Gibraltar

Budget 2024

In July 2024, the Chief Minister and the Minister for Taxation delivered their budget speeches, which included the below announcements.

Corporate income tax (CIT)

The rate of corporate taxation will increase from 12.5% to 15% with effect from 1 July 2024. 

Import duty

The following measures relating to import duty were announced:

• Mild hybrid electric vehicles (MHEVs) will pay import duty at the rate of 10% (previously 0%).
• Full hybrids and plug-in hybrid electric vehicles (PHEVs) will pay import duty at the rate of 5% (previously 0%).
• Pleasure crafts will pay import duty at the rate of 5% (previously 0%). The cap will be fixed at 35,000 British pounds (GBP) as it is for vehicles.
• The above duty increases will not apply to importations where the vehicle/vessel was ordered before 30 September this year, even if delivered after.

Stamp duty 

It was confirmed that the special stamp duty introduced previously in respect of sales of government affordable homes will not apply to sales after an acquisition of an affordable home on the open market.

New purchase agreements and assignments of off-plan purchases will be registrable instruments with a 0.5% special stamp duty payable on Assignment of Purchase Agreement (by the assignor). This will not include sales on subsidised estates.

Restriction on brought-forward trading losses

The government will introduce legislation to restrict the use of accumulated tax losses for companies within the financial services and gaming sectors. The measure seeks to limit the brought-forward trading losses for each accounting period but will not seek to eliminate them. The measure will take effect as from 1 July 2024.

Taxation on the profits or gains derived from property sales 

The Minister for Taxation announced a new tax measure under which any entity or person who holds an interest in three or more residential properties over five consecutive years will be subject to tax on the gain upon disposal of any of the properties. Specified properties are exempt from this measure, including properties used as the primary residence of the beneficial owners and in an estate of a deceased person. 

Anti-avoidance provisions will be implemented where any individuals undertaking professional conveyancing activities on behalf of another will have a reporting obligation to notify the Income Tax Office. 

Increase in audit threshold

Jointly with the Minister for Taxation, the Minister for Business announced that the audit threshold for companies will increase from GBP 1.5 million to GBP 1.75 million, applicable to accounting periods that end on or after 1 July 2024.

Extension of taxation of interest as a trading receipt to insurers and distributed ledger technology (DLT) firms

In February 2024, the Minister of Taxation announced an extension of taxation on interest income as a trading receipt to include insurance companies and DLT firms.

The amendment to the Income Tax Act 2010 specifies interest or ’similar amounts‘ and lists these as to include financial instruments that pay a recurring amount of income, income from virtual assets, discounts, or any other arrangement that has a purpose, or one of the main purposes, to avoid tax under paragraph 15 of the Act.

Anti-avoidance provisions prevent an individual from purposely disposing of the interest-generating asset or instrument to a connected person where the interest income would be outside the scope of taxation under paragraph 15 of the Act. Where it is found that the main purpose, or one of the main purposes, is the avoidance of taxation, the individual disposing of the asset or instrument will be assessable to taxation as if the disposal had not occurred.

Global Minimum Tax Act 

On 18 December 2024 the Gibraltar Government enacted the Global Minimum Tax Act 2024 (the Act). The Act imposes a Global Minimum Tax including a Domestic Minimum Top Up Tax compliant with the Organisation for Economic Co-Operation and Development (OECD) objectives by direct reference to their Global Anti-Base Erosion Model Rules (Model Rules) and Commentary and for connected purposes. 

The Act introduces a Qualifying Domestic Minimum Top-Up Tax (QDMTT) and an Income Inclusion Rule (IIR), adhering to the OECD's Model Rules with certain exclusions where applicable. The QDMTT will be effective for fiscal years commencing on or after December 31, 2024, and the IIR will apply to fiscal years starting on or after 31 December 2025.

Other changes that have taken effect over the past year

The Gibraltar Government passed a series of bills based on the 2024 budgets proposals as well as previous proposals during December 2024 parliamentary session. Each bill specifies the dates which they come into operation or changes from the initial proposals. These are as follows:

Taxation on the profits or gains derived from property sales 

The Income Tax (Amendment No.2) Act 2024 implemented the tax on the profits or gains from the sale of properties with certain amendments from the initial announcement. These changes include increasing the property threshold from three to five properties and exempting properties constructed prior to, and held by the owner since, 1 January 1988. The amendment comes into operation 1 January 2025. 

Restriction on brought-forward trading losses

The Income Tax (Amendment No.4) Act 2024 implements a proposed measure aimed at safeguarding tax revenue in the light of accumulated tax losses. The bill was passed by Parliament on 18 December 2024. The amendment limits the use of losses to offset no more than 50 percent of profits or gains for the period. These new regulations will not affect losses incurred during accounting periods or assessment years ending between 1 July 2021, and 30 June 2023. 

This measure applies to the following "Designated Persons" for accounting periods ending on or after July 31, 2024:

• any individual (includes a company) engaged in a regulated activity as defined by section 5 of the Financial Services Act 2019; 
• any individual involved in an activity that requires licensing under section 3(1) of the Gambling Act; 
• any person connected to those mentioned in (A) or (B).

A Designated Person must first apply losses from accounting periods or assessment years ending between 1 July 2021, and 30 June 2023, before applying losses from other periods.

Other provisions

The Income Tax (Amendment No.3) Act 2024 enacts a series of provisions into domestic law as of 18 December 2024. These include the following:

• Transfer of allowable losses; 
• Increase in the audit threshold from GBP 1,500,000 to GBP 1,750,000;
• Change to the late filing penalty regime based on company size;
• Corporate Tax Amnesty in relation to 2020 and 2021 accounting periods;
• Tax Credit for Start-Ups for company's commencing business in Gibraltar on or after 5 July 2016 but before 1 July 2017; 
• Tax Credit for properties constructed between 1 July 2016 and 1 January 2019; 
• Amendment to the definition of "marketing and promotion" for the application of the tax credit; and
• Tax Credit for Health Fitness, Private Education and Sole Practitioners. 

In addition to the above, The Rates of Tax (Amendment) Rules 2024 increases the corporate tax rate from 12.5% to 15% from the 1 July 2024.