On 1 January 2011, the Income Tax Act 2010 came into effect. The new act ended the distinction between offshore and onshore businesses and moved Gibraltar to a system of self-assessment for companies and self-employed individuals.
The Act provides that all companies, however owned, are taxed on profits accruing in or derived from Gibraltar, thereby preserving the territorial basis of taxation. “Accrued in and derived from” is defined by reference to the location of the activities that give rise to the profits. In the case of companies licensed and regulated under Gibraltar law, the activities that give rise to the profits are deemed to take place in Gibraltar, with the exception of profits generated by overseas branches or permanent establishments.
The Commissioner of Income Tax is responsible for the administration of the Income Tax Act and for the assessment and collection of income tax. Except for bringing a prosecution for a tax offence, the Commissioner can authorize any individual to carry out any duties imposed by the Act.
Documents, information and returns are regarded as secret and confidential, and any official or other employee of the administration who does not observe this rule is guilty of an offense. Communication of such information is, however, permitted for carrying into effect the provisions of the act or in accordance with the EU Council Directives regarding exchange of information (principally the Mutual Assistance) or international tax information exchange agreements (see below). Communication is also permitted for the purposes of a prosecution or for enabling proper double tax relief to be given.
The Commissioner may allow the Financial Secretary, Principal Auditor or any other officer properly authorised on their behalf access to documents deemed necessary for the performance of their official duties.
An independent tax tribunal hears appeals brought by taxpayers. The members of the tribunal and a clerk are subject to a statutory declaration not to disclose any information except for the purposes of any prosecution for an offence relating to the Income Tax Act, or in such other cases as may be required by law. Proceedings before a tribunal are not open to the public.
As at 30 June 2016, Gibraltar has:
In 2009, Gibraltar was placed on OECD’s White List of territories that had substantially implemented the internationally agreed standard on tax information exchange. In June 2013, the EU Code of Conduct Group and the ECOFIN fully endorsed the IncomeTax Act 2010. Shortly afterward, the EU launched a state aid investigation into the tax treatment of passive interest and royalty income. (These have been taxable on companies since 1 July 2013 and 1 January 2014, respectively). In 2014, the investigation was extended to cover Gibraltar’s procedures for giving advance tax rulings and as on 30 June 2016 it is still in progress.
The Phase II report issued by the OECD’s Global Forum on transparency and exchange of information for tax purposes gave an overall rating of “Largely Compliant” — the same rating as that of the UK, Germany and the US. Gibraltar was found to be “compliant” in seven out of ten essential elements examined and “largely compliant” in the remaining three.
The Income Tax Act 2010 sets out the following different classes of income.
Class 1 — Dividends, except for dividends:
Class 1A — Intercompany loan interest (see Section 5.3.21 below)
Class 2 — income from a fund that is not marketed to the general public, including shares in or securities of an open-ended investment company; Taxability of the income depends on whether the underlying income of the entity or entities forming the structure of the fund is taxable
Class 3 — income from any right to and interests in anything falling within classes 1 or 2 above
Class 3A — royalties received or receivable by a company (see Section 5.3.22)
Class 4 — any pension, charge or annuity that is not maintenance, alimony or other payment to a spouse or child under a court order or deed of separation
Class 5 — any profits or gains to be treated as income under the anti-avoidance clauses of the Act
Companies are subject to tax in Gibraltar only on income mentioned in the above tables accruing in or derived from Gibraltar. In other words, companies are taxed on a territorial basis with regard to the activities giving rise to the income.
Persons other than companies (i.e., generally individuals and trusts) are subject to tax upon income as mentioned in Tables B and C on a worldwide basis. Income in Table A is only taxable when accruing in or derived from Gibraltar. Generally for individuals or trusts, this would mean rental income, which would only be taxable if the property is located in Gibraltar.
Income text is not payable on the following:
For individuals and trusts, the year of assessment runs from 1 July in one calendar year to 30th June in the following year, with taxpayers being assessed on an actual basis. Companies are assessed on an actual basis according to their financial year.
Respect to income from employment, tax is deducted from wages and salaries under a PAYE system. Any additional tax due is generally payable by the employee once assessed by the ITO. Income from self-employment is payable under self-assessment. A taxpayer should make two payments on account,* first by 31st January and second by 30th June in the year of assessment. Any balance remaining is payable by 30th November following the end of the tax year.
With respect to income from employment, tax is deducted from wages and salaries under a PAYE system. Any additional tax due is generally payable by the employee once assessed by the ITO.
Income from self-employment is payable under self-assessment. A taxpayer should make two payments on account,* first by 31st January and second by 30th June in the year of assessment. Any balance remaining is payable by 30th November following the end of the tax year.
Individuals are required to file their tax return for a tax year by 30th November following the end of that tax year. Individuals with income from self-employment must draw up their accounts to 30th June each year.
The trustees of a trust are required to pay any tax due from the trust under self-assessment. Payments on account* are due by 31st January and by 30th June in the year of assessment. Any remaining balance is payable by 30th November following the end of the tax year.
The trustees of a trust with assessable income are required to file a trust tax return by 30th November. Trusts with assessable income must draw up their accounts to 30th June each year.
A company is required to make two payments on account* of corporate tax, first by 28th February and second by 30th September each year. These are payments toward the tax liability for the financial year in which those payments are due. Any balance of tax remaining is payable within nine months of the end of the company’s accounting period.
*Payments are in two equal installments of 50% of the tax payable for the last relevant accounting period. If the taxpayer believes that the tax payable on account on this basis will exceed the liability payable for the year, they may apply to the Commissioner to be discharged in whole or in part from their obligation to make the advance payment. However, if it is subsequently found that the application has been made erroneously and that the final liability is higher than predicted by the taxpayer, a surcharge on late payment of the difference may apply.
For accounting periods ending on or after 1 January 2016 all companies registered in Gibraltar and all companies (whether Gibraltar-registered or not) with income assessable to tax in Gibraltar are required to file a tax return. Prior to this date, the filing requirement only applied to companies with income assessable to tax in Gibraltar.
The filing deadline is nine months after the end of the month in which the accounting period ended.
For accounting periods ending on or after 1 July 2015, a company with assessable income of £1.25 million or more (or equivalent on a pro rata basis if the accounting period is less than one year) is required to file audited accounts with its tax return. A company with assessable income of less than £1.25 million (or equivalent on a pro rata basis) is required to file accounts accompanied by an independent accountant’s report with their tax return (in practice, audited accounts would be accepted instead).
The audit threshold, which was introduced in 2011, was initially £0.5 million of turnover. This was raised to £1 million of assessable income for accounting periods ending on or after 1 July 2013, with the increase to £1.25 million applying to accounting periods ending on or after 1 July 2015.
Guidance has been issued by the Income Tax Office setting out the accounts that, in its view, would be required to be filed by companies that have no income assessable to tax in Gibraltar. For small companies (as defined in the Companies Act 2014) with no assessable income, only an abridged balance would be required to be filed.
A taxpayer may appeal against an assessment by notice in writing addressed to the Commissioner of Income Tax within 28 days of the date of service of the assessment. Such an appeal is formally made to the Income Tax Tribunal, although in practice if there are clear grounds for an appeal, it is usually resolved by the ITO before being referred to the Tribunal