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Gibraltar Residency: Which option would you prefer?

Fiduciary Wealth Team

If you are one of the many thousands of Britons considering moving to a more favourable tax regime to escape the increasingly higher burden of taxes falling on employees, business owners and those able to live off their invested wealth then you might well want to take a look at the benefits of moving to Gibraltar.

Gibraltar provides a unique offering for high net worth individuals seeking to establish residency. Enjoying a Mediterranean climate and situated at the most southerly point of the  Iberian  Peninsula  this  self governing British overseas territory has a robust and diversified economy and has emerged as a leading international financial centre within the European Union, complying with all EU directives and Regulations. Gibraltar has replaced its former tax exempt regime with an internationally competitive tax model and with its new fiscal regime it is fast becoming a favoured jurisdiction for businesses and ‘fiscal nomads’  looking for legitimate ways to  lower  their  tax bill in a properly regulated environment. Having signed eighteen TIEAS and been white listed by the OECD Gibraltar has clearly made the transition  from  offshore tax haven to mainstream European financial centre over the last few years.

So what are the benefits of becoming a Gibraltar tax resident?

For businesses Gibraltar has a 10% flat rate corporation tax from 1st January 2011 and there is no VAT. For individuals there are two potential options for residency namely Category 2 (formerly HNWI) and Self Sufficiency.

 

 

UK

 

Highest Rate of Tax 50%

 

Category 2

 

Min Tax: £22,000 Max tax: £29,880

 

Self Sufficiency

 

NO Tax on qualifying income

 

Inheritance Tax 40% on assets  over  £325,000

NO IHT

NO IHT

Capital Gains Tax 28%

NO CGT

NO CGT

VAT 20%

NO VAT

NO VAT

Pensions taxed at highest rate

NO TAX on Occupational Pension Income

NO TAX on Occupational Pension Income

Most Savings taxed at highest rate

NO TAX on

Savings/Dividend  Income

NO TAX on Savings or Qualifying Dividend Income

Category 2 Status

Category 2 status is suitable for individuals earning in excess of £110,000 and who can demonstrate a net worth of at least £2 million. Income tax payable, on worldwide income, is capped at £29,880 (tax year 2011) with a minimum tax payment due of £22,000. There is no Inheritance Tax, Capital Gains, Wealth Tax or Gift Tax and no taxation on the remittance of foreign capital. Furthermore there is no taxation on savings interest or dividends received from a recognized stock exchange nor income received from an occupational pension scheme. Once established there is no minimum physical presence required in Gibraltar to maintain category 2 status.

The £2M wealth requirement may take various forms although a key factor in a successful application is to demonstrate that the applicant has sufficient wealth to maintain himself and, if appropriate, his family. An approved residential property, which may be purchased or rented (although renting may raise a query over the permanancy of residence), must be maintained throughout the residency period and be available exclusively for the applicant’s use.

In addition to restrictions relating to prior residency in Gibraltar, Category 2 applicants will not, ordinarily, be permitted to undertake economic activity in Gibraltar that would compete against locally based businesses. Private medicalinsurance is also required as well as professional references and curriculum vitae which form part of the application  process. All applications are subject to the approval of the Director of the Finance  Centre, part of the Ministry of Finance.

Self Sufficiency

For individuals who do not have earned income then there is an alternative route known as self sufficiency status where there is no income tax payable on qualifying income. There isnorequirement tobuyan approved property, buying or renting any accommodation in Gibraltar will suffice and the benefits already outlined for category 2 applicants will apply. A successful application for self sufficiency status requires the approval of the Director of the Finance Centre and whereas it is possible toswitch from category 2 to self sufficiency status it is not possible to switch the other way.

So if you are looking to reduce your current tax burden Gibraltar could be the ideal solution.

At Fiduciary Wealth we offer a complete service to ensure that your change of residence will be as  smooth  as  possible. As well as dealing with the formal process and liaising with otherprofessionals, such as tax advisers and lawyers where appropriate, we are able to offer a propertysourcing service both for properties to purchase and rent in Gibraltar and for those looking to acquire a second home in Spain. This facil- ity includes mortgage broking for clients requiring finance and arranging buildings and contents insurance where required. In addition     we     deal     with     all      of the other financial issues a change of residency will require including the provision of suitable private medical cover to satisfy residency  requirements  and rearranging life and protection policies where necessary to ensure that these will be appropriate to meet your new circumstances.

One area where our expertise will certainly be  required  will  be  in  assessing  your pension provision and advising on the most tax efficient retirement options available to you as a Gibraltar resident as well as reviewing your investments to ensure that you make best use of the favourable tax regime.

If you are considering Gibraltar residency contact us now to see how we can help or if you wish to explore the potentialadvantages that a changeof residency can make to your current financial position we will gladly meet with you to help you assess your options. On the other hand if you are already enjoying Gibraltar residency status and you want an independent review of your savings, investments and pensions please give us a call. 

To find out more and arrange a meeting at one of our offices contact us on one of the numbers below or email wealth@fiduciarygroup.com