Gibraltar's Tax System

With its recently introduced 10% tax rate for companies, its local source basis of taxation and special tax regimes available for High Net Worth Individuals and working expatriates, Gibraltar can provide some interesting opportunities. For further information on Gibraltar's tax system, please contact our tax team by email us or telephone us on Gibraltar (+350) 200 42686 and ask for Jo Jones.

Gibraltar tax

There are two main taxes levied in Gibraltar:

• personal income tax
• company income tax.

The tax year runs from 1 July to 30 June.

Personal Income Tax (2010/11)

Income tax is charged on the taxable income of every individual at progressive rates.

Individuals can choose whether to be taxed under Allowances Based System (ABS) or the Gross Income Based system (GIB).

ABS tax rates range from 17% to 40%.

GIB tax rates range from 10% to 29%. Under the GIB system no tax allowances or reliefs are available.

Special Personal Tax Regimes

Category 2 - High Net Worth Individuals (HNWI)

Individuals who obtain a Category 2 Individual Certificate are considered fully tax-resident in Gibraltar but subject to a special tax regime

This regime generally caps an individual's assessable taxable income in Gibraltar.

Read more about tax for HNWIs on our Gibraltar Category 2 Status page.

High Executive Possessing Specialist Skills (HEPSS)

This new tax regime for executives and senior management possessing specialist skills came into being on 1 July 2007.

The Gibraltar government has established the regime for those who, in its opinion, promote and sustain Gibraltar's economy.

Company Income Tax (20010/11)

A company is liable to the following taxes:

• 10% company income tax rate for new companies from 1 July 2009
• 22% company income tax rate for companies incorporated before 30 June 2009
• 10% company income tax rate for all companies (including current tax-exempt companies whose special tax status will cease) from 1 January 2011.

Currently, income tax for companies is generally only charged on income which is accrued in, derived from, or received in Gibraltar (referred to as the "local source" basis).

There is an opportunity for businesses which commenced after 1 July 2007 to benefit from the 10% rate from 1 July 2009, subject to conditions.

Tax exempt company status is no longer granted and all existing tax-exempt companies cease on 31 December 2010 at latest).

No Tax

There are no taxes relating to:

• capital gains, realised by either individuals or companies
• wealth, gifts, inheritance
• certain savings income e.g. bank interest and dividends from quoted companies
• sales tax or VAT.

Gibraltar has no exchange control legislation.

Withholding Tax

There are no withholding taxes on:

• dividend distributions
• royalty payments.

Withholding tax on interest payments paid by companies does exist but can be reduced to 0% in certain circumstances.

Duties

Gibraltar levies the following duties:

• import duty
• stamp duty (only levied on Gibraltar real estate transactions)
• capital duty (a fixed £10 charge on creation or increase in share capital and the issue of loan capital).

Recent developments

European Court of Justice (ECJ) Case on Gibraltar's company tax regime

On 18 December 2008 the ECJ finally gave its judgment concerning Gibraltar and its proposed new company tax regime.

The ECJ annulled in its entirety the EC's claim that the proposed reform of company income tax in Gibraltar constituted unlawful state aid.

The ECJ considered Gibraltar to be institutionally, procedurally, economically and financially autonomous.

As a result of the ECJ's judgement, Gibraltar can set its own tax rates independently of the UK.

Although the judgement is under appeal, the Gibraltar Government is confident that the decision will not be changed and has already implemented a new corporate low tax regime.

Corporate Low Tax Regime
There is a 10% corporation tax rate for new companies from 1 July 2009.

Businesses which commenced operations after 1 July 2007 also have an opportunity to benefit from the 10% tax rate from 1 July 2009, subject to conditions.

There will be a 10% corporation tax rate for existing companies (including current tax exempt companies whose tax exempt status will cease on 31 December 2010) from 1 January 2011.

The "territorial basis" will continue to apply, with companies being taxed on the basis of income "accruing in, derived from or received in" Gibraltar, which could result in a reduced Gibraltar tax liability.

The preceding year basis of tax assessment will be abolished in favour of an actual basis.

New Legislation and Climate of Compliance

The Government published a pre-legislative briefing paper in June 2010 explaining the main changes to the Gibraltar tax system, together with the text of the proposed amended and consolidated Income Tax Act.

This new Act keeps the old legislation and the majority of its taxation principles, e.g. the territorial basis, but overhauls it by a series of far reaching amendments to make it fit for the modern age.

The proposed legislation, which is anticipated to come into force on 1 January 2011, contains various provisions, including:

• the territorial basis of taxations is now enshrined in the Act, together with the basis of ascertaining profits
• the basis of assessment and transitional provisions
• definition of residency
• payment of tax and payment on accounts
• benefits in kind
• anti-avoidance to prevent avoidance and evasion
• penalties and in some cases criminal offences for tax avoided, delayed or evaded
• provision for naming and shaming defaulters.

For further information on Gibraltar's tax system, please contact our tax team by email us or telephone us on Gibraltar (+350) 200 42686 and ask for Jo Jones.