Gibraltar

Income tax is charged on income accruing in, derived from or received in Gibraltar by any person or company.

Dividends, pensions and emoluments of office accruing in, derived from or received in any place other than Gibraltar by an ordinarily resident person are also taxable in Gibraltar.  When taxed in the country of accrual and not received in Gibraltar such income is exempt.

Income arising outside Gibraltar, which although not actually received or transferred, is obtained in Gibraltar by the taxpayer in the form of an equivalent benefit, is treated as having been received in Gibraltar.

Computation of Taxable Income

Income tax is charged for the year of assessment – running from the 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 or pension which is charged on the basis of the income for that year. The taxpayer’s aggregate income, other than exempt income, is the “assessable income” and the “taxable income” is the assessable income, as reduced where appropriate in the case of an individual by the allowances described hereafter.

Standard rate of tax

The standard rate of tax for individuals is 30%.

Deductions for personal reliefs

The allowances and deductions are:

Personal Allowance

£2,735

Child Allowance

Spouse Allowance

£2,560

Only first child educated in Gibraltar

£970

Dependent Relative Allowance

Each other educated abroad

£1,075

Resident in Gibraltar (max.2)

£185

Disabled Individuals Allowance

£2,650

Non resident (max. 2)

£135

Single Parent Allowance

£2,560

Home Purchase Allowance

£11,500

Nursery School Allowance

Deduction (£1,000 max p.a.)

£4,000

Private nursery during the pre-school year

£995

Medical Insurance (max relief)

£1,090

Life assurance, etc.

This deduction is given in respect of amounts payable by the taxpayer or his wife during the year of assessment for insurance premiums on his life or that of his wife and for contributions to a pension scheme approved by the Commissioner of Income Tax. The deduction allowable in respect of premiums payable under a policy of assurance shall be granted by way of relief at the rate of 17%. No deduction shall, for any year of assessment exceed;

  • one-seventh of the total assessable income in respect of life assurance premiums;
  • 25% of the total assessable income in respect of contributions to a Personal Pension Scheme or a Retirement Annuity Contract;
  • one-sixth of the total assessable income in respect of life assurance premiums and contributions to an Occupational Pension Scheme; and
  • 7% of the capital sum excluding bonuses, etc, in the case of a policy securing a capital sum on death.

Health Insurance

This deduction is given in respect of amounts payable by the taxpayer, during the year of assessment, towards an approved insurance policy, for premiums paid for the purpose of providing health insurance for himself, his spouse or his dependant children. This deduction is limited to £1090 in aggregate.

Special deduction for senior citizens

Individuals of state pensionable age ( i.e. men 65 years of age or over and women 60 years of age or over) are entitled to an additional personal allowance being the difference between £10,590 and the standard personal allowance and the wife allowance where applicable.  The deduction is reduced by one-twelfth for each complete calendar month during the year of assessment that the individual is not resident in Gibraltar.

Mortgage Interest relief

A deduction is given in respect of the amount of interest paid on a mortgage or loan taken out by an individual for the purchase or improvement of a house or flat in Gibraltar for his own residential occupation. The deduction shall be limited to the interest paid on the principal sum of a loan limited to a mximum not exceeding £300,000.

Pensions

A pension from any statutory pension scheme or provident or other fund approved by the Commissioner and received by an individual who is –

  • aged 60 or over; or
  • compulsorily retired at age 55 by operation of section 8 (2) of the Pensions Act, shall form part of the assessable   income of the individual but shall be taxed at 0%.

Charge to tax

Individuals may choose to pay tax under the Allowance Based System or the Gross Income Based System. Under the Gross Income Based System individuals will receive no allowances and will pay tax on their gross assessable income at the following rate;Individuals with gross assessable income not exceeding £16,000:

  • the first £10,000 of assessable income – 10%
  • balance – 20%

Individuals with gross assessable income between £16,001 and £25,000;

  • income of £16,001 to £17,000, on the first £5,000 – 0%
  • balance – 20%
  • income of £17,001 to £18,000, on the first £4,000 – 0%
  • balance – 20%
  • income of £18,001 to £19,000, on the first £3,000 – 0%
  • balance – 20%
  • income of £19,001 to £20,000, on the first £2,000 – 0%
  • balance – 20%
  • income of £20,001 to £25,000, on the first £1,000 – 0%
  • balance – 20%

Individuals with gross assessable income exceeding £25,000

  • the first £25,000 of assessable income – 20%;
  • the next £75,000 of assessable income – 29%;
  • the remainder of the assessable income – £35%

Individuals who have opted to be taxed under the Allowances Based System are charged to tax on their taxable income which arrived at by deducting personal and other allowanced from the assessable income at the following rates;:

For every pound of

  • the first £4,000 of taxable income – 17%
  • the next £12,000 of taxable income – 30%
  • the remainder of the taxable income – 40%

Amount of tax payable under the Allowances Based System by individuals who are ordinarily resident in Gibraltar

Allowances Single starts paying at £2,736 Married, no children starts paying at £5,296 Married, 1 child starts paying at £6,266
Personal £2,735 £2,735 £2,735
Spouse £2,560 £2,560
Child £970
Income
£3,000 £45.05
£4,000 £215.05
£5,000 £385.05
£6,000 £555.05 £199.85
£7,000 £759.50 £289.85 £124.95
£8,000 £1,059.50 £459.85 £294.95
£9,000 £1359.50 £629.85 £464.95
£10,000 £1,659.50 £891.50 £634.95
£12,000 £2,259.50 £1,491.50 £1,200.50
£14,000 £2,859.50 £2,091.50 £1,800.50
£16,000 £3,459.50 £2,691.50 £2,400.50
£18,000 £4,059.50 £3,291.50 £3,000.50
£20,000 £4,786.00 £3,891.50 £3,600.50
£22,000 £5,586.00 £4,562.00 £4,200.50
£24,000 £6,386.00 £5,362.00 £4,974.00
£26,000 £7,186.00 £6,162.00 £5,774.00
£28,000 £7,986.00 £6,962.00 £6,574.00
£30,000 £8,786.00 £7,762.00 £7,374.00

Low Income Earner’s Tax Allowance

An individual whose assessable income is:

£8,000 or less, he shall be entitled to claim for that year of assessment an allowance in the amount of £4,000.

More than £8,000 and up to £17,500 shall be entitled to claim for that year of assessment an allowance in the amount of £1,300.

More than £17,500 and up to £18,500 shall be entitled to claim for that year of assessment an allowance in the amount of £920.

More than £18,500 and up to £19,500 shall be entitled to claim for that year of assessment an allowance in the amount of £500.

Special allowance for individuals with total allowances amounting to less than £3,600

An individual who, during a year of assessment, has total deductions amounting to less than £3,600 shall be entitled to claim a special allowance from the amount of his assessable income equal to the difference between £3,600 and the total of all other deductions.

Tax credit for the individual’s aged 60 years and over

A tax credit of £4,000 by way of a reduction to his tax liability shall be given to an individual who is aged 60 or over and is in receipt of earned income.This tax credit does not apply to an individual who;

Has income exceeding £2,000 from an occupational pension or annual amount of an annuity, orIs entitled to receive income exceeding £2,000 in respect of the capital sum in excess of 25 per cent of the capital value of a pension or annuity to be paid on his retirement or

Has commuted his occupational pension or annuity entittlement payable to him and the capital sum in excess of 25 per cent of the capital value of the pension or annuity would provide a pension or annuity in excess of £2,000 or

Has elected to be chargeable to tax under the Gross Income Based System.

Residence

Ordinarily resident when applied to an individual means an individual who resides in GibraltarNon-resident means any person other than a person ordinarily resident

Permitted Individual

A permitted individual is an individual who is a non-resident individual who carries on, or undertakes in Gibraltar any trade, business, profession, vocation or employment.

Permitted individuals are entitled to the same personal allowances and graduated rates of income tax as those afforded to ordinarily resident persons in Gibraltar. However if a permitted individual does not carry on, exercise or undertakes any trade, business, profession, vocation or employment in Gibraltar for a complete calendar month in any year of assessment, the deductions, allowances and reliefs allowed under the Act shall be reduced by one-twelfth for every such complete month. One-twelfth shall reduce the banding for each calendar month that the employment, etc. is not exercised in Gibraltar.

Qualifying Individuals

A Qualifying Individual is an individual who is non-resident and who derives no income from Gibraltar other than from an exempt Company. The Finance Centre Director sets out the rate of tax which is charged on the Qualifying Individual’s worldwide income. The rate of tax shall not be less than 2% and the total amount of tax charged shall not exceed £20,000.

Qualifying (Category 2) Individual

A Qualifying (Category 2) Individual is an individual who for the year of assessment:

(1)   has available to him for his exclusive use approved residential accommodation in Gibraltar for the whole of the year of assessment.

(2)   is not resident in Gibraltar and has not been in the previous five years;

(3)   has applied to the Finance Centre Director and has been issued with a certificate qualifying him as a Category 2 individual.

(4)   an individual who has been issued with a Category 2 Individual certificate shall be liable to income tax on the first £70,000 of assessable income only and the amount of tax due and payable in any year of assessment shall be not less than £20,000.

Qualifying (Category 3) Individual

An exempt company which satisfies certain requirements, may apply to the Finance Centre Director and be issued with a certificate designating an individual employed by that company as a Qualifying Category 3 Individual. The individual must possess skills essential to the operation of the company, which are not available in Gibraltar. He must not have been employed in or from Gibraltar in the five years preceding the application and have approved residential accommodation in Gibraltar.Tax of £15,000 per annum shall be payable in twelve equal monthly instalments on the taxable income of the individual.

Qualifying (Category 4) Individual

The rules and conditions in respect of a Qualifying (Category 4) Individual are the same as for a Category 3 Individual. However, in this case the company must satisfy the Finance Centre Director that in connection with the appointment of the Category 4 individual it has created a new and additional employment which will endure for at least the whole of the period during which a certificate has been issued.A Category 4 Individual whose taxable income does not exceed £50,000 per annum shall be charged £7,500 tax in that year of assessment. When the income exceeds £50,000 per annum the amount chargeable will be £15,000 in that year of assessment.

High Executive Possessing Specialist Skills Individual.

The rules and conditions of a High Executive Possessing Specialist Skills Individual are similar to those for a Qualifying (Category 3) and (Category 4) Individual. However, in this case the employer must satisfy the Finance Centre Director that the appointment of this High Executive Possessing Specialist Skills Individual will promote and sustain economic activity of particular economic value to Gibraltar and the Individual will earn more than £100,000.A High Executive Possessing Specialist Skills Individual shall be charged to tax limited to the first £100,000 of his assessable income, under the Gross Income Based System.

Corporation Tax

The rate of corporation tax is 22%With effect from 1 January 2011 a new rate of 10% will apply to all companies except energy and utility providers who will pay a 10% surcharge and will thus suffer a rate of 20%. These will include electricity, fuel, telephone service and water providers. A start up rate of 10% will apply to all businesses established in Gibraltar after the 1st July 2009. Tax will be assessed on an actual year basis. However, businesses that have recently been established are also able to take advantage of the start up scheme if they meet the following conditions:

  • the business must have commenced after the 1st July 2007;
  • the company must agree to be taxed on a preceding year basis;
  • the first year for which the company is liable for tax is the tax year 2008/09, and tax will be payable at the rate of 27%; and
  • in the tax year 2009/10 the tax rate will be 10%.

Small companies whose taxable profits do not exceed £35,000 are charged at the lower rate of 20%. If their profits fall between £35,000 and £44,333 corporation tax will be charged at  22% less relief of 3/40 on the difference between £44,333, and the amount of taxable profits.

The definition of a “small company” is a company whose trading activities has a minimum of 80% of its trading receipts derived directly or indirectly from sources other than;

(i) dividends, interests or discounts;

(ii) rents, royalties, premiums and any other profits arising from property.

Interest and dividends

The following income is not chargeable to tax:

(i) interest paid directly or indirectly arising from investments quoted on a recognised stock exchange, including debenture stock, bonds, certificates of deposit and any other instruments creating or acknowledging indebtedness including bills of exchange accepted by a banker and issued by or on behalf of a government, a local or public authority; or

(ii) interest paid by banks, building societies or other financial institutions licensed in     Gibraltar or in any other jurisdiction to undertake deposit taking or investment business; or

(iii) interest paid by the Gibraltar Savings bank.

A company is required to deduct tax at source from any mortgage or debenture interest, or interest on any loan advanced to the company for a capital purpose, paid to any person.  Such interest attracts a withholding tax of 30% if paid to an individual and 22% if paid to a company and shall be available for set off against any tax that may be charged on that income.

Dividends paid by a company which is ordinarily resident in Gibraltar are liable to tax in Gibraltar when paid  to a shareholder who is an individual ordinarily resident in Gibraltar or a permitted individual.  A tax credit at the rate of tax paid by the company on the profits out of which the dividend is being paid shall be available for set off against any tax that may be charged on that income.

Gift Aid

If you pay tax in Gibraltar on your income, gains or profits and then make a Gift Aid donation, locally registered charities (including ecclesiastical institutions and trusts) can claim back standard rate tax relating to that donation directly from the Income Tax Office.Any person (including a company or a body of persons) is eligible to make a Gift Aid donation, if:·

  • It is made on or after 1st July 2006.
  • It takes the form of a payment of a sum of money.
  • The aggregate sum gifted shall at present not exceed £1,000 in any year of assessment.
  • It is not subject to a condition as to repayment.
  • Neither the donor nor any person connected with the donor receives a benefit in consequence of making the gift.
  • At the time the gift is made, the donor is in receipt of income chargeable to tax in Gibraltar.
  • The donor gives an appropriate declaration to the charity.

In order for the gift to qualify as a Gift Aid donation, a declaration must be made to the charity that:·

  • The donor wants the gift to be treated as a Gift Aid donation; and ·
  • The donor has paid sufficient tax in Gibraltar for the year of assessment the donation is made to cover the standard rate tax the charity will reclaim from the Income Tax Office.

Exempt Company

An exempt company is a company in respect of which the Finance Centre Director has issued a certificate under the Companies (Taxation and Concessions) Act exempting the company, inter alia, from corporation tax on the profits of the company. The Exempt Company regime will end by 31st December 2010.

Capital gains tax

There is no Capital Gains tax in Gibraltar.

Estate duty

With effect from 1 April 1997, Estate Duty was abolished in Gibraltar.

Double taxation arrangements

A Gibraltar resident who is in receipt of income which is liable to tax in Gibraltar that is derived from and has already suffered tax in any other jurisdiction, shall be entitled to double taxation relief in Gibraltar in respect of that income of an amount equal to the tax already deducted or the Gibraltar tax, whichever is the less.

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