There has been a change on how non-resident landlord income is taxed. The option for non-residents to declare worldwide income and thereby benefit from tax allowances has been removed. The tax return for the year ended June 2018 provided the basis for the claims for allowances on page 3 “Section 1 cont’d”. The tax return for the year ended June 2019 however, has been changed to reflect the applicable law, Section 24 of the Allowances, Deductions and Exemptions Rules. As a consequence of this change a non-resident individual is not eligible to make a claim for allowances or deductions.
Our advice on non-resident landlord tax below has been amended to reflect this change.
Non-resident landlords should be aware of what tax is payable in Gibraltar on their Gibraltar property rental income. However, this is not always easy to calculate. In this article we set out the main rules on the tax payable on the rental of Gibraltar property by a non-resident (of Gibraltar) individual.
Tax on property in Gibraltar
Tax is charged on income of all individuals in respect of rents, premiums and any other interest in property located in Gibraltar.
Income Tax Office registration
The individual must register at the Income Tax Office and receive a taxpayer identification number. By the end of every tax year (to 30 June) a tax return must be submitted together with an income and expenditure account. The deadline to do this is by 30 November of the same year.
Payment of tax
Initially, the landlord should pay any taxes by the filing deadline of 30 November.
After the first return has been filed, payments on account are then due by the following 31 January and 30 June based on 50% of the previous year’s tax liability. Penalties are charged for late filing and payments.
For non-resident individuals, the first £16,000 of taxable income is charged at 17% with the remaining balance at 39%.
Which expenses may be deducted?
Deductions for expenses are only allowed if they are wholly and exclusively expended for the purpose of the property rental and are revenue rather than capital expenses. Capital expenditure generally relates to buying, improving or selling the property and is not normally allowable, although expenditure on painting, decorating, repairing or enhancing the appearance of the property can be an allowable expense if certified by the Town Planner.
Common types of revenue expenses paid by the owner that can generally be deducted are:
1. Rates and service charges;
2. General maintenance and repairs to the property;
3. Interest on a mortgage to buy the property; and
4. Letting agent and management fees.
Can a landlord claim capital allowances?
Equipment, fittings and furniture used inside a residential property do qualify for capital allowances in Gibraltar. This can provide a significant deduction against income. The assets which may be eligible for capital allowances include all the furniture used in the property as well as rugs and white goods. Generally, this means that 100% of the cost of such purchases can be deducted in the year of purchase up to a limit of £30,000 and for any excess a 20% annual writing down allowance.
Can Chestertons assist with Gibraltar landlord tax compliance?
Yes, our property management systems are fully endorsed by the Institute of Chartered Accountants in England & Wales. Our landlord statements provide a full summary of income and expenditure between any two dates. We maintain these records for you at no extra cost where you choose to rent your property with us.
Our compliance services
1. Our group company, Buckingham Corporate Services, will be able to manage all the necessary tax compliance paperwork for you.
2. Registration for income tax and obtaining a Taxpayer Identification Number;
3. Annual tax return preparation & filing;
4. Agreement of the tax assessment with Income Tax Office based on the tax return, including appealing the assessment if necessary;
5. Routine correspondences with the Income Tax Office as and when required;
6. Advising you of the tax payments required and provision of the Remittance Advice form for submission to the authorities when you make a tax payment. We can also facilitate tax payments via our Client Account where payment receipts will be emailed to you.