This article gives a brief outline of taxation laws in Gibraltar as at 31st August 2011.  It is not intended to replace detailed professional advice which should be sought by all interested parties.

Note
The tax rates and allowances described in this article relate to 2011/12 and are based on the Budget Measures announced by the Government in July 2011. These may be amended or affected by subsequent legislation.
Background

Gibraltar taxes are, in many respects, modelled on those in the United Kingdom.  However, in certain areas, Gibraltar enjoys a more liberal fiscal regime.  In particular, there are no capital taxes such as Capital Gains Tax, Wealth Tax, Inheritance Tax or Estate Duty.  No tax is payable on passive investment income, i.e. non-trading interest income, dividends from listed investments and royalties.  In addition, specific provisions in the legislation makes Gibraltar particularly attractive for high net worth individuals wishing to take up residence on the Rock and for individuals occupying senior management positions who possess specialist skills not available locally.

Though Gibraltar is a part of the European Union under Article 355(3) of the Treaty of Rome, it is specifically excluded from the regulations concerning the Common Agricultural policy, Value Added Tax and the Common Customs Tariff.

Tax Reform
In late 2010, the Government of Gibraltar published the Income Tax Act 2010.  This new Act took effect from 1st January 2011 and represented a significant change from the previous Act, particularly in the taxation of companies’ profits.

The new Act has been in gestation for nearly a decade and is the culmination of a long process to reposition the Gibraltar finance centre away from tax haven activities and towards a mainstream European status.  Central to the reform is the ending of all distinction which previously existed between offshore and onshore business.  The new Act has also introduced extensive rules and regulations to minimise tax avoidance solutions and create a climate of tax compliance.

Under the new regime, the headline Corporation Tax rate has been reduced to 10% except for energy and utility providers which are subject to a rate of 20%.  There are detailed anti-avoidance rules which impact on companies, trusts and individuals and enhanced powers have been given to the Commissioner of Income Tax.  A range of penalties have been included in the legislation, although these do not take effect until 1st July 2012. A new self-assessment system has been introduced for taxpayers, together with surcharges being due for late payment.

The territorial nature of Gibraltar’s taxation on companies has been reinforced, with a specific definition of “accruing in or derived from Gibraltar”.

Though all companies will be treated in the same manner for tax purposes, the position as regards their shareholders will be very different. If the shareholders are resident overseas, no Gibraltar tax is payable on dividends which they receive from their Gibraltar company. If the shareholders are Gibraltar resident individuals then they will be liable to tax on the dividends at their personal marginal rate (with a credit being given for tax already paid by the company on the profits being distributed). 

Double-Tax Treaties and Exchange of Information
Gibraltar does not have double-tax treaties with any other jurisdiction.  However, tax relief is available in respect of income tax paid or payable in other jurisdictions, provided that such tax is being levied on income from that jurisdiction.  The tax relief is the lower of the tax payable in Gibraltar on that income or the tax suffered in the other jurisdiction.

Gibraltar has signed OECD-style Exchange of Information agreements with eighteen countries to date (as of 31st August 2011), these being:

• Australia
• Austria
• Belgium
• Denmark
• Faroe Islands
• Finland
• France
• Germany
• Greenland
• Iceland
• Ireland
• Netherlands
• New Zealand
• Norway
• Portugal
• Sweden
• United Kingdom
• United States

The possibility of entering into agreements with Spain covering both exchange of information and double taxation issues continues to be explored.