1 Basic framework
1.1 Is there a single tax regime or is the regime multi-level (eg, federal, state, city)?
Gibraltar has a single tax regime.
1.2 What taxes (and rates) apply to corporate entities which are tax resident in your jurisdiction?
The corporate tax rate is 10%, which is applied to the assessable profits of the company.
1.3 Is taxation based on revenue, profits, specific trade income, deemed profits or some other tax base?
Taxation is based on profits (ie, assessable income after allowable expenses).
1.4 Is there a different treatment based on the nature of the taxable income (eg, gains on assets as opposed to trading income or dividend income)?
No, all assessable income is taxed equally. However, only certain classes of income are subject to taxation in Gibraltar and classed as assessable income. These include:
- trade income;
- inter-company loan interest income exceeding £100,000 per annum; and
- royalty income.
Non-assessable income includes dividends and capitals gains.
1.5 Is the regime a worldwide or territorial regime, or a mixture?
Companies are taxed on a territorial basis of taxation, meaning that only income accrued in and derived from Gibraltar will be subject to taxation in Gibraltar
1.6 Can losses be utilised and/or carried forward for tax purposes, and must these all be intra-jurisdiction (ie, foreign losses cannot be utilised domestically and vice versa)?
Losses can be carried forward indefinitely, provided that:
- there is no change to the ultimate ownership of the company; and
- there has been no change of business within a period of three years.
Foreign losses cannot be utilised domestically.
1.7 Is there a concept of beneficial ownership of taxable income or is it only the named or legal owner of the income that is taxed?
The named or legal owner of the income will be taxed only.
1.8 Do the rates change depending on the income or balance-sheet size of the taxpayer?
1.9 Are entities other than companies subject to corporate taxes (eg, partnerships or trusts)?
No, only companies are subject to corporate tax. Partnerships are tax transparent. Trusts and foundations are subject to income tax on any assessable income and charged at a rate of 10%. Individuals are also subject to income tax at applicable rates.
2 Special regimes
2.1 What special regimes exist (eg, for fund entities, enterprise zones, free trade zones, investment in particular sectors such as oil and gas or other natural resources, shipping, insurance, securitisation, real estate or intellectual property)?
Generally, passive income is not taxable in Gibraltar. ‘Passive income' is not defined under Gibraltar law, but income such as bank income, dividends from listed investments and capital gains - which, collectively, is commonly referred to as passive income - is specifically exempt from tax in Gibraltar.
2.2 Is relief available for corporate reorganisations or intra-group transfers of companies and other assets? Please include details of any participation regime.
In order to facilitate group restructuring, recent changes have been made to allow for the transfer of losses between group entities upon restructuring, provided that there is no change to the ultimate ownership or change of business within a period of three years.
2.3 Can a taxpayer elect for alternative taxation regimes (eg, different ways to calculate the taxable base, such as revenue-based versus profits based or cash basis versus accounts basis)?
The Gibraltar Companies Act requires the use of generally applicable accounting standards in the preparation of financial statements. Most Gibraltar companies use the UK Financial Reporting Standards issued by the Financial Reporting Council, as adopted by the Gibraltar Society of Accounts. Accounts are typically drawn up in accordance with generally applicable accounting standards, UK generally accepted accounting principles or International Financial Reporting Standards.
2.4 What are the rules for taxing corporates with different functional or reporting currency from that of the jurisdiction in which they are resident?
The foreign currency must be converted into local currency (pounds sterling) when computing the taxable profits of the company.
2.5 How are intangibles taxed?
Intangible assets are not subject to taxation in Gibraltar.
2.6 Are corporate-level deductions available for contributions to pensions?
Employer contributions to an approved pension scheme are allowable as a tax-deductible expense.
2.7 Are taxpayers from different sectors (eg, banking) subject to different or additional taxes or surtaxes?
Companies with a banking or money lending licence earning interest as a trading receipt will have that interest treated as trading income, as opposed to interest income, and chargeable to taxation.
2.8 Are there other surtaxes (eg, solidarity surtax, education tax, corporate net wealth tax, remittance tax)?
In relation to the construction industry, payments made to a subcontractor will be subject to a 25% withholding tax if the subcontractor does not hold a valid tax certificate. Gaming companies that are established in and operating from Gibraltar are also liable to pay gaming duty in accordance with the applicable rates set out in the relevant legislation.
2.9 Are there any deemed deductions against corporate tax for equity?
3 Investment in capital assets
3.1 How is investment in capital assets treated – does tax treatment follow the accounts (eg, depreciation) or are there specific rules about the write-off for tax purposes of investment in capital assets?
Although depreciation is included in the accounts, it is not considered a tax-deductible expense. This is nevertheless compensated by the following capital allowances:
- The first £30,000 of qualifying expenditure on plant and machinery (including fixtures and fittings) acquired in a year of assessment is fully deductible, with the balance deductible at the rate of 15% per annum on a reducing balance basis.
- The first £50,000 of qualifying expenditure on computer equipment (including software) is fully deductible, with the balance deductible at the rate of 15% per annum on a reducing balance basis.
- Expenditure on motor vehicles which does not qualify as plant and machinery does not qualify for a first-year allowance, but is deductible at the rate of 15% per annum on a reducing balance basis.
3.2 Are there research and development credits or other tax incentives for investment?
There are currently no specific research and development credits or incentives in Gibraltar. However, there are certain incentives, as follows:
- In order to encourage private development in Gibraltar, promoters and developers of approved projects are offered certain development incentives, such as tax relief, import duty and rates relief. In order to qualify, the project must be a new project that is for the economic benefit of Gibraltar and that aims to:
- create a tangible immovable asset in Gibraltar;
- provide units or housing;
- afford new employment opportunities; or
- materially improve the economic or financial infrastructure of Gibraltar.
- For taxpayers with an interest in a building situated in Gibraltar, an allowance is available for approved expenditure on the painting, decorating, repair or enhancement of the frontage of the building.
3.3 Are inventories subject to special tax or valuation rules?
3.4 Are derivatives subject to any specific tax rules?
4 Cross-border treatment
4.1 On what basis are non-resident corporate entities subject to tax in your jurisdiction?
A non-resident corporate entity will be subject to taxation in Gibraltar if it has assessable income which is accrued in and derived from Gibraltar. Unilateral relief may apply.
4.2 What withholding or excise taxes apply to payments by corporate taxpayers to non-residents?
There is no withholding tax on interest, dividends or royalty payments.
4.3 Do double or multilateral tax treaties override domestic tax treatments?
Gibraltar has not entered into any double tax treaties. However, it has entered into tax exchange of information agreements with more than 25 jurisdictions.
4.4 In the absence of treaties, is there unilateral relief or credits for foreign taxes?
Yes, Gibraltar legislation does provide for unilateral relief for foreign taxes suffered on income that is subject to tax in Gibraltar.
4.5 Do inbound corporate entities obtain a step-up in asset basis for tax purposes?
4.6 Are there exit taxes (for disposed-of assets or companies changing residence)?
5.1 Are there anti-avoidance rules applicable to corporate taxpayers – if so, are these case law (jurisprudence) or statutory, or both?
Anti-avoidance rules are incorporated into Gibraltar legislation. More particularly, the Gibraltar Income Tax Act 2010 contains the anti-avoidance rules applicable to corporate taxpayers.
5.2 What are the main ‘general purpose' anti-avoidance rules or regimes, based on either statute or cases?
Gibraltar legislation contains general anti-avoidance provisions which allow the commissioner of income tax to disregard an arrangement which he believes is fictitious or artificial.
5.3 What are the major anti-avoidance tax rules (eg, controlled foreign companies, transfer pricing (including thin capitalisation), anti-hybrid rules, limitations on losses or interest deductions)?
Gibraltar legislation also contains specific anti-avoidance provisions that deal with:
- thin capitalisation;
- transfer pricing;
- interest limitation;
- controlled foreign companies; and
- hybrid mismatches.
5.4 Is a ruling process available for specific corporate tax issues or desired domestic or cross-border tax treatments?
Gibraltar recently incorporated specific rules that allow an application for a tax ruling to be made by an actual or potential taxpayer in relation to the potential income tax implications of a transaction, or any other matter relating to the practical application of Gibraltar tax legislation. Any requests are considered on a case-by-case basis at the discretion of the commissioner of income tax and on the basis of full facts and supporting documentation. The commissioner will reserve the right to invalidate a ruling if the facts and circumstances change or the legislation changes to the extent that it would no longer support such a ruling.
5.5 Is there a transfer pricing regime?
Yes. That amount of interest payments to connected persons which exceed what would be deemed arm's length will be treated as a dividend and therefore will not be deductible for tax purposes. Also, if the amount charged for goods and services by the connected person is not at arm's length, expenses allowed are subject to a maximum of the lesser of either:
- the amount of the expense;
- 5% of the gross turnover of the company; or
- 75% of the pre-expenses profit of the company.
5.6 Are there statutory limitation periods?
There is an ordinary time limit of six years for making tax assessments. However, where any form of fraud, wilful misconduct or neglect has been committed, tax assessments may be made up to 20 years after the end of the year of assessment.
6.1 What are the deadlines for filing company tax returns and paying the relevant tax?
Companies must file their tax returns within nine months of their financial year end. Two tax payments on account must be made in each year, by 28 February and 30 September, and each payment on account should be 50% of the tax paid for a relevant accounting period as defined in tax legislation. The final tax payment should be submitted with the company's tax return and should equal the amount of the tax liability for that year less the two tax payments made on account.
6.2 What penalties exist for non-compliance, at corporate and executive level?
Penalties are imposed if tax is not paid or if returns are not filed by the due dates. For late payment of tax, there is a penalty of 10% of the amount of tax due on the day immediately after such payment was due. If unpaid for 90 days, a further amount of 20% of the tax due is charged. Failure to file a return by the due date will result in a penalty of £50, with a further penalty of £300/£500 if the return is not submitted within three/six months respectively of the due date.
6.3 Is there a regime for reporting information at an international or other supranational level (eg, country-by-country reporting)?
Where the Gibraltar entity is a member of a multinational enterprise (MNE) group which has consolidated turnover of over €750 million, the Gibraltar entity must notify the commissioner of income tax of the identity and jurisdiction of tax residence of the entity that will file the country-by-country reporting on behalf of its MNE group within nine months of its financial year end.
7.1 Is tax consolidation permitted, on either a tax liability or payment basis, or both?
8 Indirect taxes
8.1 What indirect taxes (eg, goods or service tax, consumption tax, broadcasting tax, value added tax, excise tax) could a corporate taxpayer be exposed to?
Corporate taxpayers could be exposed to import duty on the importation of certain goods, if applicable. If they are employers, they will also be liable for payments of employer social insurance contributions. Stamp duty may be payable on the transfer of a property owned by a Gibraltar company.
8.2 Are transfer or other taxes due in relation to the transfer of interests in corporate entities?
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.