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.
In the light of new information disclosure regimes and FATCA it is becoming more and more important to establish permanent residency in a favourable jurisdiction when it comes to personal tax planning. Certainly we have entered a new era of transparency where it is essential to put in place workable plans to mitigate tax rather than rely on outdated ideas of secrecy and avoidance.
So what are the benefits of becoming a Gibraltar tax resident?
For businesses Gibraltar has a 10% flat rate corporation tax and there is no VAT. For individuals there are two potential options for residency namely Category 2 (formerly HNWI) and Self Sufficiency.
Category 2 Status
Category 2 status works for individuals earning in excess of £120,000 and who can demonstrate a net worth of at least £2 million. Income tax payable, on worldwide income, is capped at £29,880 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 medical insurance 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.
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 is no requirement to buy an 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 to switch from category 2 to self sufficiency status it is not possible to switch the other way.
At Fiduciary Wealth we offer a complete service to ensure that your change of residence will be as smooth as possible. We deal with the formal process of obtaining your residency documents. We also include our property sourcing and mortgage broking (where required) services both for property to buy or rent in Gibraltar including arranging suitable buildings and contents insurance, and also in Spain where many new Gibraltar residents will acquire a second home. In addition we will deal with all of the other financial issues a change of residency will require ensuring that you have 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 potential advantages that a change of 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.
Of course you may be considering other options as well and our expertise includes advising on residency issues in Spain, Portugal and Malta.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.