2015-04-20

Gibraltar is a British Overseas Territory located in the Mediterranean Sea. The territory joined the European Economic Community in 1973, and then joined the European Union in 1993. Under its current constitution, Gibraltarians have almost complete sovereignty within their country with only a few decisions still the purview of the United Kingdom.

Companies Ordinance of 1967

In 1967, the Gibraltar Parliament passed the Companies Ordinance, which created special taxation parameters for international businesses operating in the country. This led to the birth of a robust financial sector to utilize the advantageous taxation system in place.

Why Gibraltar?

Gibraltar benefits from an extensive and high-scale international business industry that has replaced the military as one of the leading industry sectors in the country. This thriving business is due, in large part, to the favourable tax system in place. In Gibraltar, there is no capital gains tax, wealth tax, sales tax, or value added tax. This means that businesses, foreign and domestic, keep more of their hard earned money.

Capital gains taxes are taxes levied on profit made by businesses, usually stocks, bonds, precious metals, and property. In certain jurisdictions, these taxes can be seriously burdensome to a business.

For comparison, the capital gains tax rate in the United Kingdom can be as high as twenty-eight percent. In the United States, the rate can climb to twenty-eight percent. In fact, in Denmark the tax can rise to forty-two percent of capital. For these reasons, Gibraltar offshore companies can save you and your business large amounts of money.

Which Taxes Exist in Gibraltar?

While Gibraltar is an incredibly favourable business market, it is not completely free of taxes. So which taxes exist in Gibraltar?

Gibraltar levies a gaming tax, which is a tax on online gambling. The gaming tax is levied at one percent of income from gambling. However, even this tax is capped at £425,000 with a minimum payable of £85,000.

Import duties are also charged at a rate from zero to twelve percent depending on the particular imported item. For example, the import duties on bicycles, solar panels, and electric cars have been eliminated. However, taxes on gasoline vehicles, alcohol, and tobacco have increased recently.

Corporation tax in the country is ten percent for all industries except energy and utility providers.

Gibraltar also collects income tax in two different ways, and which taxes to pay is an individual choice.

How Does the Income Tax Work?

Most taxes are non-existent in Gibraltar but the income tax still exists. The jurisdictions income taxes work in two different ways: gross income based system and allowance based scheme. The choice of which system to apply is up to the taxable person.

The gross income based system does not allow for tax exemptions but consists of several tax brackets with a tax rate that tapers from twenty-nine percent to five percent. The lowest tax rate occurs with all income over £1,000,000.

An individual can also opt into the allowance based tax scheme with allows for different tax deductions. Allowances are made for personal use, spouses, dependent children, nursery schools, disable dependents, dependent relatives, apprentices, homes, and other expenses.

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