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Gibraltar: Updated tax, business relief measures (COVID-19)

Gibraltar: Updated tax, business relief measures

The Chief Minister of Gibraltar announced further measures and expanded on previously announced measures to help businesses, employees and self-employed individuals and to protect citizens in response to the coronavirus (COVID-19) pandemic.

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An amendment to the “business employee assistance terms” regulations was made on 7 May 2020 setting out the new measure applicable to “excluded sectors” for purposes of assistance provided for certain employees and self-employed individuals.

The government is expected to publish a series of guidelines and guidance notes to make it easier to understand these extra measures that have been announced. Read more on a government website dedicated to COVID-19 issues.

The following provides a summary of certain measures for businesses, employees, and self-employed individuals.


Background—business and employee assistance

The business and employee assistance COVID-19 terms are intended to provide assistance for employees and self-employed individuals that are re-registered as being “inactive.” The measures apply to registered full-time employees, part-time employees, those on “zero-hour,” and self-employed persons regardless of their nationality or residency and apply to all sectors apart from “excluded sectors”—a list (25 March 2020) [PDF 133 KB] has been published and is to be monitored by the government  on a monthly basis.

An amendment was made on 7 May 2020 to the “business employee assistance terms” regulations setting out the rules for partially inactive employees.

  • An inactive employee will be a worker whose employer has experienced a downturn or cessation in business, and as a consequence of this downturn or cessation, has been sent home. Therefore, it does not include an employee who is able to work from home.
  • A partly inactive employee will be an employee who has been designated as being inactive for an aggregate period of half of the calendar month (this can be determined by an employer on a half-day, daily, weekly or bi-weekly basis).
  • An inactive person in the case of a self-employed individual is a person whose income is affected by the COVID-19 pandemic and who is assigned to home by the “lockdown measures.”

The list of "excluded sectors" (as of 17 April 2020) is as follows:

  • Utility providers
  • Telecommunications operators and internet service providers
  • Data centre providers
  • Care workers
  • Supermarkets
  • Grocers
  • Butchers
  • Market stalls
  • Wholesalers (those with tobacco licence) 
  • Petrol stations
  • Food delivery companies
  • Online gaming industry and casinos
  • Accountancy firms
  • Law firms
  • Businesses that are licensed by the FSC (including insurance businesses and intermediaries)
  • Pharmacies
  • Bunkering, ship chandlers, SAE transport and other shipping businesses
  • Property management companies
  • Businesses that are predominantly reliant on government as their main source of income
  • Any other business deemed to be in substantive operation


How do the measures function?

Businesses that would otherwise be unable to support the continued cost of paying salaries to employees that are inactive/partly inactive are to be given direct financial support by the government to allow them to retain their staff and pay them their salaries at a fixed rate.

  • Employers would need to complete an online form where they would declare their inactive employees and provide specific details and information.
  • For a self-employed person, claims are to be made by the self-employed person online, and if approved, they would then receive the monthly payment direct.

Read more and refer to the online form on the government's website.


How much is the salary-related relief?

The COVID-19-related salary is £1,155 per month in relation to a full-time employee (working 7.5 hours per day or more) or a self-employed person, and would be apportioned for those who work less than full-time or are on zero-hours contracts.

The COVID-19-related salary is not subject to income tax (whatever the cumulative income of the individual over the year of assessment) or a social insurance deduction on the part of the employer, the employee or the self-employed person (but social insurance would be deemed as paid for the purposes of that individual’s records). 

For partly inactive employees, any COVID-19-related salary attributable to the partly inactive employee is reduced by 50% and employers will have to pay 50% of their salary (with no contribution from the Government in connection with this payment) but the employer will not be liable to PAYE on this amount.


When is it paid?

The amounts for the COVID-19-related salaries will be received by employers and the self-employed during the last week of each month during the “COVID-19 period” starting from the last week in April 2020—thereby allowing employers to pass these COVID-19-related to salaries to employees in April (so that March salaries are still expected to be paid by employers as usual).  This payment will initially be only for April 2020, but the government is also making arrangements so that these payments can continue, if necessary, in May and June 2020. 


Abuse of COVID-19-related salary measure

The government stated that any abuse of this measure will not be tolerated, and there are a number of internal checks incorporated into the system to address and minimise abuse, including the provision of the contact details of employees so that the information provided may be verified on a sample basis. Any abuse identified will be “severely punished,” and employers need to be aware there will be serious criminal penalties for providing false or inaccurate information and that it will be an offence for an employer to retain or deduct any amount from the payment for any employee.


Terminations

Any terminations of employment registered by companies from 15 March 2020 will not be allowed without the specific consent of the Director of Employment, and this consent will only be granted in exceptional circumstances. 


Inactive employees for the excluded sectors (from 7 May 2020)

An amendment to the “business employee assistance terms” regulations was made on 7 May 2020 setting out the new measure applicable to the “excluded sectors.”

Any excluded sector businesses can now apply to the Director of Employment for consent to designate their employees as “inactive” in accordance with the new rules. Consent must be provided in writing by the Director of Employment, and there is a restriction so that only a maximum of 25% of the employer’s total workforce can be designated as inactive (if this limit is to be exceeded, then an application must be made in writing to the Financial Secretary who then must be satisfied that it would be fair and reasonable under the circumstances and in the public interest).

  • First, the employee must be registered with the Department of Employment / Income Tax Office as an employee of an employer from an excluded sector and the employer must notify the employee in writing that the employer is seeking to designate the employee as inactive. The employee (or representative body) then has an opportunity to make representations in writing to the Financial Secretary and/or the Director of Employment, but these must be made within 48 hours of the employee being notified, which will be taken into account prior to any determination.
  • For each employee, an application in writing to the Director of Employment is required so it can be determined with the approval of the Financial Secretary whether it is fair and reasonable for the employee to be designated as “inactive” on a case-by-case basis.
  • The inactive period (furlough period) generally means a period of up to one calendar month during the relevant period (i.e., from the date of publication of these regulations (7 May 2020) to the earlier of 30 June 2020 or the date the COVID-19 pandemic is officially announced as being over). Lesser alternatives or other periods can be agreed to by the Director of Employment for purposes of rotating inactive employees, provided that the aggregate period (in days) does not exceed 35 days (a longer aggregate period can be agreed when the Financial Secretary believes this to be fair and reasonable in the circumstances).  
  • An inactive employer cannot provide any services to their employer during the furlough period.

An inactive employee has the right to receive 50% of the contracted salary or £1,155 over a calendar month, whichever is greater, from the employer during the furlough period. Employers that wish to pay inactive employees a sum that is greater than 50% of their contracted salary throughout the furlough period can make additional payments, provided that the payment exceeds £1,155 over a calendar month period.

The payment made by the employer to the employee up to a maximum of £1,155 per calendar month is deemed to be a COVID-19-related salary and therefore, no PAYE or social insurance will be charged to the employer on that amount. Any amounts paid in excess of £1,155 will be subject to PAYE. Inactive employees who are ordinarily required to work less than 37.5 hours a week will have the amount of £1,155 pro-rated.


Other business measures

Measures previously announced for affected businesses in the hospitality, leisure, distributive, and catering sectors—read TaxNewsFlashwill now apply to all sectors except for the “excluded sectors” (as noted above).

However, all businesses will now benefit from business rates waiver for the second quarter of 2020 and a one-off capital allowance of £50,000 for the current financial year, given that expenditures will have been incurred in adapting operations to the challenges of the pandemic.

All employers will be allowed to defer their employment-related taxes or contributions (PAYE and social insurance) for the second quarter 2020 by a period of 12 weeks from month-end (extended from 10 weeks) and also will be able to benefit from the online streamlined employee registration process that was previously announced for the gaming and financial services sectors. 


Gaming sector

The government is monitoring the sports-related segment of the online gaming sector on the basis that it is understood that the sports segment is affected, as it is wholly reliant on the availability of international sporting events. In the meantime, the government announced that licence fees payable by gaming companies on 1 April 2020 are deferred until 1 July 2020 and that gaming duty will be deferred to the end of each quarter.


Financial services sector

The government also is continuing to review how to help the financial services sector. The deferral of Financial Services Commission fees has been extended further so that these are now to be paid quarterly in arrears.


Import duty

The import duty waiver for all classes of goods (except for tobacco, fuel, and alcohol) was in effect until midnight on 30 April 2020, and its extension will be reviewed monthly. However, in relation to motor vehicles, the waiver will be administered as a rebate on the sale of the vehicle. 


Table of changes

The government is expected to make available a table that breaks down each of these measures as they apply to business sectors, the status of the measure (whether it is a deferral or a waiver), and whether the measure is up for review (and if so, when).


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

Darren Anton | +350 200 48600 | darrenanton@kpmg.gi

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