Discover the Tax Benefits and Residency Options in Gibraltar
What makes Gibraltar, the British Overseas Territory sometimes referred to as “The Rock” (due to its most prominent geographical feature), such an attractive jurisdiction for tax benefits? If you’re interested in the economic advantages stemming from locating you and your family here, we’ll go over the fundamental requirements in this article. We’ll also have a brief look at the logistics of such a move, and how you can go through the practicalities with minimal stress.
But first, a brief overview of Gibraltar
While there is not enough space to provide a thorough explanation of the centuries-long dispute between the United Kingdom and Spain over the ownership of the territory, here’s what you should know. The provocation of a significant amount of angry-sounding rhetoric between the two countries does not particularly threaten or impact Gibraltar’s status within the EU or its global position as a top financial centre. Various polls of Gibraltar’s population (including a 2002 referendum) show it to be overwhelmingly in favour of remaining as a self-governing colony of the United Kingdom. The impact of the upcoming Brexit transition period on relations between the UK, Gibraltar, Spain and the EU is still unknown. Still, we can safely bet that the territory’s interests will continue to be well-protected.
Does Gibraltar pay tax? An overview of the Gibraltarian tax system
Our focus for this article will be on the tax system for individuals in Gibraltar. Gibraltar has traditionally diverged from the British tax system despite being all but British concerning its infrastructure, legal system (with some key differences), cultural aspects and so on. Examining the Gibraltarian tax system also gives us a look into how a small territory can “roll with the punches.” Why is it the case? As a small territory previously under the watchful eye of multilateral bodies like the EU and the OECD due to its low-tax regime, Gibraltar has cooperated and adapted to their demands without compromising on its attractiveness to those seeking to live and do business on the Rock.
Gibraltar traditionally had high headline tax rates for individuals with opportunities for a substantial tax deduction through allowances and concessions. There were also several designations that taxpayers could adopt that let them take advantage of concessionary regimes as long as they met the requirements.
The authorities began to overhaul the tax system due to international objections and the need to make the system fairer with the times in the mid-to-late 2000s. The allowance-based system still exists, and under this system, there are different progressive tax rates imposed at various income thresholds. Individuals can take advantage of allowances that permit a lower overall tax burden such as personal allowances, spousal allowances, disability allowances, deductions for dependents, allowances relating to home purchases and social security.
They did also introduce a gross income-based tax system that designates a set income tax rate while not permitting any deduction. However, under this system, there is no further tax.
How to obtain Gibraltar tax residency
If your goal is to obtain tax residency in Gibraltar, internationally-mobile individuals looking to locate their business and/or family affairs in Gibraltar have many residence categories at their disposal. These include ordinary residency based on the amount of time spent in the territory (generally 183 days); those who are self-sufficient through receiving enough passive income while residing in Gibraltar and can prove it (while contracting medical insurance and having sufficient accommodation). There are also residency schemes for high net-worth individuals (HNWIs) and High Executives Presenting Particular Skills (HEPPS).
Most people that come to Europe Emirates Group seeking Gibraltar tax residency tend to fall into either the High Net-Worth Individual (or Gibraltar Category 2 tax residency under the previous residence permit system) or the High Executives Presenting Particular Skills (HEPPS).
The High Net-Worth Individual Regime
A person seeking to reside in Gibraltar under the HNWI regime must meet several criteria. They must prove they have a net worth over £2m, a property (either rented or purchased) available to serve as their residence for at least seven months of the year, the ability to acquire private medical insurance and not having spent most of the five prior assessment years residing in Gibraltar.
How much tax do you as an HNWI resident pay in Gibraltar? HNWI residents are subject to the territorial tax system (i.e. on income earned or arising in Gibraltar, except bank interest and other exempt income) on the first £80,000 of their income, with a minimum permitted annual tax liability coming in at £22,000 on this basis and a maximum at £27,560.
HNWI residents cannot conduct business or trade in Gibraltar as these activities would compete directly with existing firms in Gibraltar. They are permitted to invest or do business locally as long as they declare the first £80,000, and they have paid the tax due on this portion of their income.
High Executives Presenting Particular Skills Regime
Prospective residents looking for a Gibraltar tax residency certificate under the HEPPS regime must make more than £120,000 per year (they will pay tax under the gross income-based system) and possess economically useful job skills that are not available in Gibraltar.
They must have a residential property and medical insurance, and not have been considered a Gibraltar resident under any customary basis over the 36 months before application.
Residence Permits
HNWI applicants must apply for their residency permit with the Financial and Development secretary. You must pay an application fee as well as a list of required supporting documents including proof of income and ability to support yourself and your family financially, usually from a recognised banking institution.
You must submit HEPPS applications to the Finance Centre Director. HEPPS applicants must provide proof of income, along with a CV detailing your skills and references, including one from a bank.
How Can A Service Provider Help You To Relocate Painlessly?
The authorities in Gibraltar certainly have the infrastructure in place to aid the process of obtaining residency and settling into daily life. As with most finance centres of its calibre and size, there is a pretty up-to-date technological infrastructure, so if you chose to go through the process on your own, it is possible.
Assistance from a service provider full of local knowledge is invaluable when it comes time to carry out the initial research. They can help you in keeping abreast of tax and regulatory compliance requirements, completing the administrative residence paperwork and ongoing filing, keeping up to date with fee payments, arranging the purchase of health insurance and looking for property to buy or rent. They can also take away a significant amount of stress in the process.
Europe Emirates Group’s team of Gibraltar residency and company formation experts has the expertise and local know-how you need to go through a seamless transition. They can guide you in taking advantage of the beneficial income and corporate tax rates in Gibraltar, along with the Rock’s quality of life. If you would like to go ahead and begin the process, don’t hesitate to schedule your initial consultation.
Written by
Adrian Oton
CEO, Europe Emirates Group