In Gibraltar, employers are obligated to make social insurance contributions on behalf of their employees. These contributions fund various social benefits, including pensions, healthcare, and sick pay. The employer's social insurance contribution rate is currently 18% of the employee's gross earnings. This rate is subject to a minimum weekly contribution of around GBP 29.00 and a maximum weekly contribution of around GBP 51.00.

Calculation and Payment

Employers are responsible for deducting the employee's share of social insurance (currently 10% of gross earnings) from their salary. They must then remit both their own and the employee's contributions to the Income Tax Office. Contributions are due monthly, on or before the 15th day of the following month.

Other Employer Obligations

Employers must register with the Income Tax Office and keep accurate payroll records for tax and compliance purposes.

Additional Notes

Self-employed individuals in Gibraltar also make social insurance contributions at a similar rate (18% of gross earnings) subject to minimum and maximum amounts.

In Gibraltar, income tax deductions are based on either the Gross Income Based System (GIBS) or the Allowance Based System (ABS). Under GIBS, taxes are calculated on your total gross income. On the other hand, ABS calculates taxes on your income after deducting certain personal allowances.

Withholding (PAYE)

Your income tax is deducted directly from your salary under the Pay-As-You-Earn (PAYE) system.

Social Insurance Contributions

The employee's social insurance contribution rate is currently 10% of gross earnings up to a set weekly ceiling. This rate is subject to a minimum weekly contribution as well. Your social insurance contributions are withheld directly from your paycheck.

Allowances Under the ABS

If you are taxed under the ABS, your taxable income may be reduced by personal allowances such as:

• Personal Allowance
• Marriage Allowance
• Child Allowance
• Blind Person's Allowance
• Dependent Relative Allowance

Other Possible Deductions

Contributions you make to approved pension schemes can usually be deducted from your taxable income. Additionally, donations to approved Gibraltar charities may be eligible for deductions under the Gift Aid scheme.

Gibraltar does not have a Value-Added Tax (VAT) system. However, services supplied from outside of Gibraltar to a Gibraltar customer may be subject to a form of VAT called the 'Reverse Charge'.

Reverse Charge

The recipient of the service in Gibraltar becomes responsible for accounting for any applicable VAT under the reverse charge mechanism in certain situations. The reverse charge commonly applies to services like professional services (e.g., consultancy, legal, accounting), telecommunications services, and electronic services.

VAT Registration in Gibraltar

While there's no general VAT system, businesses that frequently receive services from outside of Gibraltar subject to the reverse charge may consider registering for VAT in Gibraltar. Registered businesses may be able to reclaim the VAT incurred on services received from abroad through the reverse charge mechanism.

Determining VAT Liability

To determine if a service received attracts a reverse charge, consider the following factors:

• The place where a service is considered to be supplied for VAT purposes is crucial. Generally, the place of supply is where the customer (the business receiving the service) belongs.
• Specific rules apply to various types of services, particularly electronic or telecommunication services.

Invoicing and Record-Keeping

Businesses subject to the reverse charge may need to 'self-bill' (issue themselves a VAT invoice) for services received from abroad. VAT-registered businesses need to file VAT returns reporting the reverse charge amounts. It's also important to keep thorough records of transactions involving services from overseas providers.

Gibraltar offers a standard corporate tax rate of 10%, which is significantly lower than many other jurisdictions. This provides a favorable environment for businesses.

Low Corporate Tax Rate

The standard rate in Gibraltar is significantly lower than many other jurisdictions, making it an attractive environment for businesses.

Specific Tax Incentives and Regimes

Gibraltar has several specific tax incentives and regimes. The High Executive Possessing Specialist Skills (HEPSS) regime aims to attract highly-skilled individuals to relocate to Gibraltar by offering a reduced income tax rate of 25%. Companies with specific activities, such as e-gaming and financial services, may be eligible for even lower effective tax rates, in some cases as low as 0%. Tax credits and reliefs may also be available for newly established businesses in certain sectors.

No Capital Gains, Withholding, or Inheritance Tax

Gibraltar does not impose a capital gains tax. Generally, there's no withholding tax on dividends, interest, or royalties paid out of Gibraltar. Additionally, there is no inheritance tax in Gibraltar.

Other Advantages

Gibraltar has a limited number of double taxation treaties, potentially reducing tax burdens for businesses with cross-border transactions. Furthermore, Gibraltar offers a stable and business-friendly regulatory environment.