Tax in Gibraltar

Gibraltar is considered to be a paradise as far as taxes are concerned and the system provides a real incentive to purchase property and take up residency.

In Gibraltar there is no capital gains tax, wealth tax, inheritance tax, sales tax or value added tax and there are two personal income tax systems to choose between.

Capital Gains tax

As a resident of Gibraltar, you will not pay tax on any growth in the value of your property. This makes ownership of property very attractive because when selling your home your profits will not be taxed.

Wealth tax

As there is no wealth tax for residents, Gibraltar is a very attractive place to make your domicile as the value of your assets will not be taxed.

Sales tax and VAT

With no sales tax added to products and services purchased in Gibraltar, the money you earn stretches further as the price does not have VAT added to it.

Personal income tax

There are two personal tax systems to choose from, the Allowances Based System (ABS) and the Gross Income Based System (GIBS). GIBS is more commonly used.

The Commissioner of Income Tax will calculate your tax using the system that is most beneficial for you, irrespective of the system that you choose.

GIBS

Under GIBS, there are tax bands in which different rates  apply depending on your earnings, which are lower notably lower than many other countries.

For earnings up to £25,000

  • 6% of the first £10,000
  • 20% of the next £7,000
  • 28% of the remainder

For earnings above £25,000

  • 16% of the first £17,000
  • 16% of the next £17,001 – £25,000
  • 25% of the next £25,001 – £40,000
  • 28% of the next £40,001 – £105,000
  • 25% of the next £105,001 – £500,000
  • 18% of the next £500,001 – £700,000
  • 5% of the remainder

There are a number of deductions that can be made under the GIBS system including purchase of a residential property with an annual £1,500 for mortgage repayments and up to £6,500 of the expenses of buying a home for first time buyers. Other deductions include pension scheme contributions and medical insurance premiums.

ABS

The Allowance Based System is also based on tax bands, yet it is more complicated as there are a wide range of exemptions, deductions and concessions that can be applied. For earnings under £11,050 and students, tax is exempt and there are allowances for incomes under £19,500.

Taxpayers under the Allowance Based System receive a tax credit amounting to the greater of £300 or 2% of the tax payable. There are a wide range of allowances and reliefs, each with a corresponding cap.

ABS tax bands

  • 14% of the first £4,000
  • 17% of the next £4,001 – £16,000
  • 39% of the remainder
Personal allowance£3,300
Spouse allowance£3,300
Nursery school allowance (per child)£5,160
Child relief in respect of first child only£1,135
In respect of each child educated abroad£1,290
Parent of a disabled individual£9,285
Dependent relative – resident (maximum)£315
Dependent relative – non-resident (maximum)£210
Blind person£5,155
Apprentice£380
Single parent£5,435
House purchase deduction£12,000
House purchase special deduction (£1,000 max p.a.)£4,000
Social insurance – employee£335
Social insurance – self-employed£432

  • Mortgage interest relief for loans financing Gibraltar residential property occupied by the taxpayer up to a maximum loan of £350,000.
  • Life assurance premiums are fully allowable provided they do not exceed one-seventh of your income or 7% of the capital sum assured at death.
  • Individuals above the age of 60 are entitled to a tax credit of up to £4,000, as long as their pension does not exceed £6,000.
  • Installation of solar energy for boilers up to £3,000 over two years
  • Medical insurance allowance for the first £5,155 of premiums paid
  • Individuals whose total allowances are less than £4,188 will have their allowances topped up to that amount. For men aged 65 and above and women aged 60 and above) the allowances are topped up to £12,200.
  • For personal pension schemes and retirement annuities tax relief for 20% of earned income or £35,000 whichever is less.
  • For occupational pension schemes, relief is restricted to one-sixth of the  income

Special tax statuses

There are two special tax statuses in Gibraltar which have had significant uptake.

High net worth individuals (Category 2)

This is open to people with Assets in excess of £2,000,000 and own or rent a property in Gibraltar. Category 2 taxpayers use the Allowance Based System, but only on the first £80,000 of income, so the maximum tax payable is £27,560. The minimum tax payable is £22,000.

A Category 2 individual cannot generally engage in a trade, business or employment in Gibraltar, unless previously agreed.

High executive possessing specialist skills (HEPSS)

To qualify for HEPSS, a person must not have been resident in Gibraltar during the preceding three years and their skills must be deemed to be of exceptional economic value. They also need to own or rent a property in Gibraltar.

The tax payable by a HEPSS is limited to the first £120,000 of earned income and they are taxed under the Gross Income Based System.