TAX NEWS - 
2010
Gibraltar Tax: Record budget surplus and continued economic growth allow further tax reductions in 2010 Budget
Although the legislation for implementation is still to be enacted, the measures will have retrospective effect from 1 July 2010.
Headline economic data
- Gibraltar's GDP is estimated to have increased by 5% in the fiscal year ended 31 March 2010 (compared with actual growth of 5.4% in the fiscal year ended 31 March 2009). Further GDP growth of 5% is projected for this fiscal year;
- The number of jobs in the economy remains at 2009 levels (nearly full employment) despite the global economic crisis;
- The government budget surplus of £29.7 million is a record high for the second year running (£15 million in 2009) and represents a cushion of almost 10% over expenditure;
- The net public debt doubled from 7.5% of GDP in the fiscal year ended 31 March 2009 to 15.2% of GDP in the fiscal year ended 31 March 2010 and is expected to rise to 19% in this fiscal year, but levels remain well below the EU recommended ceiling of 60%.
Corporate tax
On 16 June 2010 the government published the text of a new Income Tax Act reducing corporate tax rates from 22% to 10% (20% in the case of utilities). In this budget, however, the government claws back some of the benefits to companies through the following measures:
- Employers' social insurance contributions will increase by 10%, from a maximum of £29.97 per week to £32.97;
- Property commercial rates will increase by 12% and the early payment discount is reduced by half to 5% (10% for shops, wholesalers, bars and restaurants); and
- The commercial electricity tariff will increase by 10% and saltwater rates by £0.01.
Personal tax
- Under Gibraltar's dual tax system, allowing an election between an allowance-based system and a gross-income based system, the effective tax rate is lowered in all income bands, as detailed below;
- The 35% top band (imposed on amounts over £100,000) under the gross-income based system has been abolished, with a new maximum rate of 29% on amounts up to £353,000;
- To enhance Gibraltar's appeal to high earners, new tax rates and income bands have been introduced under the gross-income based system of 20% for income between £353,001 and £704,800; 10% for income between £704,800 and £1 million and 5% for income in excess of £1 million;
- All personal allowances for the allowance-based system have been increased by 2.8% for the second year running;
- For individuals holding Category 2 residence status (available to high net worth individuals), the minimum amount of tax payable increases from £20,000 to £22,000 per annum and their taxable income subject to taxation increases from £70,000 to £80,000;
- "High Executives Possessing Specialist Skills" (HEPSS) will be taxable on up to £120,000 of income (an increase from £100,000);
- Tax relief on retirement annuity contracts and personal pension schemes will be limited to the lesser of 20% of earned income or £35,000;
- Employees' maximum social insurance contributions will rise by 6% from £23.74 per week to £25.16 (although there will be no increase for those earning less than £12,000 per annum); self-employed social insurance contributions will rise by 10% from £27.43 per week to £30.17.
Other measures
- For stamp duty, the exempted value on properties increased from £160,000 to £200,000 - i.e. properties costing £200,000 or less are not subject to stamp duty. Properties costing between £200,000 and £350,000 incur stamp duty of 2% on the first £200,000 and 2.5% on the balance of £150,000. Properties costing in excess of £350,000, will incur stamp duty of 3% on the first £350,000 and the balance at 3.5%;
- The statutory minimum wage will increase from £5 to £5.40 an hour as from 1 January 2011; and
- Import duties will be increased on cars and two-stroke motorcycles and decreased on four-stroke motorcycles.
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