This country-specific Q&A provides an overview to tax laws and regulations that may occur in Gibraltar.
It will cover witholding tax, transfer pricing, the OECD model, GAAR, tax disputes and an overview of the jurisdictional regulatory authorities.
This Q&A is part of the global guide to Tax. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/index.php/practice-areas/tax-second-edition/
How often is tax law amended and what are the processes for such amendments?
Gibraltar laws are contained in Acts of the Gibraltar Parliament. The last wholesale review of the tax legislation in Gibraltar was carried out in 2010 through the introduction of the Income Tax Act 2010 (ITA). Amendments to the ITA can take place at any time by way of the presentation of a Bill to be debated and passed at the Gibraltar Parliament. The ITA, however, provides for amendments to be introduced by way of regulation, and small-scale, operational changes to the ITA are introduced this way.
What are the principal procedural obligations of a taxpayer, that is, the maintenance of records over what period and how regularly must it file a return or accounts?
Tax returns must be filed annually, nine months after the financial year end of a company. For accounting periods ending on or after 1st January 2016, all companies registered in Gibraltar (as well as any other company with income assessable to tax in Gibraltar) are required to file a tax return. Previously, only companies with income assessable to tax in Gibraltar were required to file a tax return.
Who are the key regulatory authorities? How easy is it to deal with them and how long does it take to resolve standard issues?
Administration of Gibraltar’s tax assessment, collection and enforcement is undertaken by the Income Tax Office, through the figure of the Commissioner of Income Tax.
Are tax disputes capable of adjudication by a court, tribunal or body independent of the tax authority, and how long should a taxpayer expect such proceedings to take?
Appeals arising from the determinations of the Commissioner lie to the Income Tax Tribunal.
Are there set dates for payment of tax, provisionally or in arrears, and what happens with amounts of tax in dispute with the regulatory authority?
For employees, collection of tax is through a ‘Pay-As-You-Earn’ system, which requires the employer to deduct the corresponding tax from salaries and pay this directly to the Income Tax Office. Payment is due by the 15th day of the month following the liability.
Self-employed individuals are required to make two payments on account of tax on 31st January and 30th June of each year.
Companies are required to make payments on account of tax on 28th February and 30th September in each calendar year.
Anybody appealing against the amounts charged can apply to the Commissioner to have postponed all or part of the taxation shown as payable on the assessment (other than that part of the taxation which is not in dispute).
Is taxpayer data recognised as highly confidential and adequately safeguarded against disclosure to third parties, including other parts of the Government?
Yes, appropriate organisational and technical security measures are taken to protect personal data against accidental or unlawful destruction or loss, alteration, unauthorised disclosure or access
Is it a signatory (or does it propose to become a signatory) to the Common Reporting Standard? And/or does it maintain (or intend to maintain) a public Register of beneficial ownership?
Gibraltar is an ‘early adopter’ of the CRS. It has committed to implement a public register of beneficial ownership.
What are the tests for residence of the main business structures (including transparent entities)?
There is no outright test for residence of business structures in Gibraltar. This is always a matter of fact and degree. In general terms, the residence of a company in Gibraltar is determined by establishing the place of its ‘management and control’. This is usually where ‘mind and management’ of the company occurs- typically where board meetings are held, where a majority of directors are resident etc.
Can the policing of cross border transactions within an international group to be a target of the tax authorities’ attention and in what ways?
Yes, we have noted an increase of focus in cross border transactions. This is particularly so from foreign tax authorities. We have seen an increasing amount of requests for information under the Income Tax Act 2010, our tax information exchange agreements and under the relevant EU Directives.
Is there a general anti-avoidance rule (GAAR) and, if so, how is it applied by the tax authority? Eg is the enforcement of the GAAR commonly litigated, is it raised by tax authorities in negotiations only, etc?
Yes, the Income Tax Act 2010 does contain a general anti-avoidance provision. It is applied primarily in negotiations and discussions, rather than in litigation.
How will BEPS impact on the government’s tax policies?
Already, BEPS and other initiatives have resulted in tax legislation being introduced, through amendments to the Income Tax Act 2010, to levy tax on interest received or receivable by Gibraltar companies, and on royalties.
Does the tax system broadly follow the recognised OECD Model?
Does it have taxation of; a) business profits, b) employment income and pensions, c) VAT (or other indirect tax), d) savings income and royalties, e) income from land, f) capital gains, g) stamp and/or capital duties.
If so, what are the current rates and are they flat or graduated?
Gibraltar does charge tax on business profits at the flat rate of 10% on profits accrued in or derived from Gibraltar. Tax is also charged on employment income on a graduated scale which averages out at around 25%. Despite being part of the European Union, Gibraltar enjoys a derogation from the VAT regime, and no VAT or other indirect taxes are charged. Interest income over GBP 100,000 per annum received or receivable by a Gibraltar company is charged at a flat rate of 10%, which is also the rate of taxation for royalty income. Income from land is taxable in Gibraltar at the relevant corporate or personal rates, but there are no capital gains taxes in Gibraltar. Stamp duty is payable on Gibraltar real estate at a graduated scale at 5.5% for a band between £260,000 and £350,000 and 3.5% on the balance over £350,000 for first and second time buyers. Other buyers are exempted from stamp duty if the purchase price is below £200,000. Where the purchase price falls between £200,001 and £350,000, 2% is paid on the first £250,000 and 5.5% on the balance. On a purchase price of over £350,000, 3% is paid on the first £350,000 and 3.5% on the balance. Capital duty on share capital is a nominal £10 on creation and subsequent increases.
Is the charge to business tax levied on, broadly, the revenue profits of a business as computed according to the principles of commercial accountancy?
Gibraltar operates a territorial system of taxation, taxing profits that accrue in or derive from Gibraltar-based profit-making activities.
Are different vehicles for carrying on business, such as companies, partnerships, trusts, etc, recognised as taxable entities? What entities are transparent for tax purposes and why are they used?
Is liability to business taxation based upon a concepts of fiscal residence or registration? Is so what are the tests?
Yes. Ordinary residence.
Are there any special taxation regimes, such as enterprise zones or favourable tax regimes for financial services or co-ordination centres, etc?
Are there any particular tax regimes applicable to intellectual property, such as patent box?
Is fiscal consolidation employed or a recognition of groups of corporates for tax purposes and are there any jurisdictional limitations on what can constitute a group for tax purposes? Is a group contribution system employed or how can losses be relieved across group companies otherwise?
Are there any withholding taxes?
There are no withholding taxes in Gibraltar.
Are there any recognised environmental taxes payable by businesses?
Is dividend income received from resident and/or non-resident companies exempt from tax? If not how is it taxed?
There is no charge to tax on the receipt by a Gibraltar company of dividends from any other company, regardless of where incorporated. There is no tax on dividends paid by a Gibraltar company to another, and there is no liability to tax on dividends paid by a Gibraltar company to a person who is not resident in Gibraltar.
From the perspective of an international group seeking to re-locate activities from the UK in anticipation of Brexit, what are the advantages and disadvantages offered by the jurisdiction?
Gibraltar will exit the European Union at the same time as the United Kingdom. It is anticipated, however, that Gibraltar will remain competitive in a post-Brexit world.
This is because Gibraltar is a modern, dynamic, well-regulated international finance centre, with well-qualified and trained professionals, and impressive infrastructure and logistics for all business needs.
Gibraltar has an attractive corporate tax rate, with only profits accrued or derived in Gibraltar taxed at 10%. In addition, there are no capital gains taxes in Gibraltar, VAT, wealth taxes or inheritance tax. Stamp duty is payable only on transactions concerning Gibraltar real estate.
Gibraltar is largely self-governing, with its own Government and Parliament, which enjoys wide-ranging devolved powers. The legal system is based on the English legal system, with the Privy Council being the ultimate Court of appeal.
There are also attractive residence regimes for high net worth individuals and for higher executives possessing specialist skills, which effectively cap tax in Gibraltar at £30,000 on world-wide income.
Gibraltar has, over the years, become renowned as the jurisdiction of choice for global leading insurance, funds and internet gaming businesses. Its skills and experiences are easily transportable to other industries, with distributed ledger technology, crypto-currency related ventures, fintech and other forms of cutting edge financial services business already growing in size and importance.