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Gibraltar - Taxation
There is no capital gains tax, VAT or sales tax, which makes the territory attractive for those who are wealthy, as they can also apply for a category 2 status which limits the amount of tax that they need to pay. Individuals who do not have category 2 status can be taxed under one of two systems and can choose whichever one would mean paying the least tax.
The gross base system is a tax system on the whole of the gross income. There are no allowances for individuals and income up to £25,000 is taxed at 20%, the next £75,000 is taxed at 29% and anything above £100,000 is taxed at 35%. For anyone who earns below £25,000 there are different rates. Those who earn less than £16,000 will pay 10% on the first £10k and 20% on the remainder. Those who earn an amount that falls between £16,000 and £25,000 will pay tax on a sliding scale between 0% and 20%.
There is also an allowance based system. The first £4000 is taxed at 17%. The next £12,000 is taxed at 30% and anything over this amount is taxed at 40%. An individual’s allowance is £2735, while the married allowance is £2560. A retired person over the age of 65 has an allowance of £10,590 while retired married persons have an allowance of £5290. A single parent can claim an allowance of £2560 and there are additional allowances which can be claimed for each child at nursery. There are allowances that can be claimed for educating children abroad and for disabled people as well as any dependent family members. Those who are buying a house will find that there is an allowance of up to £11,500 which can be claimed. If you have private medical insurance you can also deduct this from your tax liability. Those who have an income of less than £8000 will not have to pay any tax and there are additional allowances for those who earn less than £19.5k. Life insurance and mortgage interest is also tax deductible, as well as pensions contributions.
Category 2 status applies only to certain individuals and in order to have it, you must meet certain criteria. Your minimum net worth must be £2 million and you must be able to prove that your financial situation is on firm ground. You must have either a rented or bought home in the territory which is approved by the Gibraltar Finance Centre. This accommodation can be used only by you and your immediate family. If you have a property that you regularly allow others to use then you are classed as not having exclusive use of the property and would not qualify for category 2 status.
If you have spent more than 183 days in any tax year in the previous five years in Gibraltar you will be deemed to have had previous residency and this will also not qualify you. This also applies if you have spent an average of 90 days in the territory in three of the same five years. Once you have category 2 status you must undertake not to take part in any business or employment there. You can conduct business outside the territory and you must have private medical insurance.
Category 2 status is indefinite but the certificate has to be renewed every three years and the benefits of having it are clear for the wealthier members of society, as it caps the income tax payable at £25,580.
Further information on tax liability in Gibraltar can be found on the Gibraltar tax office website. The department is contactable by telephone and email and details on how to complete and file a tax return can be downloaded from the site.
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