial year end.


Stamp Duty

Stamp Duty is only payable on real estate and capital transactions at the following rates:

• £10 flat rate for share capital

• £10 flat rate for loan capital

On purchase of real estate:

• Nil for real estate costing up to £200,000

• 2% on the first £250,000 and 5.5% on the balance for real estate costing between £200,001 and £350,000

• 3% on first £350,000 and 3.5% on the balance for real estate costing over £350,000

Import Duties

Import duties are levied on goods imported into Gibraltar, mostly at rates 0% - 12%.

As of 1 July 2010, import duty on pedal cycles, electric cars, solar paneling and related equipment has been reduced to 0%. Import duty on hybrid cars has similarly been reduced, though it has increased for petrol and diesel powered vehicles.  

Excise Duties

An excise or excise duty is levied on spirits, wines, tobacco and mineral oils.

Estate Duty

There is no Estate duty in Gibraltar.

Capital Gains Tax or other Capital Taxes

There is no Capital Gains Tax in Gibraltar, or any wealth, gift or other capital taxes.

Value Added Tax (VAT)

There is no VAT in Gibraltar.

Withholding Tax


There is no withholding tax on dividends, interest or royalties.

Online Gaming Tax

Online Gaming Tax is levied at a rate of 1% of relevant income, i.e. gaming yield for online casinos and bets placed for online bookmakers, capped at £425,000 with a minimum payable of £85,000.

Social Insurance Contributions System

The Social Insurance Contributions system has been merged with the Income Tax PAYE system and is consequently managed by the Income Tax Office.

Earnings-related Contributions

Social Insurance Contributions are no longer based on whether a contributor works more or less than fifteen hours. Contributions are based on a percentage of salary but subject to a minimum and maximum contribution level.

Social Insurance Contributions

Social Insurance Contributions will be based on a percentage of salary but subject to a minimum and maximum contribution level as follows:

 

Contributor
Rate payable on Employee’s gross earnings 
Minimum payable   
per week
Maximum payable  
per week
Employer 20% £15.00 £32.97
Employee under 60 10% £5.00 £25.16
Employee aged 60 & over 
- - -
Self-employed 20% £10.00 £30.17


No contributions are payable if the individual is not in receipt of earnings. Income earned by a student whilst on breaks is also exempt.

Contribution credits apply in certain cases, including employees, on unpaid sick leave or maturity leave and persons over the age of 60 years.

Statutory Minimum Wage

As from 1 January 2011, the statutory minimum wage in Gibraltar is £5.40 per hour.

Annual Reconciliation

Reduced contributions will be payable by those contributors with projected annual earnings of less than around £13,000. Weekly employee contributions will be the lower of the earnings-related percentage (10% of weekly earnings) and £25.16, subject to the minimum of £5.

Weekly employer contributions will be the lower of the earnings-related percentage (20% of weekly earnings) and £32.97, subject to the minimum of £15. For the purposes of calculating the weekly equivalent of an annual salary, the annual salary should be divided by 52 – in line with the formula in the Pensions Act.

There will be an end-of-year assessment of contributions payable against the contributions actually received by the Income Tax Office.

This will assess:

• The number of contribution weeks worked

• Total gross earnings

• The contributions payable by the employer and employee

• The difference, if any, due by or payable to the Income Tax Office by the employer and/or employee

Following the end-of-year assessment, any underpayment of contributions will be payable to the Income Tax Office by the employer or employee accordingly.

Part-time/Casual Employment/Multiple Jobs

All employers are required to pay the prescribed earnings-related contribution, irrespective if the employee is already insured with another employer.

Employee contributions will also be payable in respect of each and every employment at the prescribed rate of 10% of earnings but subject to the overall cap in respect of the aggregate earnings from all jobs, i.e. the current employee contribution. There is no justification for an employee who works full-time but between two or more jobs, and earning the same as a worker with one job, paying less contribution.

The Income Tax Office will issue an exemption certificate to any employee who can satisfy the Commissioner of Income Tax that they are paying the maximum weekly contribution through their main employer. This exemption does not apply to the employer’s contribution.

Sickness

If an employee receives any earnings during a period of sickness, contributions will continue to be due and payable by both the employee and the employer. However, in the case of a woman on paid maternity leave, both the employer and employee will continue to be exempt from the payment of weekly contributions for a maximum of 18 weeks.

Contribution Credits


A contribution credit counts equally as a paid contribution for entitlement to old age pension and other social security benefits and it protects the person’s record of contribution whilst the person is out of work.

Contribution credits may be awarded for the following reasons:

• If unemployed, up to a maximum of 26 weeks in any one period

• If incapacitated for work (sick), up to a maximum of 26 weeks in any one period, provided that the employee is not in receipt of earnings

• If absent from work, in exercise of the right to maternity leave, up to a maximum of 18 weeks

• If undergoing full-time education (subject to certain circumstances)

• If taking an approved course of training provided that the employee is not in receipt of earnings

• An unpaid apprentice

• A widow in receipt of Widow’s Allowance

• If totally and permanently incapable of work

• On attaining the age of 60 years, or on attaining the statutory occupational retirement age, up to the age of 65 years

Application for credits for unemployment, maternity, widows and sick credits related to an injury at work should be made to the Department of Social Security. The application for the other category of credits should be made to the Contribution Section of the Income Tax Office.

Contribution Weeks for Entitlement to Benefits


The annual assessments will include an assessment of the number of contribution weeks that a contributor is eligible to for the purpose of entitlement to social insurance benefits.

Married Women Reduced Rate Contributions

Married women in full employment who are paying a reduced contribution on a personal-to-holder basis will continue to have this option with the same benefits rights as at present. However, they may at any time opt to join the main earnings-related contribution system and thereby be eligible to the prescribed Social Insurance pension and short-term benefits.

Employees over 60


In accordance with previous budget measures, employee contributions are no longer payable in respect of employees who are over 60 (including those contributors whose statutory occupational retirement age is before the age of 60 – uniformed officers like policemen and fire-fighters). The employer’s contributions, at the prescribed percentage, would continue to be payable.

Contact

Income Tax Office
St Jago’s Stone Block, 331 Main Street
Gibraltar
Commissioner of Income Tax Tel: +350 20075260
Senior Assessor Tel: +350 20075260
Crown Counsel Tel: +350 20075260
Accountant/Investigation Tel: +350 20075260
Pensions/Estate Duties Officer Tel: +350 20075260
Corporate Section Tel: +350 20074889
Registry Tel: +350 20074915
Fax: +350 20042398
PAYE Section Tel: +350 20074924
Fax: +350 20040020
Self-Employed Section Tel: +350 20074874
Fax: +350 20051621
Accounts Tel: +350 20074923
Fax: +350 20051621
Arrears Section Tel: +350 20050253
Fax: +35020042398
Crown Counsel Arrears Tel: +350 20043016
Fax: +350 20070764
Social Insurance Contributions Tel: +350 20052737
Enforcement Tel: +35020078566
Fax: +350 20048474
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