Gibraltar: Increased tax rate for companies, temporary allowances

Company income tax, temporary allowances, environmental improvement, social insurance, individual tax

Company income tax, temporary allowances, environmental improvement, social insurance

The Chief Minister on 20 July 2021, in the 2021 Budget Address, announced the following tax measures.

Company income tax

  • The company income tax rate is to increase to 12.5% (from 10%) for accounting periods beginning after 20 July 2021 (no increase was announced for those companies paying tax at the higher rate of 20%). The Chief Minister explained that this increase is to avoid a significant change to a tax rate of 15% if or when there is a global agreement instituted for a minimum tax rate.


Temporary allowances

The following allowances are to apply from 20 July 2021 through 30 June 2023:

  • Employment allowance—an additional 50% based on the fixed salary cost of every new employee employed.  The measure would be limited to basic salary and exclusive of bonuses, allowances and overtime payments.
  • Training allowance—an increase to 60% (from the current allowance of 50%) for qualifying training expenditures. This increase would not apply to “ancillary amounts” (e.g., related travel and accommodation). An application would have to be submitted to the Income Tax Office (ITO).
  • Marketing allowance—an additional allowance of 50% of marketing costs. For example, if £1,000 is spent on marketing, then a deduction of £1,500 could be claimed for tax purposes. An application would need to be submitted to the ITO and evidence demonstrating that the expenses are validly incurred in marketing for purposes of the business.
  • Capital allowances—
    • Plant and machinery—first year allowance to increase to £60,000 (from £30,000). When the amount of expenditure is greater than £60,000, then the first year allowance would be the greater of:
      • £60,000
      • 50% of the expenditure incurred
    • Computer equipment—first year allowance to increase increases to £100,000 (from £50,000). When the amount of expenditure incurred is greater than £100,000, the first year allowance would be the greater of:
      • £100,000
      • 50% of the expenditure incurred
  • The “pool allowance” would increase to 25% (from 15%) for companies and to 30% (from 20%) for other taxpayers. For companies paying tax at the higher rate, no increase in the pool allowance rate was announced, and thus it would continue to be 20%.
  • A general “wear and tear” allowance on real property (the location where the business is conducted) at 1% of the costs of acquiring the property (buildings already qualifying or industrial building allowances would not be eligible).
  • The “plant and machinery” definition would include private vehicles when partly used for the production of the income and the motor vehicle is a full electric vehicle (not a hybrid).


Environmental improvement

  • Increased deductions available under the Energy Performance (Deductions) Rules for improvements to the energy performance certificates (EPC) rating of a property


Social insurance

  • An increase to social insurance contributions (previously announced and enacted)


Individual (personal) tax

  • Specific allowances to increase by the rate of inflation or more.
  • Beginning 1 August 2021, for “Category 2 individuals,” the amount of capped taxable income per year of assessment included in the Category 2 rules to increase from to £105,000 (from £80,000) and the minimum tax payable would also increase to £32,000 (from £22,000) per year of assessment.
  • Beginning August 2021, to qualify as “high executive possessing specialist skills” (HEPSS), an individual would need to earn more than £160,000 (instead of £120,000). Grandfathering provisions were announced for individuals that currently have HEPSS status which will allow them to retain this status for the next two years while their employers adjust their employment earnings so their HEPSS status can be retained.  
     

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

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

 

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