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Gibraltar Cuts Income Tax

July 2011 - Tax & Private Client. Legal Developments by Hassans.

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Peter Caruana, Gibraltar's Chief Minister, has released his budget for the fiscal year 2011/12, which introduces a number of rate and threshold changes to the personal income tax system, among other changes.

The most significant change contained in the budget is to the rates and thresholds imposed under the Gross-Income Based personal income tax system. The top rate has been reduced to 28%, down 1%, and the 8% lowest rate has been reduced to 6%. This is expected to cut the tax bills of approximately 13,500 taxpayers by between GBP160 and GBP1,460.


The rates and threshold changes will have the following impact:

  • All taxpayers earning up to GBP8,000 per annum will continue to pay zero tax;
  • All taxpayers earning up to GBP15,000 per annum will now pay tax at an effective rate lower than 11%;
  • All taxpayers earning up to GBP20,000 per annum will pay tax at an effective rate lower than 15%;
  • All taxpayers earning up to GBP25,000 per annum will pay tax at an effective rate lower than 17%;
  • All taxpayers earning up to GBP40,000 per annum will pay tax at an effective rate lower than 20%; and
  • The maximum effective rate of tax in Gibraltar is now 24.99% (not reached until income of GBP300,000), over which the effective rate begins to fall.

Those subject to tax on personal income under the allowances-based system will also see their tax liability fall, through the receipt of a tax cut of GBP300, or 2% of their tax bill, whichever is greater, delivered by means of a tax credit.

On the corporate side, Caruana said that GBP29m was collected in company tax in 2010/11, a year which was split for tax purposes as the new 10% rate was introduced. This meant that companies paid 22% in the first six months and 10% in the last six months of the year.

Revenues are expected to fall to GBP18.1m when existing tax-paying companies pay the 10% tax for a full 12 months, but the shortfall is expected to be filled by previously-exempt offshore companies, whose first payment on account under the new tax system will be due on August 31.

Other tax measures contained in the budget include a halving of import duties on audio and visual electrical equipment; tableware and kitchenware, and other household goods; sunglasses and spectacles; lamps and lighting; paints and varnishes; tools; toys; and porcelain, glass objects and ornamental goods from 12% to 6%.

Lastly, import duty on cigarettes is to increase by GBP0.12 per packet of 20 cigarettes, and by GBP10 per kg of rolling tobacco.

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