Gibraltar: Personal Taxation

On this Page:

- Gibraltar Residence and Liability for Taxation
- Gibraltar Income Tax
- Gibraltar Social Insurance

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, 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 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.

Social insurance contributions remained unchanged at 20% of gross earnings, capped at GIP32.97 for employer and GIP25.16 for employee.

Gibraltar Residence and Liability for Taxation

For taxation purposes, an individual is either resident or non-resident, and nationality is not a factor in determining tax status. An individual is considered resident in Gibraltar if he has accommodation there and sets foot on the territory during the tax year (1st July to 30th June in the following year). This is the basis that was applied in the UK until 1993/94.

Gibraltar introduced 'High Net-Worth Individual Status' to encourage wealthy people to live there. A person who has not been resident in Gibraltar for the last 5 years may apply for this status, which limits total tax payable. Expatriate executives or people with specialist skills may be able to obtain a similar limitation on total tax payable.

The tax treatment of non-resident individuals is also described under Offshore Legal and Tax Regimes.

Residents are liable to tax on their world-wide income with certain exemptions, see below.

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Gibraltar Income Tax

Income tax is charged on eight types of income:

1. Gains or profits from any trade, business, profession or vocation
2. Gains or profits from employment, including allowances, perquisites or benefits in kind
3. Dividends, interest, discounts (NB: interest received from a Gibraltar bank is normally exempt from tax, by concession)
4. Pensions, charges, annuities, maintenance, alimony or any payment made to a wife under a court order or deed of separation
5. Rents, royalties, premiums and any other profits arising from property
6. The income of any person from the occupation of premises for residential purposes
7. Capital sums in excess of 25% of the capital value of the pension received by an individual on retirement from any approved fund
8. Dividends, interest, or emoluments of office accruing in, derived from or received in any place other than Gibraltar by a resident.

No tax is payable on the business profits of residents earned abroad and not remitted to Gibraltar. However there is a provision to tax 'constructive' overseas income, when a benefit is obtained in Gibraltar equivalent to the income.

Tax is charged on employment income on a current year basis through a 'PAYE'-style system; other types of income are assessed on a previous year basis, with special provisions for the opening and closing years of a source of income. The income tax year runs from 1st July to 30th June in the following year.

There are allowances for single and married persons, children, dependent relatives etc. Mortgage interest and life assurance premiums are deductible, as are pension contributions and building society interest (all of these subject to some limits and conditions).

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Gibraltar Social Insurance

There are two contributory schemes of social insurance, both of which are offered in return for regular weekly contributions:

The Employment Injuries Insurance Scheme provides cash benefits for: people who are unable to work (due to an accident at work for example), people with disabilities, and for widows, widowers and dependants of industrial casualties.

The Social Insurance Scheme provides allowances in the event of widowhood and for guardians or orphans, payment at childbirth and death, unemployment benefit and pensions on reaching pensionable age.

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