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0% Corporation tax for new companies in Gibraltar

Wednesday, 06th July 2016

0% Corporation tax for new companies  in Gibraltar Image

A new measure was introduced in the July 2016 Gibraltar budget to provide new companies establishing in Gibraltar an effective corporation tax rate of 0% for three years.  5 jobs must be created and the rate is applicable to the first £500,000 of profits per annum.

We think this creates a serious incentive to local entrepreneurs and international companies seeking to relocate to Gibraltar.

The full scheme has yet to be formally documented.  For now, we rely upon the relevant text of the Chief Minister's Budget Address given on Tuesday 5 July.  The paragraph numbers set out below are as per that speech.

If you have interest in relocating your business to Gibraltar, please talk to us, as we can help.

Here's the relevant extract:

279. As I have mentioned the Brexit vote has created uncertain times and my Government is determined to ensure that whilst in Gibraltar business continues as usual, Gibraltar remains competitive and we continue to attract top quality business to Gibraltar.  

280. In order to encourage any business giving setting up in Gibraltar due consideration the Government will implement a startup incentive. An 55 incentive of this sort, although not quite in the form that has been advocated by the Gibraltar Society of Accountants, nonetheless the impact they were suggesting. In simple terms the incentive is as follows:

281. Any company that sets up in Gibraltar over the next 12 months and meets the following conditions will be eligible for this incentive.

282. The conditions are:

283. It must be a new business setting up in the period from the date of this speech to 30 June 2017;

284. The business must employ at least 5 employees in the first year;

285. The business must not represent a transfer of a business previously existing in Gibraltar or one that is used as a transfer pricing mechanism to allocate profits from a business previously existing in Gibraltar;

286. Anti avoidance provisions will be applied to ensure this represent a new business setting up in Gibraltar;

287. The incentive will be available for companies or limited partnerships but not for individuals trading in their own name.

288. The incentive is :

289. Over the first three financial years of trading of the start up business 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;

290. The tax credit does not carry forward from one year to the next, therefore if the company does not make a profit and is unable to make use of it, it is lost. It is not eligible for repayment by the tax office;

291. The incentive simply acts as a mechanism to shelter a liability to tax up to a maximum of tax equivalent to £50,000 per annum, thereby effectively sheltering £500,000 of profits per annum.

292. My Government believes this mechanism will provide an incentive to those businesses presently considering Gibraltar as a place to set up their new business.

For the full text of the budget address click here

Contributed by Mike Nicholls