Case Study: Living in Gibraltar

Interview with Eran Shay, Managing Director of Benefit Business Solutions in Gibraltar

Eran Tell us a bit about Gibraltar.

Gibraltar is fast becoming a favored jurisdiction for high-net-worth individuals and businesses that are looking for a legitimate way to lower their tax bill in a properly regulated financial environment. Having signed more than 80 Tax Information Exchange Agreements and been whitelisted by the OECD and the EU, Gibraltar has completed a transition from offshore tax haven to a mainstream leading European financial services centre. Gibraltar also has a Double-Taxation Treaty with the UK and a Tax MoU with Spain. Gibraltar offers compelling tax planning advantages for businesses and high net worth individuals considering a new country of residence.

Why would someone choose to live in Gibraltar?

Whether this is for personal tax restructuring, estate planning or simply for a change of lifestyle there are significant benefits to being tax resident in Gibraltar. Businesses pay a flat rate of corporation tax which is set at 12.5% whilst being able to enjoy direct and easy access to the UK (especially useful post-Brexit), with English as its official language and modeled on the English legal system. Moreover, Gibraltar operates a territorial basis of taxation so companies are only taxed on income accruing in or derived from Gibraltar. Advance rulings can be obtained from the Commissioner of Income Tax to give companies certainty on their tax position. Other advantages of Gibraltar tax regime include:

• No Capital gains tax;
• No VAT;
• No tax on Dividends (for non-residents);
• No Wealth tax;
• No tax on collective investment schemes;
• No Inheritance tax;
• Interest income of up to £100,000 per annum, from loans between companies, is tax free. Thereafter taxable at 12.5%;
• Royalty income is taxable at 12.5%

What are the benefits for Individuals who are considering living in Gibraltar.

There are two distinct tax residency categories suitable for high-net-worth individuals and High Executives, both offer tremendous tax advantages:

1. CATEGORY 2 Residency: Individuals who are looking to protect either their trading or earned income from higher rates of taxation in their country of residence or where they declare their income. The key conditions which must be fulfilled to obtain Category 2 Gibraltar residency status are as follows:
   1. The Category 2 individual must be of substantial and sound financial standing and have a minimum net worth of £2 million (including assets/property). There is no requirement to bring the funds to Gibraltar.
   2. The Category 2 resident must own or rent approved residential accommodation in Gibraltar. The property must be approved by the Gibraltar Finance Centre and be used exclusively by the Category 2 individual and large enough to house direct family (if applicable).
   3. The Category 2 individual cannot have been resident in Gibraltar during the five years immediately preceding the year of assessment.
   4. The Category 2 individual is not allowed to engage in a trade, business, or employment in Gibraltar unless it is in a sector or activity which is not in direct competition with a local business
2. Category 2 status is granted on an indefinite basis, but the Category 2 residency certificates need to be sent to the Gibraltar Finance Centre for renewal every three years.
3. The Category 2 individual must have private medical insurance to cover them and their family in the event of illness in Gibraltar
4. There is no minimum physical residence requirement in Gibraltar for a Category 2 resident, meaning the individual is not required to live in Gibraltar even 1 day a year!

Application for Category 2 residency must be submitted via a local agent in Gibraltar, together with proof of net assets provided by the applicant’s accountant or banker.

Eran how much tax will the new resident under this Category need to pay?

Only the first £118,000 of the taxable income of a Category 2 Individual is considered when calculating the tax payable. Only income remitted to Gibraltar is considered, although an individual may elect for his/her worldwide income to be considered. Maximum tax payable of £44,740 and a minimum tax charge of £37,000, per annum (as at 2023).

Eran in addition what are the benefits for this new resident?

The individual will receive a Gibraltar Residency status & ID Card and will enjoy the benefits of: No Inheritance Tax and No Wealth Tax, No Capital Gains Tax, No Gift Tax, No taxation on interest savings, No taxation on dividend income arising from companies quoted on a recognized stock exchange. The individual can also apply for British citizenship after 5 years (compared to after 10 years in the UK)

What other alternatives are there in Gibraltar?

There is the “High Executive Possessing Specialist Skills” Residency Category (styled a “HEPSS individual”) which has been designed to attract top corporate executives to Gibraltar. Under HEPSS category, an individual will only be chargeable to Gibraltar Income Tax on the first £160,000 earned. Thus, at prevailing rates, for the HEPSS individual, taxation will effectively be limited to a figure of about £43,140 (27%) a year (as at 2023). The big benefit is that any income above the initial £160,000 will be completely tax-free!.

Eligibility for HEPSS Status

The criteria for entitlement for this special tax status is as follows:

1. The applicant must possess skills which are necessary to promote and sustain economic activity of economic value to Gibraltar, or the establishment, development or growth of which the Gibraltar Government is seeking to facilitate and encourage.
2. The applicant will be occupying a senior management position and will earn more than £160,000 per year
3. The skills possessed by the applicant are important for the economic benefit of Gibraltar
4. The applicant has for his “exclusive use” for the period covered by the certificate, residential accommodation in Gibraltar approved as such by the Finance Centre
5. The applicant has not been gainfully occupied or resident in Gibraltar for any part of the period of 3 years immediately prior to the making of the HEPSS Application (there exists a power to waive this criterion).

Application for HEPSS residency must be submitted via a local agent in Gibraltar, together with proof of Employment Contract showing renumeration of at least £160,000 per annum.

Besides the fiscal benefits of living in Gibraltar, it is also important to mention the high quality of life that this jurisdiction offers, with over 300 days of warm sunshine a year on average; a vibrant Mediterranean culture; a very safe place to live; excellent schooling options (above UK average); strategic location with Spain on its doorstep, Morocco 10 miles across the Strait and Portugal 3 hours’ drive away, and no need to spend hours on commuting everyday as given its small size, almost everywhere is within easy walking distance.

For more information on Eran visit his website:

www.benefitgibraltar.com