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%.
Charge to tax
Individuals may choose to pay tax under the Allowance Based System (ABS) or the Gross Income Based System (GIBS).
Deductions for personal relief under the Allowance Based System
There are a number of allowances and deductions which may be offset against assessable income. It is likely that if assessable income exceeds £25,000 pa, then the tax payer should elect to be taxed under the Gross Income Based System.
Deductions for personal relief under the Gross Income Based System
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 £6,500
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
It is unlikely that the marginal rate of income tax will exceed 25% irrespective of which system the taxpayer elects.
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%.
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 £ 80,000 of assessable income only and the amount of tax due and payable in any year of assessment shall be not less than £ 22,000.
High Executive Possessing Specialist Skills Individual
A High Executive Possessing Specialist Skills Individual shall be charged to tax limited to the first £120,000 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.
The rate of Corporation Tax is 12.5%. With effect from 1st August 2021 the rate of 12.5% applies to all companies, except utility companies, such as electricity, fuel, telephone services and water providers, and companies enjoying and abusing a dominant market position. These companies will pay a higher rate of 20%.
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.
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.
Capital Gains tax
There is no Capital Gains tax in Gibraltar.
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.