Gibraltar: Personal Taxation
Several key changes to Gibraltar's personal tax regime were introduced by Chief Minister, Peter Caruana in his June 2007 Budget:
Acknowledging Gibraltar's relatively high headline rates of income tax, Chief Minister Peter Caruana announced a dual income tax system and changes to the high-net-worth individual (HNWI) scheme designed to make the tax system more attractive to expat workers employed in the jurisdiction's finance industry.
Caruana announced that from 1 July 2007, every taxpayer would be able to choose for each tax year between two systems to pay tax, and to choose the one that results in the lower tax payment, either of which can be paid through the PAYE system.
The first system is the existing Allowance Based System under current tax rates, which were reduced in that year's budget. The alternative system is a new Gross Income Based system, in which the taxpayer receives no allowances, but pays tax on gross income at the following rates: 20% on the first GIP25,000; 30% on the next GIP75,000; 40% above GIP100,000.
Caruana said that the new Gross Income Based alternative would "very significantly" reduce the tax payments of around 6,500 local taxpayers, and would substantially redress the balance of taxation between those who enjoy certain allowances and those who do not. As a result, no taxpayer with income below GIP25,000 per annum would pay more than 20% income tax; no taxpayer with income below GIP50,000 would pay more than 25% income tax; no taxpayer with income below GIP100,000 would pay more than 27.5% income tax; and no taxpayer with income below GIP125,000 per annum would pay more than 30% income tax.
Access to the Gross Income Based alternative was to be subject to rules to prevent married couples and others living together from benefiting from both alternative systems, he announced.
Caruana also unveiled some amendments to the jurisdiction's' high-net-worth individual (HNWI) scheme. For HNWIs this scheme was to remain largely intact except that with effect from 1 July 2007 the minimum tax payable would be increased from GIP14,000 per annum to GIP18,000 per annum and the taxable income level increased from GIP50,000 to GIP60,000.
A new category called ‘High Executive Possessing Specialist Skills’ (HEPSS) was established for:
- Existing Category three holders who earned more the GIP100,000 per annum;
- New applicants who possess skills not available in Gibraltar and, in the Government’s opinion, necessary to promote and sustain economic activity of particular economic value to Gibraltar, who will occupy a high executive or senior management position, and who will earn more than GIP100,000 per annum of income in Gibraltar.
Tax would be payable only on the first GIP100,000 per annum of income under the dual choice tax system. New applicants may not have been resident in Gibraltar for any part of the period of three years immediately preceding the application.
The GIB system, effective July 1, 2007, works as follows:
- For persons whose gross income did not exceed GIP16,000 per annum, a new band of GIP10,000 was added on which tax was be paid at 10%.
- For persons with incomes between GIP16,000 and GIP25,000, new bands were added as follows on which tax was to be paid at 0%:
- Income of GIP16,000 to GIP17,000, on the first GIP5000 - 0%
- Income of GIP17,000 to GIP18,000, on the first GIP4000 - 0%
- Income of GIP18,000 to GIP19000, on the first GIP3000 - 0%
- Income of GIP19,000 to GIP20,000,on the first GIP2000 - 0%
- Income of GIP20,000 to GIP25,000,on the first GIP1000 - 0%
According to government statistics, the new bands would benefit 3,600 taxpayers by between GIP40 and GIP640 per annum. For example a single person earning GIP16,000 per annum was subject to GIP640 less tax, a 22% reduction.
For the 2011/2012 and 2012/2013 tax year, bands were changed as follows:
- for people with gross incomes between GIP8,000 and GIP25,000 per annum, the first GIP10,000 will be taxed at 6% (previously 8%); the next GIP7,000 at 20% and the remainder at 28%
- for those with gross incomes of over GIP25,000, the following rates apply:
- The first GIP17,000, 16%
- The next GIP8,000 - 19%
- The next GIP15,000 - 25%
- The next GIP65,000 -28%
- The next GIP395,000 - 25%
- The next GIP200,000 - 18%
- The next GIP300,000 - 10%, and the remainder at 5%
The attractiveness of the existing Allowances Based System was also improved - the government announced a 2% tax cut or GIP300, whichever is the greater and will be delivered by a tax credit.
It was announced in the 2013 Budget that tax cuts are to be introduced for individual tax payers.
Social insurance contributions remained unchanged at 20% of gross earnings, capped at GIP32.97 for employer and GIP25.16 for employee.