Gibraltar companies are required to pay their income tax payments on account twice a year, 28th February and 30th September. This note from our joint venture company, Buckingham Corporate Services, that specialises in tax, accounting and compliance services, sets out the general rules for financial reporting and tax responsibilities in Gibraltar.
BACKGROUND
This note summarises the accounting and tax reporting requirements for private companies registered in Gibraltar (and foreign companies with assessable income in Gibraltar). It is the responsibility of the director(s) of the company to ensure that these obligations are met. Failure to attend to these obligations in a timely manner will result in penalties being charged.
GIBRALTAR TAX RETURN
Gibraltar companies are liable to corporation tax on income “accruing in or derived from Gibraltar” at the flat rate of 10%. Certain categories of Gibraltar source income are not taxed including bank interest and dividends from quoted investments as well as income considered foreign source.
All Gibraltar companies are required to file a tax return.
Those with no assessable income are required to file a tax return which should be submitted with an Abridged Balance Sheet.
Those with assessable income are required to file a tax return together with financial statements comprising a Profit & Loss Account, Balance Sheet and a report by an independent accountant. For companies with an annual turnover of £1.25M or above, or if regulated by the Gibraltar Financial Services Commission, an audit is required.
The tax return and accounts (in the required format) must be filed within 9 months following the month in which the accounting period ends (e.g. year end 31st March should file by 31th December).
PAYMENTS ON ACCOUNT
For taxpaying companies, following the filing of the first corporate tax return, a system of advance payments of a company’s tax liability apply. The payments are calculated by reference to the previous tax liability and must be paid in two equal instalments on 28th February and 30th September every year.
It is possible to reduce the level of payments on application, but if the reduction is overstated late payment penalties will apply.
TAX RETURN FILING PENALTIES
If the tax return is filed late the following penalties arise.
Delay - Penalty
One day to 3 months - £50
3 months - An additional £300
6 months - An additional £500
One day to 3 months - £50
3 months - An additional £300
6 months - An additional £500
TAX PAYMENT PENALTIES
For taxpaying companies, the late payment of tax (including Payments on Account) attracts the following penalties:
Delay - Penalty
One day to 90 days - 10% of tax due
90 days - An additional 20% on the balance (i.e. tax due plus the 10% penalty)
One day to 90 days - 10% of tax due
90 days - An additional 20% on the balance (i.e. tax due plus the 10% penalty)
COMPANIES HOUSE FILING REQUIREMENTS
Accounts are required to be filed at Companies House within 12 months from the end of the accounting period.
The format of the accounts depends of whether the company is considered small, medium or large.
The parameters for defining the size of a company are contained within Schedule 9 of the Companies Act. For example, a company is defined as a “small” company if for two consecutive years the company satisfied at least two of the following conditions:
(i) Turnover does not exceed £10.2M;
(ii) Total assets do not exceed £5.1M;
(iii) Average employees do not exceed 50.
(iii) Average employees do not exceed 50.
For a newly incorporated company the conditions need only be met in its first financial year.
The filing fee is £17.50 if submitted on time. In the case of late filing the following fees are payable:
Delay - Fee
Up to 24 months after financial year end - £76
Over 24 months after financial year end - £134.50
Over 24 months after financial year end - £134.50
Note: This note is to provide general information on the financial compliance obligations for companies under the Companies Act and Income Tax Act in Gibraltar. It is not intended to be comprehensive and should not be construed as a substitute for professional tax advice.
Contributed by Mike Nicholls