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Gibraltar Residency: Tax benefits of being a resident of Gibraltar

Becoming a tax resident of Gibraltar can provide a wide range of tax saving benefits. Learn more about the benefits of Gibraltar residency

Written on 21 November 2019

Gibraltar residency is an exciting prospect due in no small part to Gibraltar’s thriving economy, full employment - and it is the preferred destination for many expats, particularly British people looking to live abroad.

Of course, familiarity is a great advantage and for British expats there is a common language, legal and education system as well as the territory only being a short flight from the UK.

Such a mix of expat employees and entrepreneurs compliments the local population together with many high net worth individuals and retirees looking for a benign tax regime.

Common tax statuses in Gibraltar

The first thing to point out is that compared to a number of countries the entry requirements for the high net worth scheme and the retiree (self-sufficiency scheme) are relatively modest.

The Category 2 status, which limits income tax to a maximum of £27,560 per annum on worldwide income, requires the tax resident to either rent or buy a designated property and to prove net worth of £2 million.

For the self-sufficiency scheme, it is enough to be able to rent or buy a property while also being able to prove you have sufficient means to support your lifestyle.

However, it is never quite that simple. You will also require private medical insurance and there is an ongoing and increasing requirement to substantiate your residency in the territory rather than spend the bare minimum number of days in Gibraltar or trigger residency in another jurisdiction. This is particularly relevant for people who spend a large amount of time across the border in Spain where increased collaboration by way of a formal agreement between the two governments means it is ever more difficult to avoid some Spanish taxation if you intend to spend the majority of your time that side of the border.

Tax advantages of gaining Gibraltar Residency

Gibraltar has some very generous tax advantages, for example there Gibraltar residents are not subject to:

  • Taxes on savings
  • Capital gains tax
  • Wealth taxes
  • VAT

There is also no inheritance tax either although that will not exempt British people from their inheritance tax responsibilities in the UK. This is due to British people being likely retain their UK domicile which means that worldwide assets will still be liable to UK IHT despite moving to the territory.

If you are unsure about your inheritance tax liabilities, or wish to discuss legitimate ways to reduce your exposure to inheritance tax, it is important that you seek specialist advice

For self-sufficient residents relying on investment income, there is likely to be no income tax to pay and even pensions transferred to Gibraltar QROPS will only suffer tax at 2.5% on any income drawdown.

For employers and employees there are also key advantages.

Corporation tax is at the special rate of 10% and income tax for most employees should not exceed a marginal rate of 25% whatever your earnings. There is even a special scheme to attract highly skilled executives where income tax is capped at £29,940 based on the first £120,000 of salary. Any additional earnings are tax free.

Like any jurisdiction establishing residency or setting up a company can be time consuming and difficult. There are plenty of pitfalls and mistakes can be costly. That is why it makes sense to engage the services of a cross border firm of specialists who can not only take care of your residency needs but also provide you with an holistic approach to your financial planning to make sure that you take advantage of the various tax breaks becoming resident in Gibraltar offers.