Gibraltar: 2023 budget includes consultation on implementation of Pillar Two global minimum tax, stamp duty changes

The 2023 budget was delivered on 11 July 2023.

The following discussion provides a summary of the main tax measures in the budget for 2023.

• For individuals with taxable income below £100,000, there is a 1% reduction in income tax rates for the 2023/2024 tax year of assessment. This is a partial reduction of the 2% increase announced in last year’s budget and it was confirmed that this temporary 2% increase would cease for all taxpayers in the 2024/2025 tax year of assessment if the government is re-elected.
• A number of new incentives were introduced that would result in deductions against a taxpayer’s tax liability for costs relating to private school tuition, Legal Services Regulatory Authority (LSRA) fees for single practitioner lawyers, and gym membership/personal trainers if certain conditions are met.
  
• An investigation into the simplification of the Gibraltar individual (personal) tax system (which currently operates two tax systems for individuals) is to be undertaken by the Commissioner of Income Tax. 
  
• A one-off tax-free lump sum can be paid by private sector employers to employees (there is a similar assistance payment for public sector workers) but there would be no tax deduction for the employer for this cost and the amounts must be excluded from payroll. The following amounts can be paid:
  
  • £1,200 to employees with basic salary less than £50,000
  • £900 to employees with basic salary between £50,000 and £75,000 
  •  £600 to employees with basic salary between £75,000 and £100,000

• There is no change in the company income tax rates.
• An adoption of a tax consultation process and several consultations were announced, although it was noted that conclusive changes would not necessarily be made in all areas:
  • Global minimum tax (“Pillar Two”)
  • Group relief rules
  • Amortisation of intangible assets – goodwill
  • Sub-contractor regulations
  • Alignment of corporate tax filings dates to the Company Registrar and a review of the timing of company income tax payments
• Pillar Two establishes a global minimum tax regime that would apply to multinational groups with consolidated revenue over €750 million. The OECD has released model rules, commentary, and guidance. Gibraltar is seeking to implement a distinct new tax regime for companies within the scope of Pillar Two plus a domestic minimum top-up tax and new tax incentives.

Implementation would take effect in Gibraltar no earlier than for accounting periods beginning on or after 31 December 2024. 

Since 2011, the government has legislated numerous “green” tax incentives and a review was undertaken to explain why the adoption rates are below what was expected. Two main reasons were identified:

• Significant lack of awareness as to what is available
• Initial outlay costs can be prohibitive

The government is determined to achieve their carbon neutral pledge by 2030 and therefore, the Commissioner of Income Tax will be driving awareness of the initiatives through the government’s “Net Zero Delivery Board” information campaign and exploring alternative means of granting relief to taxpayers. The Commisssioner will also be liaising with other government departments to make the green initiatives more available, accessible and less restrictive for taxpayers. 

• The stamp duty rate applicable to sales of property over £800,000 would increase from 3.5% to 4.5%.
• The first-time homebuyer allowance would increase from £260,000 to £300,000.
• A consultation between the Land Property Services and the Financial Secretary on whether to introduce stamp duties for the assignment of purchase contracts for real property (e.g., off-plan purchases). Conclusions are to be reported to the Chief Minister by 30 September 2023.
   

For more information, contact a KPMG tax professional in Gibraltar:

Darren Anton | darrenanton@kpmg.gi