Saturday, September 4, 2010

New corporation tax rate in Gibraltar

With talk of austerity and budget deficits in most parts of the world, it is refreshing to be able to report on some good tax news. Being based on the Costa del Sol, my firm of accountants and tax advisers naturally has a lot of clients with interests in Gibraltar so we have to keep an eye on what is happening on the Rock. This Summer a new Income Tax Act has come into force.

The Act is available for download on the Gibraltar government website

For companies the news is pretty good, because the long-heralded reduction in corporation tax has come into force and at an even lower rate - 10% - than had been anticipated. The basis of taxation has also changed from prior year assessment to self-assessment and payment after the company's year end. Gibraltar companies are expected to file accounts and estimates of their liability to tax within 6 months of their year end and pay the tax at the same time.

Most importantly for companies who are not run in Gibraltar or active there, the scope of corporation tax is only on profits "accrued in and derived from" Gibraltar itself. So if the company is based on the territory or makes money there, only those profits are subject to the new corporation tax regime. In addition interest, royalties and capital gains are not taxed.

Gibraltar used to be a popular place for foreigners resident in Spain to set up companies because of the existence of "non resident" companies which did not pay any tax at all. These have been abolished and all Gib companies are subject to the new regime wherever they are managed from or where they generate their income. But provided the company has no Gib activities ( or these are incidental - less than 22 days a year) or locally generated income, the profits of Gib companies can still escape tax. For individuals with international activities and income that can be booked through companies based anywhere, the low tax rate and the exemption of non-Gibraltar income make the Rock look an attractive option.

In Spain and need tax advice for a company or business (or thinking of setting one up)? Check out our website which has a lot of useful articles like Contracting in Spain and Autonomo Guide (self employment in Spain)

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