Bank On The Rock
Monkeys… that’s the usual thing that springs to mind when you mention The Rock of Gibraltar to most people in the UK… and the amusing antics of the 300 Macques are certainly a tourist attraction, but the Macques are not what brings business to Gibraltar – it’s the 10% Corporation tax rate introduced in January 2011 for companies that have a physical presence here.
There are a number of jurisdictions in Europe that have the 10% rate, but none that also have the added advantage of not being in the VAT zone. This has encouraged many companies to re-locate their service type businesses to Gibraltar – add a dash of sunshine, a dip in the Mediterranean Sea and Gibraltar is hard to beat. Couple that with a highly educated, multinational staff base attracted here initially by the explosion of international gaming companies, and Gibraltar ticks all the boxes.
Many software development companies, web design and maintenance operations, marketing specialists, logistic planners and online marketers take advantage of the low corporation tax. Gaming, gambling, Insurance and financial companies have also relocated to Gibraltar over the last few years – all require licencing by the Financial Services Commission, but the climate is encouraging for experienced and professional management teams.
The increase in companies setting up in Gibraltar has also had a knock on effect on the local economy, boosting the property market for both commercial and residential property, and finding a sensibly priced office or apartment can be a challenge, but weigh that against the low tax and no vat regime and Gibraltar continues to thrive.
Many high net worth individuals (HNWIs) have also been attracted to take residency in Gibraltar due to the enticing CAT2 resident option. HNWIs who can demonstrate a wealth, including property, in excess of two million pounds can apply for the CAT 2 residency status. Qualifying includes the purchase or rental of approved property in Gibraltar, a personal reference from a bank, accountant or lawyer, along with a few standard documents and once approved, CAT2’s can cap their personal income tax to as little as £30,000 per annum. With property still booming many HNWIs have taken the decision to buy rather than rent, and luxury property developments have sprung up all over the rock.
Another residency option is the High Executive Possessing Specialist Skills (HEPPS) – if approved a HEPPS professional only pays personal income tax on his first £120,000 per annum, which equates to approximately £32,000 per year. Like the CAT2, a HEPPS has to buy or rent approved value property in Gibraltar. But the largest number of companies incorporated in Gibraltar every year are still the non-operating, not physically present companies – still referred to locally as “non-resident” companies. These companies pay no corporation tax in Gibraltar as they do not derive or accrue their income here, neither do they normally need to charge VAT on their invoices, although that may depend on where they do operate from, but this option is still a very popular choice for many tax planners, where they usually incorporate a holding element.
It has to be said that as an experienced corporate service provider, licenced in Gibraltar, one aspect of operating in Gibraltar that has grown more and more difficult over the years has been the change in attitudes of the banks here. Many of the main high street banks have closed their doors to commercial business and have turned their attentions to investment banking only, leaving a massive detrimental hole in the framework of Gibraltar – however in April 2015 the new Gibraltar International Bank opened its doors for business. Owned by the Government of Gibraltar, and opened with the intention of filling that hole, offering local people and businesses an opportunity to bank commercially again. As a corporate service provider looking to assist business people, we are hopeful that the GIBank will allow more clients to be able to “Bank on Gibraltar” for a variety of reasons.