How Sovereign Tax Services can help
Qualified and experienced in UK and Gibraltar tax matters, Sovereign Tax Services can provide tax advisory and tax compliance services to individuals, companies, trusts and pensions schemes.
Gibraltar Tax Residency
Gibraltar offers special residency regimes that are specifically designed to attract HNWIs (Category 2) and High Executives Possessing Specialist Skills (HEPSS). These make Gibraltar a very attractive home for entrepreneurs, for retirees and for suitably qualified individuals and their dependants that wish to enjoy the Mediterranean climate and lifestyle while living in an international finance centre with a favourable tax regime.
Sovereign Fiscalis, now rebranded and trading as Sovereign Tax Services, is a Gibraltar-based tax compliance and tax advisory firm, specialising in Gibraltar tax and residency. We can provide tailored tax advice, manage any residency application process, as well as providing introductions to professional service providers, such as legal, real estate and relocation firms. As part of the Sovereign Group, we can also utilise its international tax and structuring expertise to advise on international arrangements across multiple jurisdictions.
Individuals applying for Gibraltar residency under the ‘Category 2’ residency regime are required to hold private medical insurance (PMI). Through Gibraltar-based Sovereign Insurance Services (SIS), we can further assist with securing competitive PMI, as well as all types of general or life insurance to meet the individual’s insurance needs in Gibraltar.
The Qualifying (Category 2) Individuals Rules 2004 provide for a well-established regime that limits income tax for HNWIs wishing to reside in Gibraltar.
Key ‘Category 2’ Tax Benefits
- Gross assessable income is generally capped at £118,000 per annum (2021-22 £105,000 per annum)
- At current rates, maximum annual tax liability is 44,740
- At current rates, minimum annual tax liability is £37,000
- Spouse and family income may be included
- Gibraltar does not levy wealth tax, capital gains tax, inheritance tax or gift tax and neither does it levy income tax on many types of investment income.
Following successful application to the Finance Centre Director, and receipt of a Category 2 certificate, the holder becomes taxable in Gibraltar, but only to a limited extent. Only the first £118,000 of assessable income derived by a Category 2 Individual is generally taken into account when calculating their tax liability in Gibraltar. However, income from certain Gibraltar activities, if permitted under the Category 2 regime, for example, the receipt of Gibraltar rental income, can be taxable separate to, and in addition to, the Category 2 tax.
The maximum annual tax liability, which generally arises if £118,000 or more of assessable income is received is currently £44,740,. Category 2 residency is subject to a minimum annual tax liability of £37,000, which is pro-rated in years of arrival and departure. The Gibraltar tax year runs from 1 July to 30 June.
The benefits of Category 2 residency, which can be a lifetime status subject to the eligibility criteria being satisfied on an ongoing basis, can extend to the worldwide income of a spouse or civil partner and of dependent unmarried children up to 18 years or to the end of their higher education.
Category 2 residency in Gibraltar is awarded on the decision of the Finance Centre Director. To become a Category 2 resident in Gibraltar, an applicant is required to:
- Verify that he or she has a minimum net worth of £2 million and is of good character.
- Either rent or buy appropriate accommodation in Gibraltar for his or her exclusive use.
Eligibility restrictions apply if the applicant has previously been resident or working in Gibraltar within the preceding five years.
Generally, Category 2 residents should not carry out business in competition with ordinary Gibraltar taxpayers. However certain local activities are permitted, with the approval of the Finance Centre Director. Any income derived from such activities may be taxed separate to, and in addition to, the Category 2 tax (at 41%).
Once established, there is no minimum physical presence required in Gibraltar to maintain Category 2 residency. However, this will not protect an individual from also becoming tax resident elsewhere if they qualify under the residency rules of another country. If a Category 2 individual is spending time outside Gibraltar, awareness of the residency rules in that country is essential.
Gibraltar Category 2 residency is in principle conferred for an indefinite period of time, but it is required to be endorsed every three years. Upon endorsement, the Finance Centre Director considers whether all the requirements of the status have been complied with and that there are no other valid reasons to cancel the residency certificate.
Summary of Benefits
- No gift, succession or inheritance taxes in Gibraltar
- No capital gains or wealth taxes in Gibraltar
- No VAT or sales taxes in Gibraltar
- Generally, maximum annual tax liability of £44,740
- Good economy and infrastructure
- Mediterranean climate
- Vibrant housing market
Find details of the Category 2 regime summarised here:
High Executives Possessing Specialist Skills (HEPSS)
Gibraltar is keen to attract individuals who bring special skills not available locally. The HEPSS Rules 2008 provide a favourable tax regime for individuals who possess particular skills in key positions in a locally established business.
This HEPSS regime has played an important role diversifying and widening the skills base of the Gibraltar economy, particularly in respect of the gaming and financial services sectors. The government is also encouraging the creation of a critical mass of specialists in particular areas such as IT and Digital Ledger Technology (DLT) that will hopefully generate growth in new economic activities.
- Gross assessable income is capped at £160,000 per annum
- At current rates maximum annual tax liability is £43,140
A person in possession of a HEPSS certificate is only taxable on the first £160,000 of assessable income, including any bonuses, perquisites and other benefits in kind connected with employment. At current rates, this would result in a maximum tax payment of £43,140 per annum. This tax is pro-rated in years of arrival and departure.
HEPSS residency is awarded on the decision of the Finance Centre Director. A company that is either incorporated, registered or carrying on business in Gibraltar must apply to the Finance Centre Director for a certificate to be issued designating that a role held within the organisation is to be carried out by a HEPSS individual.
Qualifying individuals are required to satisfy the following conditions:
- The applicant must have specialist skills that are necessary to promote and sustain economic activity of particular economic value to Gibraltar or the establishment, development or growth of which the Government is seeking to facilitate and encourage
- Those skills are not available in Gibraltar and are important for the economic development and growth of Gibraltar
- The applicant will occupy a high executive or senior management position
- The applicant will earn more than £160,000 per annum in Gibraltar
- The applicant must have exclusive use of approved HEPSS property. The property may either be bought or rented
- The applicant has not previously been resident or working in Gibraltar within the three years preceding the application
For HEPSS residents with a valid and in force HEPSS certificate on 31 July 2021, earning more than £120,000 but less than £160,000, there are transitional rules. These rules state that their HEPSS status remains in force until the earlier of:
- 31 July 2023, or
- the expiration of the period of validity of the certificate or the revocation of the certificate.
From 1 August 2021, such HEPSS residents will be chargeable to Gibraltar tax in accordance with the Gross Income Based tax system on all of their assessable income. This removes the (£120,000) tax cap they previously benefited from and effectively results in any assessable income between £120,000 and £160,000 being taxed at 27%.
These rules apply until 31 July 2023, unless the HEPSS certificate expires or is revoked sooner. If the income of the HEPSS resident increases to over £160,000 by the end of the transitional period, they can revert to benefiting from the HEPSS cap, now set at £160,000.
In addition to assessable income under the HEPSS regime being capped at £160,000, Gibraltar does not levy wealth tax, capital gains tax, inheritance tax or gift tax and neither does it levy income tax on many types of investment income.
Find details of the HEPSS regime summarised here:
HOW SOVEREIGN TAX SERVICES CAN HELP
We can assist with all matters relating to the obtaining of Category 2 and HEPSS residency in Gibraltar.
We can also combine local and international tax expertise to advise on individual circumstances.
The services we provide include:
TAX ADVISORY AND TAX COMPLIANCE SERVICES
Individuals are subject to income tax in Gibraltar on income accruing in or derived from Gibraltar. An ordinarily resident individual is also generally liable to Gibraltar income tax on certain types of income from non-Gibraltar sources. Nonetheless, many exemptions from Gibraltar income tax apply, for example, bank and building society interest, dividends from quoted companies, dividends paid to non-residents etc.
The concept of self-assessment applies so that individuals are required to make annual returns of their assessable income.
We provide Gibraltar tax advisory and tax compliance services to Gibraltar residents, and non-Gibraltar residents in receipt of Gibraltar source income (e.g. Gibraltar rental income). As tax agents, we can manage individual tax compliance obligations, ensuring full entitlement to any relevant allowances, deductions, exemptions and reliefs is claimed and deal with the tax authorities on your behalf.
You can check your Gibraltar tax position with our 2023/24 Gibraltar Tax Rate Brochure:
Generally, non-UK residents are liable to UK income tax on UK source income. However various forms of UK income may be exempted, with, for example, UK income tax on such income restricted to any UK tax withheld at source. The most common types of UK chargeable income for non-UK residents are UK rental income and profits from a trade carried on in the UK.
Generally, non-UK residents are not within the scope of UK Capital Gains Tax on gains realised. However, there are some important exceptions, which include gains realised on the direct or indirect disposal of UK property and gains realised in a period of temporary non-UK residence.
We can advise non-UK residents on the territorial limits of UK tax and how this impacts their UK tax position. Where any UK self-assessment tax reporting is required, we are registered tax agents with HMRC and can prepare and submit online annual self-assessment tax returns. Often, for many, completion of such tax returns can be a daunting prospect, we can help relieve this burden, ensuring correct reporting and calculating any liabilities and advising on payments or repayments (where appropriate).
PROPERTY TAX SERVICES
MANAGING TAX COMPLIANCE FOR PROPERTY INVESTORS AT HOME OR ABROAD
Owners of investment property are legally required to ensure compliance with their tax obligations. This can be challenging when the property is located in a different country to the owner’s country of residency, but with increasing information exchange, the pressure to comply intensifies.
Sovereign Tax Services, can guide and assist landlords by providing the following services for Gibraltar and/or UK property:
Landlord registration with the Gibraltar Income Tax Office and preparation and filing of annual Gibraltar Tax Returns reporting the rental profits. This may include a calculation of any available capital allowances and consideration of any available tax credits for new property rentals. Both Gibraltar and non-Gibraltar resident landlords are legally required to comply with these rules.
On 24 February 2022, the Gibraltar Government announced the launch of its Register of Property Occupation, by commencement of the Register of Property Occupation Act 2021. This Register is fully integrated into the Gov.gi eServices portal, and will provide the Government with an accurate and live record of people who reside in Gibraltar. With effect from 24 February 2022, Gibraltar residents have a legal requirement to register and detail the names of all persons who are residing in their property whether owned by them, rented or licensed by them, within a period of 3 months. For rented property, this requires tenants and landlords to provide details to be maintained in the Register. There are fines for non-compliance. It is highly recommended that landlords of Gibraltar property (whether resident themselves in Gibraltar or not) review their tax arrangements and ensure that they are compliant and up-to-date as soon as possible. Sovereign Tax Services provide Gibraltar tax compliance services to landlords, helping to provide peace of mind that tax affairs are dealt with correctly and are up to date.
Many non-UK residents own UK property, this is often a result of retaining a previous UK residence or having built up a property portfolio in the UK. The UK tax law in this area has changed rapidly and significantly in recent years. This poses challenges for non-UK resident owners who are often unaware of such developments.
Sovereign Tax Services can assist with reviewing the UK tax position in order to plan for the future and to avoid being caught unawares. We can prepare and submit online UK Self-Assessment tax returns, providing peace of mind that tax affairs have been dealt with. A review undertaken in good time can save considerable time and anxiety in the long term.
In particular, Sovereign Tax Services can provide the following services:
For UK property rentals, registration with HM Revenue & Customs (HMRC) as a non-resident landlord (if required) and preparation and online filing of annual UK Income Tax Returns.
For any UK property disposals, we can advise on the position in respect of UK Capital Gains Tax.
Advising on the UK Inheritance Tax position in respect of UK property ownership.
Both UK resident and non-resident landlords are legally required to comply with these rules.