On 20 July 2021, HM Government of Gibraltar announced its budget measures for the year 2021/22.

The measures include an increase in the corporate tax rate, together with a series of tax measures to encourage investment by business.

Few changes were made to personal taxation, other than for those taxed under a special tax status.

Key highlights of the announcement are summarized below.

Key highlights

Corporate taxation

An increase in the rate of corporate tax from 10% to 12.5% was announced. This is to apply to financial periods commencing after 20 July 2021. A series of measures to encourage investment by companies were set forth and include:

• Capital allowances:
  • Initial allowances for plant and machinery will be increased from the current limit of £30,000 in a year. The initial allowance will now be the higher of: (a) expenditure up to £60,000; or (b) 50% of the expenditure incurred.
  • Initial allowances for computer equipment will be increased from the current limit of £50,000 in a year. The initial allowance will now be the higher of: (a) expenditure up to £100,000; or (b) 50% of the expenditure incurred.
  • The annual allowance given on the remaining “pool” of such assets will be increased from 15% to 25% per annum (or from 20% to 30% in the case of utility or fuel supply companies, whose profits are taxed at 20%).
  • “Plant and machinery” will include private vehicles that are partly used for the production of income, if the vehicle is fully electric.
  • A wear and tear allowance of 1% of acquisition cost of property from where business is conducted will be introduced (this will not apply to industrial buildings which already attract an allowance).
• There is an additional allowance of 50% of the fixed salary cost of new employees employed after 20 July 2021.
• The additional allowance already given for qualifying training costs is to be increased from 50% to 60%. The increase applies to the cost of training only, and excludes ancillary costs, such as travel and accommodation.
• An additional allowance of 50% of marketing costs will be provided (subject to agreement by the Income Tax Office that it is validly incurred in marketing for purposes of the business).

Personal tax

• There are no changes to the tax rates or bands under either the Allowance Based System or Gross Income Based System.
• Category 2 Individuals:
  • Minimum tax payable to increase from £22,000 to £32,000 per annum
  • Tax “cap” for income taxed under the certificate to be increased from £27,560 to £37,310
  • The above changes to apply as from 1 August 2021
• High Executives Possessing Specialist Skills (HEPSS):
  • Going forward, such individuals will need to earn more than £160,000 per annum to qualify for HEPSS (currently £120,000).
  • Tax payable to be based on this new threshold amount (i.e., tax will increase from £29,940 to £39,940 per annum).
  • The above changes to apply as from 1 August 2021. Transitional rules will apply for existing HEPSS employees earning between £120,000 and £160,000.
• A limited number of allowances for other taxpayers were also announced.
• Social insurance contributions – increases with effect from 1 July 2021 were announced in June 2021.

__________________________________________

For additional information with respect to this Alert, please contact the following:

EY Limited Gibraltar

• Neil Rumford | neil.rumford@gi.ey.com
• Stephen Carreras | stephen.carreras@gi.ey.com