Taking up residence in Gibraltar can be an astute move financially for individuals and families who have higher than average incomes and a qualifying amount of capital. The tax bill on their worldwide income can be substantially reduced by making Gibraltar their main place of residence. Those people resident in Spain but employed in Gibraltar can also benefit from new income tax measures that came into force in the tax year commencing 1st July 2007.
The High Net Worth Individual taxation scheme was introduced in 1992, and the current Qualifying (Category 2) Individual scheme is a continuation of that tax regime. Wealthy individuals who have not been resident in Gibraltar for the preceding five years can take up residence and find that the maximum amount of tax that they have to pay on their total worldwide income is only £22,000, a substantial discount to the amount they would have to pay if they were resident in most other countries. Income tax is assessed on only the first £60,000 of income, and as little as £18,000 could be liable. (These figures are based on current taxation legislation and could be subject to change through future government legislation. Individuals who may have been living or working in Gibraltar during the five years preceding the application to become a Category 2 resident may also take advantage of the Category 2 tax scheme, although certain restrictions apply in these cases.)
To qualify as a Category 2 individual, under current ruling the applicant must have a minimum net wealth sufficient to maintain a wealthy lifestyle and either own or rent a suitable property in Gibraltar that is for the exclusive use of the Category 2 individual and his or her family. The property must meet certain minimum standards and must be classified as a Category 2 residence; it can be owned or rented by the Category 2 individual, either solely or in joint ownership, or by a company which is in the sole ownership of the applicant. The property must be available for the individual throughout the year, although there is no minimum time set on the annual occupation of the residence by the individual. The Category 2 individual may not carry out any business activities that would compete with locally established businesses that derive their income within Gibraltar, although business activities in other jurisdictions are not restricted. Category 2 status is granted by the Finance Centre, after the qualifying individual has applied for the status and been approved by the Finance Centre Director. There is a £1000 non-refundable application fee, and the application must be accompanied by two character references from established professionals in banking and in legal or accountancy firms; other criteria must also be met.
Residence as a Qualifying Individual in Gibraltar is enhanced in the financial sense by the fact that there is no tax due on income derived from sources such as capital gains, gifts or savings. There is no estate duty payable in Gibraltar on assets of residents of Gibraltar.
Other individuals may also be able to benefit from income tax legislation designed to attract those people with specialist skills that are needed in Gibraltar, with differing amounts of tax payable dependent on which taxation regime is the most suitable. High Executives Possessing Specialist Skills (HEPSS) need only pay income tax on the first £100,000 of assessable income, while Qualifying (Category 3) Individuals pay £15,000 in income tax regardless of income. Qualifying (Category 4) Individuals pay either £7500 in income tax if their income is under £50,000 or £15,000 if it is over that amount. Applications for HEPSS status should be made by the company employing the qualifying individual and there are strict rules to ensure that the skill supplied by the individual is not otherwise available in Gibraltar and that it is in Gibraltar’s economic interest that the individual be employed in a Gibraltar-based business. Further information on qualifying status and the circumstances under which the various income tax regimes operate can be obtained from www.gibraltarlaws.gov.gi. However, it should be noted that Category 3 or Category 4 status is only available to those individuals who had held the status as at 1st July 2007, with no new applicants being considered for the status after that date.
A bone of contention with those people employed in Gibraltar but not resident on the Rock was that they were unable to claim for certain allowances and deductions that the Gibraltar resident is entitled to, such as mortgage interest tax relief. Accordingly, since the start of the 2007-2008 tax year there are two income tax systems in existence, either of which can be applied to people working in Gibraltar, whether resident or not. The allowance-based system takes into account various deductions that can be applied dependent on a person’s status. These can include spouse and child allowances and mortgage interest tax relief. The gross income-based system can be applied where no deductions are possible, with the employed individual paying 20% on the first £25,000 of income, 30% on the next £75,000 and 40% on amounts above £100,000.
With the advantages conferred by the Category 2 taxation system, it makes great financial sense for wealthy individuals and families to relocate to Gibraltar, quite apart from the advantages derived from residence in a safe and picturesque British enclave on the shores of the Mediterranean. If you are considering moving to Gibraltar, then 123 Property have a great selection of suitable properties, for either sale or rent, and we will be happy to help you find the perfect
property for you to reside in; we can also put you in contact with relocation companies that can ease your move into Gibraltar. We also have a good selection of properties in Spain, both luxury homes and more modest properties (see www.123propertynews.com). Call us on (+350) 200 47123 or email us at firstname.lastname@example.org and we will do our utmost to find the perfect property for you.
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