Gibraltar: Additional tax proposals in 2024 budget, including update to Pillar Two rules

The Minister for Justice, Trade and Industry on 2 July 2024 addressed the Gibraltar parliament in relation to the 2024 budget.

The following proposals were announced:
 

Tax losses

• Given the financial sectors (financial services and gaming) in Gibraltar have accumulated significant tax losses in excess of £2.1 billion, a measure will be introduced to limit the use of the tax losses available to carry forward applicable to the financial services and gaming sectors.  
• An overriding principle of the measure will be the ability to carry forward unutilised tax losses (no elimination of tax losses) and that current year tax losses can still be deducted. However, the use of the tax losses will be restricted so to be at a slower rate.
• The proposal will have immediate effect from 1 July 2024 and will apply to tax returns filed after this date irrespective of the accounting period because of the delayed filing positions observed in these sectors.
   

Real estate assets

• A measure will be introduced to impose taxation as trading income on the profit or gains from property sales when any persons holds three or more properties, including off-plan developments (other than primary residences or other exempted property), with effect from 1 July 2024.
• Under an anti-avoidance rule, any person undertaking professional conveyancing activities will have a reporting obligation to notify the Income Tax Office.
• Suitable exemptions will be included so that the measure will be focused.

The relevant draft Bills for the above measures are in the final stages of preparation and the Minister intends to provide explanatory notes to the business community at large so these measures can be fully understood.
 

Living accommodation exemption

• This exemption, which has been available to employees relocating to Gibraltar under defined conditions, will now continue after the employee changes residential address or employment after relocating to Gibraltar.
• The exemption will not be available for accommodation in Spain.
• The duration of the exemption—currently seven years—will likely be reduced, subject to transitional rules for employees who currently benefit from the regime.
• Consideration is also being given to anti-abuse safeguards and compliance with relevant filing obligations.
   

Students in part-time employment

• Full-time students working outside holiday periods will now pay income tax and social insurance on earnings exceeding £11,450.
   

Other announcements

• A working group is considering the best way to introduce the Gibraltar qualified domestic top-up tax (QDMTT), and are engaging with the technical team at the OECD. It was previously announced that this QDMTT will apply to accounting periods commencing on or after 31 December 2023. Draft legislation is expected in September 2024 and then a wider consultation will be undertaken.
• The income inclusion rule (IIR) is expected to be implemented during 2025.
  

It was separately announced that the audit threshold for tax purposes will be increased to £1.75m of assessable income per annum (currently £1.5m). The impact of this change will be monitored and there may be scope for a further increase in the future. 

Read TaxNewsFlash for previous tax measures announced.

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

Darren Anton | darrenanton@kpmg.gi