An individual is regarded as being resident in Gibraltar if he resides in Gibraltar except for “temporary absences which are considered reasonable by the Commissioner of Income Tax” (i.e. generally if he resides in Gibraltar for more than six months in the year). A resident is chargeable to income tax on his worldwide income (with certain exceptions) after deduction of all expenses which are wholly and exclusively incurred in the production of that income.

RESIDENTS

Category 2 Individuals

The status of High Net Worth Individuals (HNWI) was introduced in February 1992 by the Government of Gibraltar. New low tax limits for HNWI’s were introduced to encourage wealthy individuals to establish a residence in Gibraltar. These were revised and are now set out in the Qualifying (Category 2) Individuals Rules 1999.

The status of HNWI and residency is particularly attractive for individuals of countries that have a high rate of personal tax and impose tax by way of residency rather than citizenship (e.g. USA). In essence a HNWI will only pay tax on the first £50,000 of assessable income with a minimum tax payable per annum of £14,000. In the first year of assessment the minimum tax payable under the new Rules shall be £833.33 for each complete month or part thereof.

Only income received or remitted to Gibraltar is taxable and therefore such individuals could still hold a Gibraltar tax exempt company or a Gibraltar qualifying company (see separate information) or indeed hold deposits in their own name in a bank in Gibraltar. The income from such companies or bank accounts will only be taxable if received by the individual for his own use in Gibraltar. Additionally British nationals with pensions based in the UK can relocate their pensions to Gibraltar and make significant tax savings.

Application for Category 2 Status (HNWI)

An application for this status is made to the Financial & Development Secretary and a Qualifying (Category 2) Individual Certificate under the Qualifying (Category 2) Individuals Rules 1999 of the Income Tax Ordinance will be issued. In order for an individual to qualify as a HNWI he will be required pursuant to the new Rules to have available for his exclusive use approved residential accommodation in Gibraltar for the whole of the year of assessment (July to June).

In addition, in support of an application an applicant must submit a Curriculum Vitae detailing his qualifications and work experience and two references, one of which must be from a banker confirming that the individual has available to him a minimum £500,000 worth of bank deposits. A copy of the applicant’s passport must be included together with evidence of the ownership or rental of property. A non-refundable application fee of £1000.00 is payable on submitting an application.

Taxation

There are no allowances or deductions. Tax is payable only up to the maximum assessable income of £50,000 notwithstanding that the income remitted to Gibraltar is less than that amount. The advantage of this is that no tax return will need to be made to the Gibraltar Authorities. The difference between the minimum tax payable of £10,000 and the amount of £20,000 which would be payable could be offset against any liabilities for tax in respect of income dealt with under the rules in the next year of assessment.

Residency

Once the HNWI status has been approved an application for residency is made under the Immigration Control Ordinance. The process for obtaining residency differs depending on whether the HNWI is a European Union or non European Union National. Applications are made to the Governor of Gibraltar who will issue a permit to any person who in his opinion is of good character and it is in the interests of Gibraltar that he be issued with such a permit. A permit is valid for such period as the Governor may specify. Generally, a permit of residence is valid for a period of one year and renewal thereafter.

Each applicant will have to satisfy the authorities that he holds private medical insurance which would cover him and his family in the event of illness in Gibraltar.

Whilst the holding of a permit does not automatically entitle a person to claim citizenship or any social benefit or social security in Gibraltar, children of the family may attend local schools and enjoy benefits enjoyed by local residents.

Qualifying (Category 2) Individuals

Individuals who have obtained a Category 2 Individual certificate are subject to a special tax regime. They are liable to a minimum charge of £14,000 and an effective maximum of £20,000 for a full tax year. Such individuals must have approved residential accommodation in Gibraltar available for their exclusive families, but must not have been resident in or engaged in trade, business or employment in Gibraltar during the preceding five years.

Category 2 individuals may not engage in a trade, business or employment in Gibraltar other than duties which are incidental to any trade business or employment based outside Gibraltar or duties as a director of a Qualifying or Exempt Company.

Qualifying (Category 3) Individuals

An Exempt or Qualifying company with a physical presence in Gibraltar may apply for a certificate designated an individual as a Category 3 individual.

This certificate fixes the amount of tax payable by the individual from emoluments earned from the Exempt or Qualifying company and most other classes of income to £10,000 per annum only. The individual must have skills or experience which are essential to the operation, not currently available in Gibraltar and important for the economic regeneration of the territory. In addition they must have accommodation available for their use in Gibraltar and should not have been employed locally during the previous five years.

Qualifying (Category 4) Individuals

A Category 4 individual is assessable to income tax at the rate of £5,000 per annum if his taxable income for the year does not exceed £50,000 and at a rate of £10,000 per annum or otherwise.

The rules and conditions pertaining to this status are similar to those pertaining to Category 3 individuals. However, the company making the application must also satisfy the Government that connected with the appointment of the Category 4 individual it has created new and additional employment.

Non Residents

Permitted Individual (British and Non-British)

Permitted individuals are non-residents who carry on, exercise or undertake in Gibraltar any trade, business, profession, vocation or employment. They are entitled to personal allowances (except mortgage interest relief, first time home buyer allowance or child relief in respect of children educated overseas) and the reduced rate of tax on the first £3,000 of income. Allowances are reduced by 1/12 for each complete calendar month that the individual is not in business or employment in Gibraltar.

Qualifying Individuals

Individuals who are not ordinarily resident or domiciled in Gibraltar and have no income derived in Gibraltar (except income from exempt or qualifying companies) can apply for a Qualifying Certificate. A Qualifying Individual will be charged to tax on his worldwide income at a rate of not less than 2%, as may be specified on the Certificate, but the total amount of tax cannot exceed £20,000.

FIRST ROCK TRUSTEES LIMITED

First Rock Trustees Limited is licensed by the Gibraltar Financial Services Commission to provide company, ordinary trust and asset protection trust management services

For further information, please contact:

Bernard Hazell – Resident Director – email: bernard.hazell@moorestephens.gi

Cindy Glasby – Legal Compliance Officer – email: cindy.glasby@moorestephens.gi

Maurice Posso – Tax Manager – email: maurice.posso@moorestephens.gi

We believe the information to be correct at the time of going to press but we cannot accept responsibility as a result of acting or refraining from acting as a result of any item herein