(as published on the Gibraltar Chronicle)

I own a company trading in Gibraltar.   I’ve heard there are new rules about deadlines for filing and payment of tax.

As mentioned in a previous article, the onus is now on all taxpayers to make the right returns and payments by the right time.  This means taxpayers are responsible for calculating their own payments.  Late payment – or underpayment - of amounts due, even by a day, will mean an automatic surcharge.

The new Income Tax Act applies to the first set of accounts which have a year-end date in 2011.  Each company with income taxable in Gibraltar has to file their accounts, together with a Tax Return, tax computation and any payment of tax due for that year, within six months of the year end.

So the first companies with this deadline are those with a January 2011 year end – their accounts, etc, are required to be filed by the end of this month.

What about previous accounts?

The new Act’s deadlines do not directly apply to those.  However, we understand that the Income Tax Office will not accept gaps between older years and the current year.  So they would not accept your 2011 accounts without previous ones being brought up to date.

I understand advance payments of corporation tax are now also required?

Companies are required to make a self-assessed payment on account by 31st August and 28th February each year.  The first one is due this 31st August, although many companies also made payments on account in February 2011, if assessed by the Tax Office.

These payments are towards the tax liability for the financial year in which the payment is due.  For example, if your company has a 31 December year end, the payment due by 31st August 2011 is an advance payment of your tax liability for the year ended 31st December 2011.  When you file your accounts for a financial year – hopefully within six months of the year end – what your company pays at that point is the total tax liability less any payments on account made in respect of that financial year.  If the payments on account for that financial year exceed the total tax liability, then a repayment is due to your company.

How are the payments on account calculated?

Each payment on account is based on your accounts for a previous financial year.  The relevant financial year is the most recent for which six months have elapsed since the year end.  So, a company with a 31 December year end would base its payment due on 31st August 2011 on its accounts for year ended 31 December 2010.

But if last year I had a good year and this year is looking a bit lean, won’t I be paying too much?

This could be the case if the payment on account is based on last year’s high profits, but this year’s profits – and therefore tax – will be lower.  You can apply to make a reduced payment.  However, be careful – surcharges will be imposed if it turns out that extra tax should have been paid, so you may need to polish up on your predictive powers.