Gibraltar is a specific kind of area known as a British Overseas Territory, which places it under the purview of the United Kingdom. It is not very far “overseas” though. It is located on the Iberian Peninsula with Spain and Portugal. The area is actually quite optimal, because it sits at the entrance to the Mediterranean Sea. The territory is quite small, with an area of 6.7 square kilometres.
Brief History
To understand why you should consider doing business in Gibraltar, you need to understand a little bit about the history of the territory. In the year 1704, a force of the English and the Dutch captured Gibraltar from Spain. In 1713, a treaty granted the territory to Britain for as long as Britain seeks to hold it. In the past, it served a function as a naval base and a base of operations for British interests. However, now it’s mostly a base for tourism, finance, shipping, and handling. What is most relevant to your interests as a business person, however, is its relationship to the United Kingdom. Since it is a British overseas territory, it bears some ties to England. However, the Gibraltar constitution of 2006 grants the territory the right to govern itself. That means they can set their own tax laws. That’s why it is appealing to many businesses.
Taxation
Gibraltar law has its roots in English law, but is completely separate from the United Kingdom. Gibraltar law allows businesses run by non-residents to have exemptions from income tax. The only non-resident business subject to the majority of taxes is one that derives its income from the territory. Also, there is no tax on capital gains. There is also no value-added tax, sales tax, or wealth tax. Most companies are required to pay a corporation tax and some property taxes.
In many parts of the UK and the Western world, income taxes have become incredibly high. For example, in the United States, the highest tax rate is almost 40%. It is similar in the United Kingdom. In addition to a high-income tax, these jurisdictions have very high capital gains taxes as well. This is a tax on the money your business makes. You also have to pay value-added tax for many different sources of wealth. In addition to that, you pay sales tax on almost every item you buy.
So, in this system, you could conceivably pay six or seven different taxes on the same amount of money. For example, if you were trying to buy a boat, you could pay several different kinds of taxes. Your company will pay capital gains tax on the money it makes. When your company pays you, the government will take out an income tax from that money that’s already been taxed once. Then, depending on your amount of wealth, you might have to pay a value-added tax. Then, if you wanted to actually buy the boat, you would pay a sales tax on the boat. This amount of taxation stifles opportunity in a public and personal sense. So, what options do you have?
Non-resident companies in Gibraltar pay very little taxes. These are often called “tax havens.” However, Gibraltar has acquiesced to various international organizations; therefore, it is not considered a non-compliant tax haven. Money in Gibraltar from non-resident sources is not taxed the way locals are taxed. Unlike many countries in the Western world, this system is designed to grow wealthy individuals and successful companies.
Taxes You Would Have to Pay
Though Gibraltar has a very favourable taxation system, there are a few taxes you would have to pay. You would have to pay corporation tax, stamp duty, and income tax if you were making your money in the territory.
The corporate tax rate in Gibraltar is 10%. Any new company that opens a business in the territory is required to pay a 10% rate. That rate is assessed on a yearly basis. However, energy companies and utility providers are required to pay an extra 10% surcharge. That includes water, phone, fuel, and electricity.
As far as personal taxes, those who are Gibraltar residents or those who are making money in the territory are required to pay income tax. The income tax system is split into two different systems. One system is based on the individual’s gross income and provides no allowances for reduced rates. The other system has different rates and allows for allowances. The individual taxpayer chooses which system he or she would like to adhere to. So, as you can see, even the taxation system that is in place values the individual more than many systems in the Western world. You can choose which taxation system you would like to adhere to; therefore, you can pay as little as possible.
The final sort of tax that might apply to your business is the Stamp Duty. This tax is only required for real estate and the movement of capital.
Allowances
Certain allowances are in place to make taxes easier to afford. The low-income earners allowance is one such tax relief. Those who make under £8000 per tax year do not have to pay any taxes. Anything you earn while in school or at university is also exempt from taxes. If you are working in Gibraltar, and you are over the age of 60, you will not be required to pay taxes if you are not subject to a pension. There are various other tax allowances in the territory that make it much easier to pay.
Summary
So, as you have seen, Gibraltar is a wonderful place to do business. It is, unlike many territories in the Western world, very favourable towards businesses. The elimination of the capital gains tax, value-added tax, and income tax for non-residents, make it a very attractive option for business people. However, since it complies with many international regulations, it is not a non-compliant tax haven. That means your money and your company will be safe in Gibraltar, and you will be free to enjoy the enhanced freedom that lower tax rates allow.
