Taxation and Residency (including Cat II)

Note: the following information is intended as a general guide only and we strongly recommend that you contact us directly regarding any queries you may have.

The purchase process - an overview

With our extensive portfolio of properties and our excellent working relationships with the other local agents, rest assured that we will find what you are looking for. We can also set up meetings with local mortgage advisors for you so that you can discuss your options if you need financing for the purchase.

Once you decide on the property you wish to purchase and your offer has been accepted by the vendor, it is standard practice to place a holding deposit equal to 2% of the purchase price. This deposit is normally paid into our Client Account and held by us on a "subject to contract" basis. Unless otherwise stated, this deposit is no more than a good faith payment resulting in the property being taken off the market. Neither party to the sale is legally bound until exchange of contracts and your deposit is fully refundable until then.

It is recommended that you instruct a lawyer to carry out the conveyancing for you. Once your offer has been accepted and the deposit has been placed, we will prepare the Memorandum of Sale summarising the deal agreed whereupon you will need to instruct your lawyer to begin the conveyancing process.
It is up to you the purchaser to reasonably examine the property prior to purchase and take note and responsibility for its condition and, for this reason, it is advisable that you carry out a survey.

Exchange of contracts takes place once the due diligence has been done and all enquiries have been confirmed and agreed, which usually takes 2-3 weeks. At this stage you need to pay a further 8% from your lawyer’s account to the vendor’s lawyer’s account and it is here that the sale becomes legally binding.

The final stage of the process is completion which is where all documentation is finalised, the remaining money owed is transferred from your lawyer’s account to the vendor’s lawyer’s account, and you are handed the keys to your new home. The timing of this depends on a number of factors but it usually takes place 4-6 weeks after exchange of contracts.

The timeframe of a property purchase in Gibraltar is typically 6-8 weeks but it can take less or more time depending on your position and that of the vendor.

Fees payable over and above the agreed purchase price

The standard conveyancing fee in Gibraltar is 1% of the purchase price for purchases up to £150,000 and 0.5% on anything above that.

For an overview of Stamp Duty payable, please click here.

Cat 2

Qualifying (Cat 2) Individual status limits the amount of tax payable in Gibraltar by individuals in respect of monies remitted to Gibraltar up to a maximum of approximately £80,000 taxable income, regardless of the actual world-wide income of the individual.

The maximum tax payable by a Cat 2 Individual is approximately £29,000.

Applying for Cat 2 individual status involves an application for Tax Status and an application for Gibraltar residency. The following items are required in support of a Cat 2 application:

  1. A detailed curriculum vitae;
  2. A property purchase agreement or rental contract on a property which qualifies as a Cat 2 property;
  3. A reference letter from an accountant/lawyer or banker confirming the individual’s assets of £2million;
  4. A further reference letter from a different person with the above stated qualifications, confirming the number of years the applicant has been known to them and that he is of good standing, trust and repute
  1. A non-refundable application fee of £1,000;
  2. 2 passport sized photos; and
  3. a copy of a private medical insurance policy covering applicant in Gibraltar.

A lawyer would ideally handle the above procedure on behalf of an individual interested in obtaining such status.

Further to the above, there are no capital gains taxes operating under Gibraltar Law. When a property is sold, all profit is free of taxation except in the case of a company which sells as part of its trade.

Key Benefits

  • Maximum tax payable on all income, wherever it is generated, is approximately £29,000
  • No capital gains tax
  • No wealth tax
  • No inheritance tax / death duties

HEPPS

HEPSS (High Executive Possessing Specialist Skills) status is available for individuals with specialist skills of exceptional economic value to Gibraltar.

A HEPSS certificate will be granted to a company for individuals who will occupy a high executive or senior management position, earn in excess of £100,000 per annum and satisfy the Government that they possess skills which are important for the economic development of Gibraltar and are skills that are not available in Gibraltar.

The company must also satisfy the Gibraltar Government that the individual for which they are requesting a HEPSS status has not been a resident in Gibraltar for any part of the period of three years immediately preceding the year in which the application is made. The individual obtaining the HEPSS status is required to buy or rent accommodation of a high standard which is available to him for his exclusive use, all year round.

Irrespective of the HEPSS's annual income, tax will be capped to the first £120,000 and taxed under the Gross Income Based system. Currently this results in an annual tax liability of approximately £28,000.

The 3-Year Residency requirement

Certain properties in Gibraltar are subject to the 3-year residency requirement which basically states that only those individuals who have been living in Gibraltar for at least 3 years continuously are eligible to purchase them. Additionally, such properties cannot be purchased by individuals who already own a property in Gibraltar.

Due to such restrictions, these properties are more affordable than those in the open market. They make up the majority of properties for sale under £250,000.

Leasehold V Freehold

The Gibraltar Government owns the land in most modern developments in Gibraltar. Typically, the Government grants a lease to the company developing a particular plot of land for a term of 150 years. The development company then sells each apartment on the land to third parties for the term less seven days. In most leasehold purchases, the estate where the property is situated is managed by a management company and you will ordinarily be required to pay service charges on a quarterly or half yearly basis.

Freehold property does still exist in Gibraltar but such properties are rare. In the event that you are considering purchasing a freehold property, it is recommended that you seek legal advice before placing a deposit because the title history to such properties is complex.