Gibraltar has a low tax policy and the country offers many advantages from a taxation point of view to foreign investors who open a company here. Taxes in Gibraltar are determined according to residency and in case of the income tax there are progressive rates Resident companies in Gibraltar are subject to the corporate tax and so is the income derived by individuals, either in the form of employment income, trade, rent, director’s fees or other forms of income.
Below, our company registration consultants in Gibraltar explain how the taxation system works here.
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What are the taxes in Gibraltar?
Gibraltar is a very attractive jurisdiction from a taxation point of view, however there a few taxes which apply to individuals and companies. There are also various exemptions from taxation. Overall, the Gibraltar taxation system looks like this:
- the personal income tax is applied individuals residing in Gibraltar;
- the corporate income tax is applied to local and foreign companies with operations in Gibraltar;
- Gibraltar imposes a gaming tax, given its status as a major gaming hub in Europe;
- there are stamp duties and excise taxes which must be paid in Gibraltar;
- employers and employees are subject to social contributions in Gibraltar;
- Gibraltar does not impose the value added tax, being the only European jurisdiction without such levy;
- there are no capital gains or withholding taxes on interests, royalties and dividend payment.
Another important fact is that Gibraltar does not impose any estate tax. This low taxation regime makes it possible for some to consider Gibraltar a tax haven.
Our experts invite you to watch an informative video about taxation in Gibraltar:
Corporate taxation in Gibraltar
Companies in Gibraltar are taxed based on residency. A legal entity is considered a resident in the country if it is managed and controlled from here. The basis for taxation is income produced in or derived from the country. The taxation principles for branches in Gibraltar are the same as for all other companies. Non-resident corporations are only taxed on their income produced in the country.
Corporate tax is imposed on the profits made by that company in the country. Business and trading income produced or derived from Gibraltar are subject to tax. Income from listed securities is not subject to tax for regular individuals (it is taxable for banks).
The Gibraltar tax rates for companies are not differentiated based on the turnover and there are no taxation brackets.
Royalty income is subject to a 10% tax rate. Interest received from inter-company loans is also subject to a 10% tax, however, the tax does not apply if it is less than 100,000 GIP per year.
The standard tax rate for corporate taxation is 10%. Utility companies and those who abuse a dominant position are taxed at a higher rate of 20%. No surtax applies and no alternative minimum tax.
There is no withholding tax on dividends, royalties, and interest no capital gains tax in Gibraltar. There are no payroll taxes, no transfer tax and no real property taxes.
Social security is payable both by the company and the employee. The employer’s contributions are paid weekly, up to a certain amount.
Although a Gibraltar tax free regime does not apply for corporate income, the tax is very low compared to other jurisdictions, therefore, it remains a suitable option for those looking to set up a company and be subject to low taxes.
Personal taxation in Gibraltar
The Income Tax Act regulates the manner in which individuals are taxed in Gibraltar. Like in the case of companies, taxation for individuals is based on their residency status. An individual is considered a resident for tax purposes when he is in Gibraltar for at least 183 days in a tax year or for 300 days in any three consecutive tax years. The presence in the country is not conditioned by the use of accommodation and it is defined as any part of a 24-hour period (that commences at midnight).
The income tax is levied at progressive rates on the total income produced by the individual in the country or derived from here. Individuals who are not ordinarily residing in the country are still subject to the income they produce here, for example income from employment. Individuals who are less than 30 days per year in the country are exempt. Business people who travel often to Gibraltar can be liable to tax on income on their work days in the country. For tax minimization purposes you can request the help of our experts.
There are two types of tax systems in Gibraltar applicable to individuals: the allowance-based system and the gross income-based system. The choice between the two will be based on the lower tax liability.
When using the allowance-based system, individuals claim allowances against their gross income and then pay tax on their net income. In the gross-income system, an individual will pay tax on the gross income at a lower rate than for the alternative system. It should be noted that the allowances can differ from one year to another, thus the important consideration is that the choice depends on the lower tax liability.
The rates for the gross income-based system are progressive, according to the income produced by the individual:
- if the gross income is under 25,000 GBP the tax rate is 6% on the first 10,000 GBP;
- the rate is 20% between 10,001 and 17,000 GIP and
- 28% for income over GBP 17,000 when using the gross income bases system (not exceeding GBP 25,000).
When using the gross income-based system for income exceeding GBP 25,000, the taxes in Gibraltar are the following:
- 5% on income over GBP 700,000;
- 18% on income between GBP 500,001 and GBP 700,000;
- 19% on income between GBP 17,001 and GBP 25,000;
- 25% on income between GBP 25,001 and GBP 40,000;
- 28% when the income is between GBP 40,001 and GBP 105,000.
The allowance types for individuals in Gibraltar
The allowance-based system allows for a reduced tax rate of 14% for the first GBP 4,000, a standard rate of 17% for taxable income between GBP 4,001 and GBP 16,000, and a maximum rate of 39% for income exceeding 16,000 GIP. In some cases, expenses that are incurred in the production of taxable income can be deducted.
The spouse can benefit from personal allowances in some cases and there are also situations in which the taxpayer can benefit from allowances himself. Other allowances can be granted for children, for marriage, and dependent relatives, in case of approved pension scheme contributions or life insurance premiums as well as for medical insurance contributions, in some cases.
We list below a number of possible allowances, different than those for the reduced tax rate listed above. These are available to individuals who qualify to particular situations, as follows:
- age allowance: for individuals who has the state-pensionable wage and receives taxable income; personal identification documents are required for this allowance and the maximum amount differs according to whether or not the individual is married or not;
- apprentice: an allowance for those individuals who have signed an agreement for this purpose; they will need to provide the relevant contract; for the year 2019/2020 this allowance was £380;
- blind individual: issued based on a confirmation from a qualified medical professional for any blind individual or his/her spouse; for the year of assessment 2019/2020 this amount was £5,395;
- house purchase: an allowance is granted for an individual who buys property in Gibraltar and will use it as his or her main residence; in this case, for the year 2019/2020 the value was £13,000.
Please keep in mind that the allowance values herein are only for informative purposes, as they can be subject to change.
All of the applicable deductions and allowances are granted under certain conditions. If you wish to know if these can apply to you, you can discuss this matter further with our agents specializing in taxes in Gibraltar.
Dividend payments are taxed only when the payment is made from profits that are taxable in Gibraltar and the taxpayer is subject to a tax credit for the corporate tax that was paid on the underlying profits (out of which the dividend payment was made).
If you have questions about the Gibraltar tax rates for individual taxation (according to the income that exceeds a certain amount), you can talk to our tax experts.
What are the main tax compliance rules in Gibraltar?
The tax year for corporate taxation is calculated from July 1 to June 30 the next year. If a company’s accounting period is larger than 12 months, it is divided into two periods. Companies must submit the tax return, together with the audited accounts or an accountant’s report within nine months from the end of the tax year. Advance payments are possible, and they can be made between 28 February and 30 September and they are calculated on the tax liability incurred in the previous tax year (50% of this amount). If this is the case, a final balancing payment will be due. Alternatively, the taxpayer can request a refund when he files the tax return.
Individuals must make a self-assessment on income each year. The period is the same as in the case of companies, starting on July 1. The tax on employment income is collected through a special system and remitted to the Gibraltar tax authorities. Penalties and surcharges apply for the late payment of tax and the late filing of tax returns. In the case of individuals, the income of the spouse is taxed separately.
Does Gibraltar have double tax treaties?
No, Gibraltar does not have double taxation agreements, with other countries except the United Kingdom, however it has signed conventions related to the exchange of tax information in order to adhere to international regulations. The fact that investors enjoy an almost Gibraltar tax free regime compensates for the lack of double taxation agreements.
If you would like to know more about the provisions of the Income Tax Office or those of the Government in terms of taxation, our team of tax specialists can answer your questions.
Are there any reliefs against taxes paid in other countries?
Even if it has no double tax treaties, Gibraltar offers tax reliefs to resident individuals and companies which have paid taxes in another country. They must submit proof of the payment of such taxes with the Gibraltar Tax Office in order to benefit from these reliefs. These features can further add to the range of characteristics that make Gibraltar a tax haven.
Relief from other taxes in Gibraltar
There is no value-added tax in Gibraltar and no goods or services tax, as there may be in other jurisdictions. There is no capital duty, no transfer tax and no real property tax. No inheritance tax or net wealth/net worth tax is applicable.
Gibraltar is considered by many investors a tax haven. If you want to know more about tax compliance in the country or want to open a company, you can contact our company registration agents in Gibraltar.