Tax Corner #1: The New Tax Act - Does it Affect You? PDF E-mail

(as published on the Gibraltar Chronicle)

The new Income Tax Act, which came into effect on 1st January 2011, has brought the greatest change in taxation in Gibraltar in recent history.

The impact is more pronounced for businesses than for employees.  A 10% across the board tax rate for (almost) all companies is designed to address concerns raised by the European Community and the OECD about the previous distinction between onshore and offshore companies.  At the same time it is hoped that the 10% rate, combined with other features of the new Act, will continue to make Gibraltar an attractive jurisdiction in today’s increasingly global economy.


Although there was no such swingeing cut in tax rates for individuals, the steady decrease in personal tax rates in recent years appears to be part of the plan.  The government has signalled an intention to reduce personal tax rates further – and with an election looming, one might speculate that a continued move in that direction may be made in this year’s budget.

The Act has brought in a host of new rules on benefits-in-kind.  This is an area which, up to now, was inconsistently applied and lacked clarity, with the old tax law providing little in the way of detail.  The new rules contain some generous tax breaks which are worth knowing about.  There are also some rules which, whilst no doubt designed to prevent abuse, can mean considerable inconvenience for employees and employers alike.

For the more mobile members of our business community there are new rules about what constitutes residence for tax purposes.  This is now determined by the number of days present in Gibraltar, irrespective of where one lives
  
The new Act seeks to encourage a new climate of compliance, which arguably did not exist in Gibraltar. It introduces self-assessment and payments on account.  Previously, we had some comfort in the knowledge that all we had to do to avoid any penalties was to make sure that any assessments sent to us were either paid, or appealed against if they were excessive.  The onus now rests firmly on us as taxpayers to make the right payments and returns at the right time. Significant and comprehensive anti-avoidance measures have been introduced and more powers are given to the Commissioner of Income Tax. An extensive range of surcharges and penalties are in place – the penalties being applied from 1 July 2012 onwards - and those can be substantial.
 
So, who is affected by these changes? In short, you are, if you run a business or are an employee.

 

Our aim is to keep readers informed with a series of short articles on different aspects of Gibraltar tax.  Some of these will be based on the questions that we know are being asked by the local community – or should be asked, and some will provide timely reminders and explanations of critical dates in the tax calendar.
 
Copyright 2011 Baker Tilly GibraltarSitemap
Legal Disclaimer