Foreign tax credit
Relief is available in Gibraltar in respect of foreign tax paid. This applies to any person who has paid or is liable to pay tax under the Income Tax Act in respect of profits or gains derived from sources within Gibraltar or within any other jurisdiction who can prove to the satisfaction of the Commissioner of Income Tax that one has paid or is liable to pay income tax in the other jurisdiction in respect of the same profits or gains.
The relief available in respect to those profits or gains shall be of an amount equal to the lesser of the two following amounts:
- The taxation under the Income Tax Act in respect of the said profits or gains.
- The income tax in the other country, territory, or jurisdiction in respect of that income.
In order to encourage private development in Gibraltar, promoters and developers of approved projects are offered certain incentives, such as tax relief, import duty relief, and rates relief.
In order to qualify for the above reliefs, the project needs to be a new project that is for the economic benefit of Gibraltar and the aim of which is:
- to create a tangible immovable asset in Gibraltar that will remain in existence after the applicant has ceased to derive the benefits under the licence
- to provide more than two additional units of housing accommodation in Gibraltar
- to contribute materially to the development of the tourism industry in Gibraltar
- to afford any new employment opportunities or career prospects in Gibraltar, or
- to materially improve the economic or financial infrastructure of Gibraltar.
The project needs to be completed within a specified time (dependent on the type of project) following the issue of the licence, and the applicant must not expend less than the prescribed amount for the project.
Applications for development aid must be made to the Minister for Trade.
Deduction of approved expenditure on premises
For taxpayers with an interest in a building situated in Gibraltar, an allowance is available for approved expenditure on the painting, decorating, repair, or enhancement of the frontage of that building.
The approved amount will be available as a deduction against the taxpayer's income. This deduction is in addition to any deduction, relief, or allowance given in accordance with any other provision of the Income Tax Act in respect of the same expenditure.
The claim for the deduction must be made within two years after the end of the year of assessment with respect to which the deduction is claimed.
Property investment incentive
Owners of property constructed in Gibraltar during the period from 1 July 2016 to 31 December 2018 that is rented for residential purposes will receive a tax credit equal to the tax payable on the profits earned on the first 24 months of rent occurring in the first five years after the completion of construction of that property.
Commercial property rate incentives
There are early payment discounts available on property rates, depending on the business conducted from the premises.
A one-off tax deduction is available against assessable income (with the percentage to be verified and subject to the discretion of the Commissioner of Income Tax) on the investment made by an individual, company, or business that makes a significant improvement to the Energy Performance Certificate (EPC) rating of their premises.
Training costs borne by an entity for employees studying for a qualification are allowed as an expense against the profits of a business at the rate of 150%. It needs to be shown that the costs are relevant to the work, either current or planned, carried out by an employee for their employer. For accounting periods ending in the period 1 July 2021 to 30 June 2023, a deduction can be claimed at the rate of 160%.
Small business and start-up incentives
All newly established businesses in Gibraltar are able to claim 100% of their eligible capital allowances in the first year of trade.
Businesses with ten employees or less will receive a credit of GBP 100 per employee in respect of social insurance contributions. For new businesses in the first year of operation, the credit is extended to 20 employees.
A tax credit equal to the lower of 200% or GBP 5,000 of architectural fees and fees charged by the government in respect of successful planning applications is available in the first three years of operation.
New businesses set-up in Gibraltar between 5 July 2016 and 30 June 2017 are eligible for a tax credit equal to the tax due, up to a maximum of GBP 50,000 per annum, over each of the first three financial years of trading. This incentive is subject to the following conditions:
- It must be a new business set-up in Gibraltar and not the transfer of a business already existing in Gibraltar.
- The business must employ at least five people.
- The business must be a company or limited partnership but not an individual trading in its own name.
- The tax credit does not carry forward from one year to the next. Consequently, if the company does not make a profit and is not able to use the credit, it will be lost.
For a limited period, in relation to accounting periods ending in the period 1 July 2021 to 30 June 2022, an additional deduction is available for marketing and promotion expenditure in relation to marketing Gibraltar as a tourism destination or as a jurisdiction for the purposes of attracting new business ventures and enterprises to set up and operate from Gibraltar.
The allowance will not be applicable to general marketing and promotional costs incurred in relation to the production of the assessable income of trade, business, profession, or vocation in or from Gibraltar.
For a limited period, in relation to accounting periods ending in the period 1 July 2021 to 30 June 2023, a further deduction is available based on 50% of the fixed salary cost (excluding bonuses, incentive or compensation payments, overtime, allowances, and any similar non-fixed or contracted amount) of new employees employed after 1 July 2021.