Ian Watts, providing legal services in Gibraltar since 2002
HNWI’s – Gibraltar’s Offering
With the international migration of millionaires in mind, the law of Gibraltar, like in other popular offshore jurisdictions such as Switzerland and the Cayman Islands, offers a special tax regime to what has been dubbed in global financial circles as the “HNWI” (High Net-Worth Individual). The current regime offered to HNWI’s is found in the Qualifying (Category 2) Individual Rules 2004, which are made under the relevant provisions of the Gibraltar Income Tax Act 2010. HNWI’s who satisfy the criteria imposed under the Rules, come to be known colloquially in Gibraltar as “CAT 2 Individuals”.
Gibraltar & Offshore Tax Residency
Gibraltar enjoys the Mediterranean climate and lifestyle. It is a British Overseas Territory that shares a border with Southern Spain. Nearby Andalucia offers a plethora of golf resorts and tourist hot-spots such as Marbella, Granada and Seville. Gibraltar maintains daily flights to and from London. An average plane journey from London is about 2 ½ hours.
Gibraltar hosts a modern well regulated Offshore Finance Centre. There are no inheritance taxes, capital gains taxes or value added taxes levied in Gibraltar.
Gibraltar has also passed legislation to confer special fiscal benefits upon highly-skilled workers in order to attract them to her jurisdiction – those that benefit from the legislation are known locally as HEPSS Individuals. These initiatives also represent a highly attractive regime worth considering.
Overall, in the context of modern offshore tax planning, Gibraltar is a respectable candidate.
What are the requirements for Gibraltar CAT 2 Status?
To be eligible for a Gibraltar CAT 2 status you need to satisfy the Finance Centre Director of certain requirements (see further below, for the Gibraltar ‘Cat 2’ Application Process).
You will not be eligible for CAT 2 Status in Gibraltar on grounds of certain past residency and commercial activity, as laid down by Rule 4: –
Rule 4 enacts:
(1) Subject to sub-rules (2) and (3) below, an individual who in the last five years of assessment immediately preceding the year of assessment in which the application is made –
(a) was present in Gibraltar for a period exceeding–
(i) 183 days in any such year of assessment, or
(ii) an average of 90 days in any three of those years of assessment;
(b) has carried on or exercised any trade, business, profession, vocation or employment in Gibraltar,
shall not be entitled to a certificate issued under rule 6 of these rules.
(2) Paragraph (b) above shall not apply in relation to activities, duties or functions performed by the individual in Gibraltar that are incidental to any trade, business, profession, vocation or employment carried on or exercised outside Gibraltar by that individual.
(3) The Finance Centre Director may waive any requirement of this rule where he is satisfied that the issue of a certificate under rule 6 of these rules would be of benefit to the economic development of Gibraltar.
What are the tax benefits of your acquiring Gibraltar CAT 2 Status?
- A ‘special tax’ status in that you will only be assessed for tax in Gibraltar on the first £118,000 of your worldwide taxable income. As from the 7th July 2022, the minimum amount of tax payable in Gibraltar by a CAT 2 individual on any year of assessment following the year of assessment in which the actual status application is made, is capped at £37,000.
- In certain circumstances, the 2004 Rules allows for the CAT 2 Individual to able to elect that the income of his spouse or civil partner or child of his or his spouse or civil partner, be deemed to be his income under the 2004 Rules. There also exists the power for a latter family member of the CAT 2 Individual to apply in their own right for a CAT 2 Status and if so, the prospective family member applicant and the CAT Individual in question shall be deemed to have exclusive use of the approved accommodation in question.
Your attention is drawn to the following:-
- You must not assume that merely because you become a Gibraltar CAT 2 individual that you will be immune from paying taxes in any other jurisdiction(s) in which you may be ‘deemed’ to be considered resident for taxation purposes.
- It is therefore very important that you seek appropriate professional tax advice before applying for Gibraltar Cat 2 Status. Residency and international tax law can be particularly complicated and therefore there is to be no substitute for considered advice on the particular facts of the individual case.
Gibraltar CAT 2 Application Process:-
An application is made in writing (usually with the assistance of a Gibraltar Lawyer) to the Gibraltar Finance Centre Director enclosing the following the information:
- A copy of your CV and a certified copy of your passport;
- Evidence that you have a “net” worth of £2 million+ in assets;
- Evidence that you hold suitable private medical insurance cover;
- Two character references – one from your attorney and one from a banker certifying your good character; and
- Proof that you have (or undertake to have) “approved residential accommodation” (i.e. a property approved property by the Gibraltar Finance Centre Director for the purposes of the CAT2 Status Rules) for your “exclusive use” (which includes your family and friends and occasional non-paying guests) during the whole or part of the financial year of assessment in which the application is made. Incidentally, the property in question can be purchased or rented by you for your exclusive use as aforesaid, but you cannot rent or lease out the property to any third party.
The application process is accompanied by a £1,000 fee which is non-refundable. This fee is of course apart from any professional charges levied in respect of the application process.
On a final note, although Gibraltar Cat 2 residency status is in principle conferred for an indefinite period of time, it is renewable every 3 years if the Finance Centre Director considers all the requirements of the status have been complied with and that there are no other valid reasons to cancel the residency certificate.
For further information on Gibraltar Cat 2 Applications, please feel free to contact Ian Watts.
©Ian Watts, Gibraltar Lawyer, 2017-2023. All Rights Reserved.