GIBRALTAR Law and Practice Contributed by: Stuart Dalmedo, Adrian Pilcher and Louise Anne Turnock, ISOLAS LLP
3. Corporations and Non-Corporate Businesses 3.1 Form of Closely Held Local Businesses Most closely held local businesses operate in cor - porate form through a company. However, a grow - ing number of local businesses are operating as sole traders. 3.2 Individual and Corporate Rates There are no rules that prevent individual profession - als from earning income in a corporate form. Whilst corporate rates (generally 15%) are lower than individ - ual rates (effective rate of 26%), if the individual then draws any income out of the corporation then this income would be taxable in the hands of the individual at the individual rates (either under the PAYE system, in relation to a salary, or as a dividend payment). Gibraltar also has specific legislation regarding ben - efits in kind, which are treated as gains from employ - ment and include: • expense payments; • vouchers and credit tokens; • living accommodation; • cars, vans and related expenditure; • loans to employees, directors and shareholders; and • removal benefits and expenses. There is also a catch-all provision for other benefits that are not specifically listed above. The employer may opt to pay the tax on the benefits on behalf of an employee at the following rates: • 0% where the total annual value is less than GBP250; • 20% where the value is between GBP250 and GBP15,000; and • 29% where the value is over GBP15,000. 3.3 Restrictions on Retention of Earnings by Closely Held Corporations Gibraltar does not have traditional “accumulated earn - ings tax” rules. However, under the new GAAR pro - visions introduced by the Income Tax (Amendment)
2.8 Other Taxes on Transactions On a transaction involving Gibraltar property, there may be property rates payable as well as any possible charge by a landlord for the consent for an assign - ment. Stamp duty may also be payable (see 1.4 Appli- cable Corporate and Individual Tax Rates ). 2.9 Other Notable Taxes Exit Tax applies in the following circumstances: • a taxpayer transfers assets from its head office to its permanent establishment outside Gibraltar, and Gibraltar, as the head office, no longer has the right to tax the transferred assets due to the transfer; • an entity transfers assets from its permanent establishment in Gibraltar to its head office or another permanent establishment outside Gibral - tar, and Gibraltar no longer has the right to tax the transferred assets due to the transfer; • a taxpayer transfers its tax residence from Gibral - tar to another jurisdiction, except for those assets that remain effectively connected with a permanent establishment in Gibraltar; and • a taxpayer transfers the business carried on by its permanent establishment from Gibraltar to another jurisdiction, and Gibraltar no longer has the right to tax the transferred assets due to the transfer. A “transfer of business” is defined as when the entity ceases to have a taxable presence in Gibraltar and acquires a taxable presence in another jurisdiction, without becoming tax resident in that other jurisdic - tion. A “transfer of assets” is defined as when Gibral - tar loses the right to tax the transferred assets, while the assets remain under the ownership of the same taxpayer. For the purposes of the above, a “taxpay - er” means an ordinarily resident company that has assessable income under the provisions of the Income Tax Act 2010 or a permanent establishment of such company resident outside Gibraltar. Tax would be applied at the applicable corporate rate on the difference between the market value of the transferred assets at the time of exit of the assets, minus their value for tax purposes.
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