The taxable base of a company is as defined in Section 5.2.2.
A company is considered to be ordinarily resident in Gibraltar if the management and control of that company take place in Gibraltar, or if the management and control is exercised outside Gibraltar by persons who are ordinarily resident in Gibraltar. Management and control mean the highest level of oversight, usually as exercised by the board, rather than day-to-day management. However, ordinary residence, in itself, is not what determines if a company is taxable in Gibraltar; this is determined by the location of the activities giving rise to the company’s profits (see Section 5.2).
As of 1 January 2011, all companies are chargeable on taxable profits at a rate of 10%, except for utility, energy and fuel supply companies and for companies deemed to be abusing a dominant market position, for which the applicable rate is 20%.
In 2010, the standard rate of tax for companies was 22%, with a reduced rate of 20% for small companies. This lower rate applied to companies whose taxable profits did not exceed £35,000 and which derived at least 80% of their turnover from trading. For profits ranging between £35,000 and £44,333, marginal relief applied.
Companies that commenced trading on or after 1 July 2007 benefitted from “start-up” relief, subject to conditions, under which the 10% tax rate applied prior to 2011.
Exempt company status was phased out by 31 December 2010.
As a general rule, a deduction in computing the profits or gains will only be allowed with respect to any disbursement or expense that is wholly and exclusively incurred for the production of income from a trade, business, profession or vocation. In addition, deductions are available with respect to the below points.
Expenditure incurred on painting, decorating, repairing and, in general, enhancing the appearance of the frontage of premises entitles the claimant to a deduction in computing the taxable income. This deduction is in addition to any other deduction that may already be available as a business expense, for example, if the expenditure already meets the criteria as a deductible repairs expense.
The expenditure must be certified by the town planner and the claim for the deduction must be made within two years after the end of the year of assessment for which the deduction is claimed.
A capped 200% credit was introduced for tax year 2015-16 onwards in respect of the cost of architect’s fees for successful planning applications under the Town Planning Act (and any fees charged by Government for such an application) made by a company in respect of its own property in the first 24 months of operation of a start-up company. The credit, capped at £5,000, is deductible against tax liabilities in the first three years of operation of the company.
For 2015-16 onwards, 150% of training costs are allowable against the profits of a business as a deduction.
For 2015-16 onwards, a one-off deduction is available against assessable income on the investment made by an individual, company or business in order to make a significant improvement to the EPC rating of their premises, subject to conditions.
The objective of Development Aid was to encourage investment in Gibraltar by way of development that brings a tangible and substantial benefit to the economy. Although the legislation is still in place, new Development Aid licenses are no longer being issued for the time being. The provisions of the legislation still apply to existing licence holders
Once a licence was granted, the relevant Government Minister, on the advice of the Development Aid Advisory Committee, determined what proportion of the total capital expenditure in percentage terms was available for tax relief.
The amount calculated on this basis is available as a deduction against taxable profits, with any unused amount being available to use as a deduction in future years. The amount of profits that have been offset by Development Aid, once distributed to the beneficial owners of the development company, is treated as non-taxable in the hands of those beneficial owners.
In addition, first-time occupiers of property that was the subject of a Development Aid licence are entitled to rates relief at the following rates:
|Commercial Premises||Residential Premises|
|6 (and after)||0% and so on|
The Income Tax Act 2010 includes a list of expenses that are not deductible, or for which the deduction may be restricted. These expenses include:
The first £30,000 of capital expenditure on plant and machinery (including fixtures, fittings and equipment acquired in a year of assessment is fully deductible within the year. An annual allowance is given for any remaining balance over this amount. From 1 January 2016 this includes commercial motor vehicles, and private motor vehicles only if for hire or the carriage of members of the public in the ordinary course of business or trade. Prior to that date, there were no initial allowance is given for motor vehicles, but an annual allowance is given as set out below.
In addition, the first £50,000 of qualifying capital expenditure on computer equipment is also fully deductible within the year. As for plant and machinery, an annual allowance is given for any remaining balance over this amount.
From 1 July 2015 onwards, new businesses may claim 100% of eligible capital allowances in the first year of trading, subject to conditions.
The following table summarises the position both before and after 1 January 2011.
|Until 31.12.10||From 1.1.11|
|Initial allowance||Additional allowance||Additional allowance|
|Plant and machinery (including fixtures and fittings)||100% on first £30,000||At 25% p.a. straight line on balance||At 15% p.a. on reducing balance|
|Computer Equipment||100% on first £50,000||At 25% p.a. straight line on balance||At 15% p.a. on reducing balance|
|Industrial buildings (including factories, hotels and similar premises)||4% p.a. straight line||4% p.a. straight line on cost|
As of 1 January 2011, all assets are pooled for tax purposes. The pool is increased by relevant capital expenditure in excess of the initial allowance in the period, and is reduced by the proceeds of any disposals during the period. The allowance for the year is then calculated at 15% of the value of the pool. The pool value is then reduced by that allowance and the remaining balance is carried forward to next year.
In addition to the above, from 1 July 2013, capital allowances are given with respect to the construction of office accommodation in Gibraltar where construction commenced on or before 31 March 2015. From 1 July 2014, this was extended to “high-value accommodation” where ground was broken before 31 December 2015. In the first year following the completion of construction, 30% of the construction costs are given as an allowance, with the remaining 70% over the subsequent seven years. This allowance can be claimed in part or in full by either the developer or the occupant. It is limited to those costs wholly and exclusively laid out or expended in the construction of the accommodation, including all preliminary planning, design and associated costs, but excluding the cost of the land.
Amount paid to a principal landlord (which is taxable for the landlord) in acquiring leasehold premises may be written off over the period of the lease, provided the lease is for 12 years or less.
Amounts amortized with respect to goodwill and other intangible assets (excluding any software in respect of which capital allowances apply) are not tax deductible.
There is no capital gains tax legislation in Gibraltar. Capital gains are, therefore, not subject to taxation.
Under the Income Tax Act 2010, losses can be carried forward indefinitely to be offset against future profits arising from the same or similar trade, profession or vocation. Any such losses cannot, however, be carried forward if, within a period of three years, there is both a change in the ownership of the company and a major change in the nature or conduct of a trade of the company.
There are no provisions for carrying back such losses. Losses made by former exempt companies (while holding exempt status) do not give rise to usable tax losses.
|Profit per accounts||£|
|Add: disallowable expenses included in accounts||X|
|Less: non-taxable income||X|
|Less: Capital allowances||X|
|Profit for the year subject to corporate tax||X|
|Less: losses brought forward||X|
|Taxation payable = 10%/20%||X|
|Less: Double tax relief||X|
|Less: new business start-up relief (see 5.3.18)||X|
|Net tax payable||X|
Dividends paid to resident shareholders attract a tax credit equivalent to the tax paid by the company on the profits out of which the dividend was paid.
In the case of dividends declared in accounting periods ending up to 31 December 2015, dividends are deemed first to be paid out of taxable income before non-taxable income.
Within those two groups of income, profits earned at an earlier date are allocated first.
For dividends declared in accounting periods on or after 1 January 2016, profits are grouped according to the headline tax rates applying. Profits corresponding to earlier groups are allocated first, but with taxable and non-taxable income in those groups being allocated in equal proportions.
There are detailed rules for calculating the amount of non-taxable income and for determining the amount of the tax credit. There are also rules for the transition from the earlier method of allocating dividends to the current method.
For accounting periods ending on or after 1 January 2016, a dividend return is required to be filed by any Gibraltar-registered company if it declares a dividend. Prior to this date, a dividend return was only required to be filed by a company if it declared a dividend in favour of a person ordinarily resident in Gibraltar, or to a Gibraltar incorporated company.
Dividend returns are required to be filed within nine months of the end of the end of the month in which the accounting period ends.
If a loan is made by a company to a shareholder, or to a person connected to a shareholder (in either case, the borrower not being a company), then the amount of the advance will be treated as a dividend, if in the opinion of the Commissioner of Income Tax this represents a distribution of income. The amount deemed to be a dividend is taxed accordingly. This rule is generally only applied if the loan is not already taxed as a loan to a director (or connected person) under the provisions in the Income Tax Act relating to benefits in kind (see Section 5.9.5).
As of 1 January 2011, all incorporated and unincorporated businesses are assessable to tax on an actual basis. Prior to this, many companies were assessed on a preceding year basis (i.e., for a given tax year, the profits assessed were those for the financial year ending in the prior tax year).
Businesses that were assessed on a preceding year basis up to 31 December 2010 are subject to transitional rules. Under those rules, a company is deemed to have ceased trading on 31 December 2010 and restarted on 1 January 2011.
These businesses will, therefore, be subject to cessation rules as set out in the previous Income Tax Act, as follows:
|Tax Year||Basis of assessment|
|Last (2010-11)||Beginning of tax year to date of cessation(1 July 2010 to 31 December 2010)|
|Penultimate (2009-10)||The greater of:
Special transitional rules applied for businesses established after 1 July 2007, which qualified for start-up relief. Moreover, companies that commenced trading after 1 July 2008 (if start-up relief is not applied) and companies that lost exempt tax status after 1 July 2007 are generally assessed on an actual basis.
There are no double tax agreements in force between Gibraltar and any other jurisdiction. However, tax relief is available with respect to foreign income tax paid, deducted from, or liable to be paid on, income that is also chargeable to Gibraltar tax, up to the lower of Gibraltar tax or foreign tax on the income. This only applies where the jurisdiction imposing the foreign tax is the same as the jurisdiction in which the income is generated.
There is no provision for group relief in Gibraltar.
There is no automatic requirement to withhold tax on any payment due to a non-resident under an agreement for management or consultancy services or services of a similar nature performed in Gibraltar.
However, the recipient will be liable to tax and the Commissioner may instruct the payer to withhold tax on any future payments.
Gibraltar has implemented the EU Parent-Subsidiary Directive and the EU Directive on interest and royalties, so that no tax or withholding taxes apply on dividends, royalty and interest payments paid between associated companies within the EU (minimum shareholding, residency and establishment rules apply).
In the case of dividends, in general, a Gibraltar-registered company holding, directly or indirectly, a relevant participation of the voting capital of a company registered in another member state does not pay corporate tax on any income derived from that company.
Similarly, any dividends paid by a Gibraltar-registered company to a company in another member state are not subject to withholding tax. The relevant participation means an interest equal to at least 10% in the voting share capital.
[Note: The company of the member state must be of a type listed under the directive. This lists specific types of companies acceptable in each jurisdiction as well as the kind of tax those companies must be subject to in their respective states.]
Apart from legislation arising from these two EU Directives, there is, in any case:
An incentive scheme is available to companies for business start-ups which commence between 5 July 2016 and 30 June 2017. The business will be eligible for a tax credit equal to the tax otherwise payable up to a maximum of £50,000 over each of the first three years of trading. The business must have at least five employees in the first year. There are anti-avoidance measures to ensure that it is only applied to genuinely new businesses in Gibraltar
The tax treatment of profits accrued and derived in Gibraltar by branches (or any form of permanent establishment) established by foreign companies in Gibraltar is similar to companies. Similarly, profits accrued and derived by branches or permanent establishments of Gibraltar companies in another jurisdiction are not liable to Gibraltar corporate tax to the extent of the activities so conducted outside Gibraltar.
Protected cell companies are taxed as if each cell were a separate company.
Interest from loans or advances by one company to another company are taxable where the interest from the individual company concerned is £100,000 or more per annum. As an anti-avoidance measure, interest received or receivable from different companies will be considered to be from the same company for the purposes of the £100,000 threshold where those companies are “connected persons” as defined elsewhere in the Income Tax Act 2010.
For the above purposes, interest will be deemed to be accrued and derived in Gibraltar where the company in receipt of the interest is a Gibraltar-registered company. This applies from 1 July 2013 onward.
With effect from 1 January 2014, royalties received or receivable by a company are taxable. If the company in receipt of the royalty is a company registered in Gibraltar, the royalty is deemed to accrue in and derive from Gibraltar.
Gains or profits derived by a non-resident person (including companies) from the carriage of passengers or cargo to or from Gibraltar in any ship or aircraft owned, chartered or operated by that person is not taxable.