An individual is regarded as being resident in Gibraltar if he resides in Gibraltar except for “temporary absences which are considered reasonable by the Commissioner of Income Tax” (i.e. generally if he resides in Gibraltar for more than six months in the year). A resident is chargeable to income tax on his worldwide income (with certain exceptions) after deduction of all expenses which are wholly and exclusively incurred in the production of that income.
Category 2 Individuals
The status of High Net Worth Individuals (HNWI - see factsheet here) was introduced in February 1992 by the Government of Gibraltar. New low tax limits for HNWI’s were introduced to encourage wealthy individuals to establish a residence in Gibraltar. These were revised and are now set out in the Qualifying (Category 2) Individuals Rules.
The status of HNWI and residency is particularly attractive for individuals of countries that have a high rate of personal tax and impose tax by way of residency rather than citizenship (e.g. USA). In essence a HNWI will only pay tax on the first £80,000 of assessable income with a minimum tax payable per annum of £22,000 and a maximum of £29,880p.a. In the first year of assessment the minimum tax payable under the new Rules shall be £1,833.33 for each complete month or part thereof.
Only income received or remitted to Gibraltar is taxable and therefore such individuals could hold deposits in their own name in a bank in Gibraltar. The income from such bank accounts will only be taxable if received by the individual for his own use in Gibraltar. Additionally British nationals with pensions based in the UK can relocate their pensions to Gibraltar and make significant tax savings.
Application for Category 2 Status (HNWI)
An application for this status is made to the Finance Centre Director and a Qualifying (Category 2) Individual Certificate under the Qualifying (Category 2) Individuals Rules of the Income Tax Act will be issued. In order for an individual to qualify as a HNWI he will be required pursuant to the Rules to have available for his exclusive use approved residential accommodation in Gibraltar for the whole of the year of assessment (July to June).
In addition, in support of an application an applicant must submit a Curriculum Vitae detailing his qualifications and work experience and two references, one of which must be from a banker confirming that the individual has available to him a minimum £2million worth of net assets. A copy of the applicant’s passport must be included together with evidence of the ownership or rental of property. A non-refundable application fee of £1000.00 is payable on submitting an application.
There are no allowances or deductions. Tax is payable only up to the maximum assessable income of £80,000 notwithstanding that the income remitted to Gibraltar is less than that amount. The advantage of this is that no tax return will need to be made to the Gibraltar Authorities.
Once the HNWI status has been approved an application for residency is made under the Immigration, Asylum and Refugee Act. The process for obtaining residency differs depending on whether the HNWI is a European Union or non European Union National. Applications are made to the Governor of Gibraltar who will issue a permit to any person who in his opinion is of good character and it is in the interests of Gibraltar that he be issued with such a permit. A permit is valid for such period as the Governor may specify. Generally, a permit of residence is valid for a period of one year and renewal thereafter.
Each applicant will have to satisfy the authorities that he holds private medical insurance which would cover him and his family in the event of illness in Gibraltar.
Whilst the holding of a permit does not automatically entitle a person to claim citizenship or any social benefit or social security in Gibraltar, children of the family may attend local schools and enjoy benefits enjoyed by local residents.
Individuals who are not ordinarily resident or domiciled in Gibraltar and have no income derived in Gibraltar (except income from exempt or qualifying companies) can apply for a Qualifying Certificate. A Qualifying Individual will be charged to tax on his worldwide income at a rate of not less than 2%, as may be specified on the Certificate, but the total amount of tax cannot exceed £20,000.
Other Non Residents
Generally liable to tax on income accruing in, derived from, or received in Gibraltar with certain exceptions. In particular, tax on interest from bank and building society deposit accounts is exempt, as are dividends and (generally) interest paid by a Gibraltar company.