Introduction
The assessment and collection of income tax is currently governed by the Income Tax Act 2010, Rules and Regulations. That act was enacted in 2010 and came into effect on 1st January 2011. Tax is charged on income accruing in or derived from Gibraltar, on the profits or gains of a company or trust from any trade, business, profession or vocation. Tax is charged on the income accruing in, derived from or received in Gibraltar (or in any other place) by an individual ordinarily resident in Gibraltar from employment or the exercise of any self-employment activities in connection with a trade, business, profession or vocation. Dividends, pensions and emoluments of office accruing in, derived from or received in any place other than Gibraltar by an ordinarily resident individual are also taxable in Gibraltar. Generally, when taxed in the country of accrual and not received in Gibraltar such income is not taxable in Gibraltar. Tax is charged on income of all individuals and companies in respect of any rents, premiums and any other interest in real property located in Gibraltar. Income arising outside Gibraltar, which although not actually received or transferred, is obtained in Gibraltar by an individual 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 1st July in one calendar year to 30th June in the next - on the actual basis of the income for that year. The taxpayer's aggregate income, other than non-chargeable 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 20%.
Deductions for Personal Relief
The allowances and deductions are:
Personal Allowance £ 3,455 pa
Child Allowance £ 1,190 pa
Spouse Allowance £ 3,455 pa
Child Educated Abroad £ 1,375 pa
Dependent Relative Allowance £ 400 pa max
Disabled Individuals Allowance £ 10,000 pa
Home Purchase Allowance £ 13,000
Single Parent Allowance £ 5,800 pa
Home Purchase Allowance (Special Deduction) £1,000 max pa £ 4,000
Nursery School Allowance £ 5,480 pa max
Medical Insurance £ 5,395 pa max
Life Assurance etc.
This deduction is given in respect of amounts payable by the taxpayer or his spouse or civil partner during the year of assessment for insurance premiums on his life or that of his spouse and for contributions to a pension scheme approved by the Commissioner of Income Tax. No deduction shall, for any year of assessment exceed; - one-seventh of the total assessable income in respect of life assurance premiums; - the lesser of 20% of the earned assessable income or £35,000, in respect of contributions to a Personal Pension Scheme or a Retirement Annuity Contract; - one-sixth of the total assessable income in respect of 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 civil partner or his dependant children. This deduction is limited to £5,395 in aggregate.
Special Deduction for Senior Citizens
Individuals of state pensionable age (i.e. men aged 65 or over and women aged 60 or over) are entitled to an additional personal allowance as follows: Unmarried individuals: £9,055 pa
Married individuals / Civil Partners: £5,600 pa
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, his spouse or civil partner, for the purchase or improvement of a house or flat in Gibraltar for his/their own residential occupation. The deduction shall be limited to the interest paid on the principal sum of a loan limited to a maximum not exceeding £350,000.
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 be taxed at 0%.
Charge to Tax
Individuals may choose to pay tax under the Allowance Based System (ABS) or the Gross Income Based System (GIBS). Under the GIBS, individuals may only claim for the following deductions
• Mortgage interest payments up to a maximum of £1,500 pa.
• Home Purchase Allowance up to maximum of £7,500 (on or after July 2019)
• Contributions to an approved pension scheme up to a maximum of £1,500 pa.
• Contributions to an approved medical insurance up to £3,000 pa.
Individuals who have opted to be taxed under the Gross Income Based System will pay tax on their assessable income at the following rates:
Individuals with gross assessable income not exceeding £25,000:
the first £10,000 of assessable income @ 8%
the next £7,000 @ 22%
balance @ 30%
Individuals with gross assessable income exceeding £25,000:
the first £17,000 of assessable income @ 18%
the next £8,000 @ 21%
the next £15,000 @ 27%
the next £65,000 @ 30%
balance @ 27%
Individuals who have opted to be taxed under the Allowances Based System will pay tax on their taxable income (assessable income less allowances) at the following rates:
the first £4,000 of taxable income @ 16%
the next £12,000 of taxable income @ 19%
balance @ 41%
To calculate your tax liability click on the Gross Income Based Tax Calculator. Alternatively you can check your tax liability by clicking on the Tax Tables.
Low Income Earner Tax Allowance
An individual whose annual assessable income does not exceed £11,450 shall not be subject to tax.
An individual whose annual assessable income falls within £11,451 and £19,500 will be entitled to claim a low income earners allowance as follows:
Between £11,451 and £17,500 the amount of £1,300.
Between £17,501 and £18,500 the amount of £920.
Between £18,501 and up to £19,500 the amount of £500.
Special allowance for individuals with total deductions amounting to less than £4,343
An individual who, during a year of assessment, has total deductions amounting to less than £4,343 shall be entitled to claim a special allowance from the amount of his assessable income equal to the difference between £4,343 and the total of all other deductions.
Tax credit for individuals 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 £6,000 p.a. from an occupational pension or annuity,
• Is entitled to receive an occupational pension or annuity exceeding £6,000 p.a. on his retirement,
• Has commuted his occupational pension or annuity entitlement payable to him and the capital value of the pension or annuity would provide a pension or annuity in excess of £6,000 p.a.
• 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 irrespective of whether such individual is domiciled in Gibraltar or otherwise, in any year of assessment is present in Gibraltar for a period of at least 183 days in aggregate or is present in Gibraltar in excess of 300 days in three consecutive years. Non-resident means any person other than a person ordinarily resident.
Qualifying (Category 2) Individual
A Qualifying (Category 2) Individual is an individual who for the year of assessment:
• has available to him for his exclusive use approved residential accommodation in Gibraltar for the whole of the year of assessment;
• is not resident in Gibraltar and has not been in the previous five years;
• has applied to the Finance Centre Director and has been issued with a certificate qualifying him as a Category 2 individual.
An individual who has been issued with a Category 2 Individual certificate shall be liable to income tax on the first £ 118,000 of assessable income only and the amount of tax due and payable in any year of assessment shall be not less than £ 37,000
High Executive Possessing Specialist Skills Individual
A High Executive Possessing Specialist Skills Individual shall be charged to tax limited to the first £160,000 of his assessable income, under the Gross Income Based System. An employer must satisfy the Finance Centre Director that the appointment of a High Executive Possessing Specialist Skills Individual will promote and sustain economic activity of particular economic value to Gibraltar and that he will earn more than £ 160,000. Conditions on residential accommodation and previous non-residency apply.
Corporation Tax
The rate of Corporation Tax is 10%. With effect from 1st January 2011 the rate of 10% applies to all companies, except utility companies, such as electricity, fuel and water providers, and companies enjoying and abusing a dominant market position. These companies will pay a higher rate of 20%. Telecommunication companies will also to be taxed at 20% on only their telecommunication services, with other taxable income being taxed at the standard rate of 10%.
A Start-up Incentive Scheme was introduced for companies or limited partnerships starting up between the 5th July 2016 and 30 June 2017. Over the first three financial years of trading the company will be eligible for a tax credit equal to the tax due up to a maximum of £50,000 over each of the first three years. This will be subject to conditions, including employing at least five employees in the first year, as well as anti-avoidance measures to ensure it only applies to genuinely new businesses in Gibraltar.
Interest and Dividends
Interest is not chargeable to tax under the Income Tax Act 2010 unless:
• it is in the course of licensed money lending activities or deposit taking activities as defined in the Financial Services (Banking) Act; or
• it is interest on loans by a company to another company in excess of £100,000.
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. 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.
Captial Gains Tax
There is no Capital Gains Tax in Gibraltar.
Estate Duty
With effect from 1 April 1997, Estate Duty was abolished in Gibraltar.
Relief in respect of foreign tax paid
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 unilateral relief in Gibraltar in respect of that income, of an amount equal to the tax already deducted or the Gibraltar tax, whichever is the lesser.
Source: This information is abridged from the Government of Gibraltar website.