Gibraltar

Budget 2025

In June 2025, the Chief Minister and the Minister for Taxation delivered their budget speeches, which included the below announcements.

Corporate income tax 

No changes to the rates of corporate taxation 

Social Insurance

The cap on both employer and employee social insurance contributions has increased by 5%.

Introduction of a Transaction Tax 

Given the political agreement with the EU on Gibraltar gaining access to the Schengen Area, a new Transaction Tax will be introduced and replace import duties. However, it is not the Gibraltar Government's intention to change or replace the rates of duties until the EU Treaty has been ratified and enacted into Gibraltar law. 

Once enacted, the Transaction Tax would be phased - starting at 15% in the first year, rising to 16% in the second and 17% in the third. A monitoring mechanism will be implemented to assess market distortions relative to Spain, allowing for future rate adjustments. Essential goods such as food, water, medicines, books, and electricity will benefit from a 0% super-reduced rate, while items like children's clothing and bicycles will fall under 5% reduced rate. Certain sectors, including bunkering, aviation, and bonded goods, will be exempted.

Excise duties aligned with EU minimum rates will apply to tobacco, alcohol, and fuel - with fuel benefiting from a three-year transition period. Tobacco pricing control will also be introduced to eliminate illicit trade. 

Employer-provided accommodation exemption

On 19 June 2025, the Gibraltar Government published the Income Tax (Amendment No.2) Act 2025, introducing significant changes to the tax exemption for employer-provided accommodation. Aimed at attracting international talent while tightening compliance, the exemption now applies only to "specific employees" whose skills are either scare or vital to Gibraltar's economic development, as determined by the Commissioner. Employers must formally apply for approval and report any changes to the accommodation. The exemption period is reduced from seven years to four years and can only be used once per employee. Directors are no longer excluded, and all benefits must be declared in annual returns, with non-compliance constituting an offence. Existing beneficiaries may retain the seen-year exemption unless their circumstances change. 

The amendment has yet to be passed and enacted into law but Gibraltar Parliament. 

New General Anti-Avoidance Rule 

On 10 April 2025, the Gibraltar Government published the Income Tax (Amendment) Act 2025 Bill, aimed at revising section 40 of the Income Tax Act 2010. This update introduces a General Anti-Avoidance Rule (GAAR), replacing the old anti-avoidance measures and empowering the Commissioner of Income Tax to tackle tax avoidance by dismissing or modifying the effects of such arrangements. It incorporates definitions for "tax avoidance arrangement" and "tax advantage" and employs a substance-over-form approach.

The legislation further specifies measures to counteract tax avoidance linked to Pillar 2 tax elections, profit accumulation followed by voluntary liquidation, and excessive remuneration from occasional presence. The Bill also gives the Commissioner of Income Tax powers to report professionals involved in promoting or facilitating tax avoidance schemes, or displaying conflicts of interest, to their regulatory bodies.

The Bill was formally passed and enacted into law by the Gibraltar Parliament in July 2025.