Gibraltar Location

5.5 Alternative methods of personal taxation

Under the GIBS, a taxpayer is entitled to very few allowances and/or reliefs, but generally the applicable tax rates are lower. The majority of taxpayers are taxed under the GIBS, under which the effective (i.e., overall) tax rate is never more than 25%.

Irrespective of the system that is opted for, on final assessment, the ITO will apply the system most beneficial to the taxpayer.

In general, where a taxpayer opts for the GIBS and the spouse does not, the availability of allowances to the spouse opting for the ABS is restricted. In such a case, any allowance claimed by the spouse up to 30 June 2007 who now opts for the GIBS may not be “transferred” to the spouse opting for the ABS. Other restrictions include:

  1. Mortgage Interest Relief: In relation to the purchase of a home after 30 June 2007 in Gibraltar where neither spouse had, by that date, claimed mortgage interest relief for the year ended 30 June 2007, mortgage interest relief available to the spouse being taxed under ABS is restricted to the lower of 50%* of the eligible mortgage interest paid and one-sixth of that spouse’s assessable income.
  2. Home Purchase Allowance (HPA): In relation to the purchase of a home after 30 June 2007 in Gibraltar where neither spouse had, by that date, claimed the HPA for the year ended 30 June 2007, the HPA available to the spouse being taxed under ABS is restricted to a maximum of 50%* of the deduction that could otherwise be claimed. The ITO also restricts the HPA to one-sixth of the assessable income of the spouse claiming the allowance.
  3. Life insurance policies taken after 1 July 2007 on the lives of both spouses: In such a case, the spouse that has opted for the ABS is not entitled to claim relief on the life insurance premiums.
  4. Medical insurance policy covering both spouses: As mentioned above, the spouse that has opted for the ABS cannot claim any allowances.
  5. Pension contributions: The spouse of a person contributing to a pension scheme that opts for the GIBS cannot claim tax relief on contributions.

*The party claiming the allowance must have at least a 50% legal interest in the property.

However, individuals opting for the ABS will always be able to benefit from the following allowances or reliefs even if their spouses opt for the GIBS (note that this list is not exhaustive):