Gibraltar Budget 2022
28 June 2022
In the Chief Minister’s budget address on 28 June 2022 various measures were introduced. A summary of the salient points are set out below:
Personal tax
- For a two-year period, the tax rates across all tax bands under the Allowance Based System and the Gross Income Based System will be increased by two per cent. Therefore, an individual earning over £25,000 and who is currently taxed under the GIB system will now pay tax at an average rate of 27 per cent instead of 25 per cent. These are temporary personal taxation measures that will restore to prior tax rates after two years.
- Currently under the Gross Income Based System, income in excess of £500,000 but below £700,000 is taxed at a rate of 18 per cent, whilst any income in excess of £700k per annum is taxed at five per cent. Going forward, any income earned above £105,000 per annum will be taxed at a flat rate of 25 per cent.
Minimum wage
- The minimum wage will increase in line with the estimated rate of inflation at 8 per cent. This results in an increase of 60p per hour to a rate of £8.10 per hour.
- Based on a 37.5-hour week, the minimum wage will increase from £14,681.25 per annum to £15,855.75 per annum resulting in an annual increase of £1,174.50.
- Based on a 39-hour week, the minimum wage will increase from £15,268.50 per annum to £16,489.98 per annum resulting in an annual increase of £1,221.48.
- The State Pension and Disability Benefit will similarly increase by the estimated rate of inflation.
Category 2 individuals
- Category 2 individuals will see an increase in their personal tax bands with the maximum assessable income increasing to £118,000 from £105,000.
- The change will result in the maximum amount of tax payable increasing by £5,000 per annum.
- The minimum amount of tax payable will also increase by £5,000 from £32,000 to £37,000.
- With effect 1 July 2022, Category 2 individuals will be required to pay their year’s tax in advance and that will be based on the maximum amount of tax payable under the regime.
- The 2022/2023 advanced tax payment is due by the 30 November 2022 - the date by which their personal tax return (tax year ended 30 June 2022) and balancing payment of tax for the corresponding year is due.
- In the event that a Category 2 individual choses to leave Gibraltar mid-tax year, any overpayments made on assessment will be credited or rebated.
- A non-Gibraltar national, who claims residency in Gibraltar or is resident in Gibraltar, is not in possession of a CAT2 or HEPPS certificate and is not in true third-party employment will be taxed on their full savings income, including pension income, interest income, dividend income and income from other passive sources. This is intended as a penalty for individuals not paying any direct or indirect taxes to Government.
- As long as these individuals meet the criteria and pay any outstanding taxes, they will be able to apply for Category 2 status retrospectively.
Transitional provisions on increased corporation tax rate
- Following the increase in the corporate tax rate from 10 per cent to 12.5 per cent in the 2021 budget address, the Income Tax Office will be issuing explanatory notes supplementing an amendment to the Rates of Tax Rules 1989, clarifying how the change in tax rate is to be computed.
Marketing deduction
- In the 2021 budget address an incentive was introduced in relation to marketing and promotional expenses which resulted in an additional deduction of 50 per cent of marketing costs incurred by a company in two financial years.
- The intention was for these marketing and promotional costs to relate solely and exclusively to the marketing of Gibraltar as a destination / jurisdiction. This interpretation was not sufficiently conveyed in the 2021 budget address or clarified by the legislation enacted.
- Although the provision was initially set for two years, the incentive has been terminated with immediate effect. In order to ensure fair treatment, the incentive will apply for the initial year as set out in legislation, but only in the way it was originally intended.
- Guidance to define marketing in the context of legislation will be issued in due course by the Income Tax Office.
Fees for tax certificates and information requests
- As from 1 September 2022, the Income Tax Office will impose administrative fees for the provision of information requests including ordinarily resident certificates, subcontractor retention certificates, payment transaction printouts and printouts / copies of previous filings and associated documents.
- A tariff sheet will be made public by the Income Tax Office in due course.
Tax penalties
- The current tax penalty regime is being reviewed with the aim of implementing stricter but fairer sanctions which are commensurate with the size of the defaulter and the level of frequency of the default. This will be issued by the Income Tax Office in due course.
Amnesty period
- An amnesty period will be available up to 31 December 2022. Any and all companies that have filed accounts during the COVID period (last two financial years) and should have filed accounts up to December 2022, will be allowed to revisit their returns if they have under declared or pushed deductions in a way that might be considered “over creative”.
- Companies can resubmit their returns and pay any corresponding tax without penalty, interest or further question.
- After this period the Commissioner of Income Tax will issue assessments for those companies where they believe there has been an under declaration of tax for the years in question. Penalties and interest will be applicable.
Audit threshold
- The tax assessable income threshold triggering the requirement for companies to submit audited accounts to the Income Tax Office will be increased from £1,250,000 to £1,500,000 per annum. The increase will be applicable for accounting periods ending on or after 1 July 2022.
Covid charge
- For the next two years, every company will be required to pay a COVID recovery charge of £25 per week.
- As from 1 August 2022, the charge will be levied as part of the company’s annual return collected by Companies House.
- Government is currently revisiting the implementation of the £25 Covid recovery charge for Companies.
Import duty
- The previous measures introduced as a result of the pandemic, which saw an import duty waiver for all commercial imports, other than certain commodities, and the introduction of a 10 per cent flat rate of import duty on all personal imports over £25 will be revoked with effect from 29 June 2022.
- Private imports will be charged at the import duty rates in place prior to the implementation of the above measures.
Ban on used car and mopeds
- Used passenger cars other than classic cars, light commercial vehicles and buses over five years old will become prohibited imports as from the 1 January 2023.
- Mopeds fully fuelled by diesel or petrol will also become prohibited imports as of 1 July 2023.
Electric charging points
- Any individual tax payer who installs a mechanism for the electric charging of a vehicle in their home or private parking space or garage will be able to continue to deduct the first £2,000 of costs approved by the Commissioner of Income Tax against their tax liabilities.
Sustainable Tourism Tax
- As from 1 August 2022, hotel and Air BnB visitors will be required to pay £3 per person per night for the duration of their stay in Gibraltar.
- As from 1 April 2023, Cruise ship passengers will be required to pay a £1 passenger environmental levy based on the number of passengers on the vessel.
- Responsibility stands with each hotelier or property owner to collect and pass the tax on a monthly basis to the Department of Environment.
Water and electricity increases
- In line with the estimated rate of inflation and the increased cost of fuel, electricity and water bills are set to increase by 8 per cent. This will apply as from August 2022.
Contact
For any queries or clarification please contact your usual BDO contact or alternatively, you can contact our tax director / manager:
Christian Summerfield Stephanie Montegriffo
Director Manager
+350 200 47300 +350 200 47300