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CAT 2 and HEPPS Information

Individuals who wish to enjoy the benefits of Mediterranean living in a beneficial tax environment may now avail themselves of the Qualifying (Category 2) Individual Rules 2004 (the Rules) which were made under the Income Tax Act. Such individuals may become residents of Gibraltar and in this connection may apply for a Qualifying Certificate under the Rules.

Under the Rules, individuals in possession of a Qualifying Certificate are liable to tax only on the first £80,000 of assessable income. Under the rates of tax currently enforced in Gibraltar, the maximum liability to tax for such individuals would be approximately £29,880 per annum. There is, however, a minimum tax of £22,000 per annum, payable irrespective of the individualís income in that year of assessment.

Under the sliding rates of tax imposed on an individualís assessable income, receipt in Gibraltar of an amount greater than £80,000 per annum would expose an individual to an amount of tax greater than the minimum sum of £22,000 per annum, but always subject to the maximum amount outlined above.

Only individuals not currently resident in Gibraltar and who have not been resident in any of the previous five years of assessment may apply for a Qualifying Certificate.

Applications should be made to the Finance Centre Director of Gibraltar and must be accompanied by two references (one of which must be from a bank) and a non refundable fee of £1,000. Applicants will usually be informed that the application has been successful within one or two weeks of the application being made.

In order to be successful the Applicant must have, for the exclusive use of himself and his family, approved residential accommodation in Gibraltar.

Details of the property acquired or rented must be forwarded to the Finance Centre Director within two months of the issue of the Qualifying Certificate. The Finance Centre Director may decide whether or not a property is an approved property. This usually consists of verifying that the size and type of property is consistent with the size and make up of the Applicantís family and the Applicantís status as a Qualifying Individual.

There are various modern, high quality developments in Gibraltar which would be suitable as an approved property, as well as other properties located in and around the town centre.
Individuals with substantial assets and/or income may therefore take advantage of the Rules by establishing their tax residence in Gibraltar. This should facilitate an individualís tax planning and may be useful in limiting tax liability in other jurisdictions on world-wide income.

Notwithstanding the residential status acquired by an individual who has obtained a Qualifying Certificate, such individual may make use of certain tax structures to assist in the planning of fiscal affairs. These tax structures are usually only available to non residents of Gibraltar. Therefore, the use of a Gibraltar trust, which (under certain conditions) is not subject to taxation, may be available to such individuals. These possibilities together with the fact that there is no capital gains tax, inheritance tax or estate duty in Gibraltar make the jurisdiction an attractive proposition to individuals able to fulfil the criteria required.

The proximity of Spain also provides further diversion and attraction to individuals who may wish to establish a residence in Gibraltar. The Andalucian cities and countryside are rich in history and tradition and there are numerous cultural and leisure activities on the Costa del Sol, including several top international golf courses.

The residence rules available in Gibraltar make the Rock an ideal location for persons wishing to combine the advantages of residence in a warm Mediterranean climate with a singularly advantageous tax regime.

Please contact us for further details.