Doing Business In Gibraltar, The 2019-20 handbook

Doing Business

In Gibraltar

The 2019-20 handbook

Brexit developments

The parliamentary majority secured by the Conservative party at the General Election on

12 December 2019, paves the way for PM Johnson to re-introduce the European Union

(Withdrawal Agreement) Bill before Christmas, to enable the UK and Gibraltar to leave

the EU on 31 January 2020, on the terms set out in the withdrawal agreement.

A transition period between exit date and 31 December 2020 will then come into place

where Gibraltar and the UK would remain subject to EU Laws. The transition period is

envisaged to allow the EU and UK to negotiate a deal on the future long-term trade

relationship between the two blocs.

Throughout the Brexit process, the UK Government has provided repeated assurances

that the UK will negotiate both the withdrawal and the future relationship with the EU on

behalf of and for the benefit of the whole UK family, including Gibraltar. The UK

Government has been clear that when it come

s to financial markets, there are strong

mechanisms already underpinning Gibraltar’s access to the UK market which are

enshrined in UK law and that the UK government will maintain

that access in post-Brexit

scenario.

The clear commitment from the UK to maintain access to its markets, which are the

mainstay of our business in key sectors such as Insurance and e-gaming, together with

double taxation agreements concluded during the year with the UK and Spain, underpins

Gibraltar’s positive outlook that we can navigate the challenges and take advantage of

the opportunities as we leave the EU together with the UK.

Contents

Executive summar

-9

1 Introduction and general

information 10-21

2 Business entities and accounting 22-42

3 Finance and investment 43-53

4 Residency, employment regulations

and social security contributions 54-62

5 Taxation 63-115

6 Appendices 116-130

Doing business in Gibralta

B. Foreign investments

Currency and

exchange controls

Ź Official currency —Sterling

Ź No exchange controls

Ź Residents and non-residents permitted to maintain

accounts denominated in foreign currencies

Banking services

Ź Well established

Regulatory and supervisory practices that match UK

standards

Ź Some major banks (including one UK clearing bank)

represented in Gibraltar

Ź Services offered: retail, private and corporate banking,

loans, import finance and mortgages on real estate

Investor protection

Ź Deposit Guarantee Scheme (in compliance with the EU

Deposit Guarantee Directive)

Ź Investor Compensation Scheme (in compliance with the EU

Directive on Investor Compensation Schemes)

UK standards of supervision and regulation

Import and export

procedures

Ź Not part of customs territory of the EU

Ź Few restrictions

Ź Import duties generally at rates of 0% (exempt) and a newly

introduced rate of 200% for disposable plastic products

Ź No VAT or other sales taxes

Excise duties

Ź Levied mainly on spirits, wines and tobacco

Doing business in Gibraltar

Executive summary on Gibraltar

A. General

Location Ź Southern tip of the Iberian Peninsula

Land area Ź 7 sq. km (approximately

)

Population Ź 32,000 (approximately

)

Language

Ź English (official), Spanish

Climate Ź 23°C-35°C (summer), 10°C-25°C (winter

)

Time zone Ź GMT +1

Status Ź UK overseas territory

Ź Local government responsible for internal affairs

Ź UK Government responsible for defence, external affairs

and internal security

Economy Ź Leading activities: financial services, tourism, shipping

and online gaming

Ź Joined the European Union (EU) with the UK in 1973 but

exempted from Common Customs Tariff, Common

Agricultural Policy and harmonization of turnover taxes

(notably VAT)

Legal system Based on common law and the rules of equity (as the UK)

GDP £2.35 billion(estimate for year to 31 March 2019

)

Inflation 2.8% (year to July 2019

)

Doing business in Gibraltar

B. Foreign investments

Currency and

exchange controls

Ź Official currency —Sterling

Ź No exchange controls

Ź Residents and non-residents permitted to maintain

accounts denominated in foreign currencies

Banking services Ź Well established

Regulatory and supervisory practices that match UK

standards

Ź Some major banks (including one UK clearing bank)

represented in Gibraltar

Ź Services offered: retail, private and corporate banking,

loans, import finance and mortgages on real estate

Investor protection Ź Deposit Guarantee Scheme (in compliance with the EU

Deposit Guarantee Directive)

Ź Investor Compensation Scheme (in compliance with the EU

Directive on Investor Compensation Schemes)

UK standards of supervision and regulation

Import and export

procedures

Ź Not part of customs territory of the EU

Ź Few restrictions

Ź Import duties generally at rates of 0% (exempt) and a newly

introduced rate of 200% for disposable plastic products

Ź No VAT or other sales taxes

Excise duties Ź Levied mainly on spirits, wines and tobacco

Doing business in Gibraltar

Executive summary on Gibraltar

A. General

Location Ź Southern tip of the Iberian Peninsula

Land area

Ź 7 sq. km (approximately

)

Population Ź 32,000 (approximately

)

Language

Ź English (official), Spanish

Climate

Ź 23°C-35°C (summer), 10°C-25°C (winter

)

Time zone Ź GMT +1

Status

Ź UK overseas territory

Ź Local government responsible for internal affairs

Ź UK Government responsible for defence, external affairs

and internal security

Economy

Ź Leading activities: financial services, tourism, shipping

and online gaming

Ź Joined the European Union (EU) with the UK in 1973 but

exempted from Common Customs Tariff, Common

Agricultural Policy and harmonization of turnover taxes

(notably VAT)

Legal system Based on common law and the rules of equity (as the UK)

GDP £2.35 billion(estimate for year to 31 March 2019

)

Inflation 2.8% (year to July 2019

)

Doing business in Gibraltar

D. Local Tax

Income tax

Taxpayers may choose between the traditional allowance-based system (ABS) and

the gross income based system (GIBS) (see Section 5.4.1).

Income tax rates GIBS

Ź See Section 5.6

ABS

Ź See Section 5.7

In almost all cases, the effective (overall) rate never exceeds

25%

Principal

allowances

Ź See Sections 5.6.2 and 5.7.2

Corporation tax Companies with income taxable in Gibraltar are taxed on an

actual basis so that the tax period of assessment is the same

as the financial year of the company.

The standard rate of corporation tax is 10% (20% in the case

of utility, telecom and petroleum companies and companies

which abuse a dominant market position).

Companies are taxed on profits accrued in or derived from

Gibraltar (i.e., territorial basis of taxation).

In case of companies licensed and regulated in

Gibraltar,

profits

are deemed to accrue in and be derived from Gibraltar,

except for profits from activities conducted outside Gibraltar

by a branch or permanent establishment.

No tax is payable on dividends paid between companies.

Non-Gibraltar

income

In the case of companies, income that is not accrued in or

derived from Gibraltar is not subject to tax. Upon distribution

to individuals or to trusts, only such shareholders who are

resident would be liable to tax in Gibraltar.

Resident individuals, trusts and foundations are generally

subject to tax on a worldwide basis.

Withholding tax There is no withholding tax on dividends, interest or royalties.

Doing business in Gibraltar

C. Key financial products

Trusts

Recognised and widely used in Gibralta

Ź Trust legislation based on English law of equity

Ź Residency of trust established by the residency of the

beneficiaries only (excluding Category 2 individuals, see

below); non-resident trust only liable to tax on income

accrued in or derived from Gibraltar

Foundations Ź Introduced in 2017, by the Private Foundations Act 2017

Ź An entity with a separate legal personality

Ź Tax treatment very similar to that of a trust

Asset protection

Designed to protect a settlor’s assets from certain trust

situations

Aims to provide a higher degree of certainty in

determining legal propriety

High net worth

individual (Category

2 individuals)

Ź Only the first £80,000 of assessable income taxable,

(Category 2 individuals) resulting in maximum tax payable

of £27,560. Subject to a minimum of £22,000.

Additional tax payable on certain income accrued in and

derived from Gibraltar

High Executive

Possessing

Specialist Skills

(HEPSS)

Ź Tax payable limited to the first £120,000 of earned

income

Ź Conditions relating to skills, residential accommodation,

previous non-residency and managerial position apply

Doing business in Gibraltar

D. Local Tax

Income tax

Taxpayers may choose between the traditional allowance-based system (ABS) and

the gross income based system (GIBS) (see Section 5.4.1).

Income tax rates GIBS Ź See Section 5.6

ABS Ź See Section 5.7

In almost all cases, the effective (overall) rate never exceeds

25%

Principal

allowances

Ź See Sections 5.6.2 and 5.7.2

Corporation tax Companies with income taxable in Gibraltar are taxed on an

actual basis so that the tax period of assessment is the same

as the financial year of the company.

The standard rate of corporation tax is 10% (20% in the case

of utility, telecom and petroleum companies and companies

which abuse a dominant market position).

Companies are taxed on profits accrued in or derived from

Gibraltar (i.e., territorial basis of taxation).

In case of companies licensed and regulated in Gibraltar,

profits are deemed to accrue in and be derived from Gibraltar,

except for profits from activities conducted outside Gibraltar

by a branch or permanent establishment.

No tax is payable on dividends paid between companies.

Non-Gibraltar

income

In the case of companies, income that is not accrued in or

derived from Gibraltar is not subject to tax. Upon distribution

to individuals or to trusts, only such shareholders who are

resident would be liable to tax in Gibraltar.

Resident individuals, trusts and foundations are generally

subject to tax on a worldwide basis.

Withholding tax There is no withholding tax on dividends, interest or royalties.

Doing business in Gibraltar

C. Key financial products

Trusts

Recognised and widely used in Gibralta

Ź Trust legislation based on English law of equity

Ź Residency of trust established by the residency of the

beneficiaries only (excluding Category 2 individuals, see

below); non-resident trust only liable to tax on income

accrued in or derived from Gibraltar

Foundations

Ź Introduced in 2017, by the Private Foundations Act 2017

Ź An entity with a separate legal personality

Ź Tax treatment very similar to that of a trust

Asset protection

Designed to protect a settlor’s assets from certain trust

situations

Aims to provide a higher degree of certainty in

determining legal propriety

High net worth

individual (Category

2 individuals)

Ź Only the first £80,000 of assessable income taxable,

(Category 2 individuals) resulting in maximum tax payable

of £27,560. Subject to a minimum of £22,000.

Additional tax payable on certain income accrued in

and

derived from

Gibraltar

High Executive

Possessing

Specialist Skills

(HEPSS)

Ź Tax payable limited to the first £120,000 of earned

income

Ź Conditions relating to skills, residential accommodation,

previous non-residency and managerial position apply

Doing business in Gibraltar

Stamp duty Stamp duty is payable only on real estate and capital

transactions at the following rates:

Ź Share capital £10 (flat rate)

Ź Loan capital £10 (flat rate)

It is payable on purchase of real estate as follows:

First and second-time buyers

First £260,000 of purchase price Nil

Balance above £260,000 to £350,000 5.5%

Balance above £350,000 3.5%

Other buyers

Where purchase price does not exceed

£200,000

Nil

Purchase price ranging between

£200,001 and £350,000

2% on first

£250,000 and

5.5% on balance

Purchase price exceeding £350,000 3% on first

£350,000 and

3.5% on balance

Gaming tax Levied at the rate of 1% on relevant income (gaming yield for

online casinos and bets placed for online bookmakers), capped

at £425,000 with a minimum payable of £85,000 p.a., per

licence

Doing business in Gibraltar

Wear and t

Wear and tear Initial allowanc

Additional allowanc

Plant and machinery

(including fixtures and

fittings)

100% on first £30,000

(except for non-

commercial motor

vehicles)

At 15%* p.a.(including

fixtures (except for non-

commercial reducing

balance

Computer equipment 100% on first £50,000 At 15%* p.a. on

reducing balance

Industrial buildings

(including factories and

similar premises)

4% p.a. straight line on

cost

Assets are pooled for the purposes of calculating capital allowances and reduced by

the proceeds of any disposals.

*The annual capital allowance is given at 20% of the pool value for any company taxable at

20% on profits (for example, utility and energy companies).

Taxation of capital Ź No estate duty, capital gains tax or other capital

taxes

Savings income Ź Income of a passive nature is not liable to tax

Pensions

Ź Income from approved occupational pensions is

tax-free

Ź Income from Approved Qualified Recognised

Overseas Pension Schemes (QROPS) are taxed at

2.5%

Contributions to approved occupational and

personal pension schemes are eligible for tax

relief (subject to limits)

Ź No requirement to buy an annuity — 100% of the

capital may be withdrawn tax-free on retirement

age

Doing business in Gibraltar

Stamp duty Stamp duty is payable only on real estate and capital

transactions at the following rates:

Ź Share capital £10 (flat rate)

Ź Loan capital £10 (flat rate)

It is payable on purchase of real estate as follows:

First and second-time buyers

First £260,000 of purchase price Nil

Balance above £260,000 to £350,000 5.5%

Balance above £350,000 3.5%

Other buyers

Where purchase price does not exceed

£200,000

Nil

Purchase price ranging between

£200,001 and £350,000

2% on first

£250,000 and

5.5% on balance

Purchase price exceeding £350,000 3% on first

£350,000 and

3.5% on balance

Gaming tax Levied at the rate of 1% on relevant income (gaming yield for

online casinos and bets placed for online bookmakers), capped

at £425,000 with a minimum payable of £85,000 p.a., per

licence

Doing business in Gibraltar

Wear and t

Wear and tear Initial allowanc

Additional allowanc

Plant and machinery

(including fixtures and

fittings)

100% on first £30,000

(except for non-

commercial motor

vehicles)

At 15%* p.a.(including

fixtures (except for non-

commercial reducing

balance

Computer equipment 100% on first £50,000 At 15%* p.a. on

reducing balance

Industrial buildings

(including factories and

similar premises)

4% p.a. straight line on

cost

Assets are pooled for the purposes of calculating capital allowances and reduced by

the proceeds of any disposals.

*The annual capital allowance is given at 20% of the pool value for any company taxable at

20% on profits (for example, utility and energy companies).

Taxation of capital Ź No estate duty, capital gains tax or other capital

taxes

Savings income

Ź Income of a passive nature is not liable to tax

Pensions

Ź Income from approved occupational pensions is

tax-free

Ź Income from Approved Qualified Recognised

Overseas Pension Schemes (QROPS) are taxed at

2.5%

Contributions to approved occupational and

personal pension schemes are eligible for tax

relief (subject to limits)

Ź No requirement to buy an annuity — 100% of the

capital may be withdrawn tax-free on retirement

age

Doing business in Gibraltar

During the subsequent three centuries (2004 marked the tercentenary of British Gibraltar),

the Rock has been, and continues to be, an important British defence asset. It has played a

key role in conflicts such as the Revolutionary and Napoleonic Wars of the late 18th and early

19th centuries, the First and Second World Wars, and more recently, the Falklands and Gulf

Wars. At the start of the 21st century, the importance of Gibraltar in the defence of one of

the world’s most important strategic locations remains unchanged.

In the years following the British capture of Gibraltar, Spain repeatedly sought to recover

the territory. During the 18th century, these attempts were of a military nature, but more

recently the Spanish Government has sought to further its claim by applying economic and

diplomatic pressure, culminating in the closure of the frontier from 1969 to 1985.

The Spanish claim over Gibralta

r has been impeded by the refusal of the people to

countenance any change of sovereignty, and by the British Government’s refusal to impose

any such change

against local wishes. The people of Gibraltar overwhelmingly manifested

their desire to preserve their links with the UK in the referenda held in 1967 and 2002.

Despite these political differences, cross-border business and social relations are friendly

and extensive, with circa 7,000 Spanish nationals working in Gibraltar and many

Gibraltarians owning holiday homes in Spain.

On 14 December 2006, after a long process of negotiation between the Gibraltar and

the UK Governments, a new constitution was granted to Gibraltar. This new constitution

provides Gibraltar with a much higher degree of self-government while preserving British

sovereignty. The UK remains fully responsible for Gibraltar’s external relations.

1.4 Government and judiciary

Gibraltar is a self-governing UK overseas territory. The 2006 Constitution Order provides

for a governor as Her Majesty’s representative in Gibraltar. The governor is responsible for

external affairs, defence, internal security and various public appointments as specified

in the Constitution. Elected ministers are responsible for any matters that fall outside the

governor’s responsibilities.

The Constitution includes an updated chapter on the fundamental rights and freedoms

of the individual. It establishes a legislature for Gibraltar consisting of Her Majesty and an

elected parliament, and a council of ministers appointed from among the elected members

of the parliament. It provides for a supreme court and a court of appeal for Gibraltar, and

for appeals to Her Majesty in council. It also makes provision for public finance and for the

public service of Gibraltar.

Doing business in Gibraltar

Introduction and general information

1.1 Geography and climate

Gibraltar lies at the southern tip of the Iberian Peninsula and covers 7 sq. km. The famous

Rock of Gibraltar rises to 426 meters (1,396 feet) above sea level at its highest point and

towers above the Strait of Gibraltar, the strategic waterway that connects the Mediterranean

and the Atlantic Ocean.

The Spanish enclave of Ceuta in North Africa lies directly opposite just 23 Km (14 miles) away

and the Moroccan city of Tangier is 51 Km (32 miles) away at the western end of the strait.

The Spanish town of La Linea de la Concepción lies beyond the narrow isthmus joining

Gibraltar to the Spanish mainland. Gibraltar airport is built across this isthmus.

The temperature can reach as high as 40°C in the summer months of July and August, with

lows of 10°C in January and February. Normally, though, the winter temperature does

not fall below 13°C and in summer, it ge

nerally ranges between 28°C and 33°C. Climatic

conditions are further affected by the pressure differences that can exist between the

Mediterranean

and the Atlantic, resulting in strong winds. Westerly and southerly winds

bring hotter, drier weather, whereas the easterlies produce cooler humid conditions.

1.2 Population and language

Gibraltar’s population is of diverse origin, but most are local and of mainly English, Spanish,

Portuguese, Maltese or Genoese origin.

English is the official language. However, most Gibraltarians are bilingual in English and

Spanish.

1.3 History

Gibraltar has long been a dramatic landmark at the western end of the Mediterranean. There

is archaeological evidence of Neanderthal habitation, and in ancient times the Rock of

Gibraltar became a place of worship where sailors would offer sacrifices to the gods before

venturing into the Atlantic.

However, the modern history of Gibraltar begins in 711 AD when an Islamic force led by the

Berber general,

Tariq ibn Ziyad, landed at the foot of the Rock and then proceeded to

conquer most of the Iberian Peninsula. The Rock was then named Gibel Tariq, the mountain

of Tariq, from which the modern “Gibraltar” is derived.

The Moors remained in Iberia for more than seven centuries and Gibraltar did not fall into

Spanish hands until 1462. Spain controlled Gibraltar until 1704 when, during the War of

the Spanish Succession, it was captured by a combined Anglo-Dutch force. Gibraltar was

formally ceded to Britain, in perpetuity, at the end of that war by Article X of the Treaty of

Utrecht of 1713. Britain’s title was reaffirmed in 1783 by the Treaty of Versailles.

Doing business in Gibraltar