ON 1 JULY 2024, FABIAN PICARDO KC, DELIVERED HIS 13th BUDGET SPEECH AS GIBRALTAR’S CHIEF MINISTER, ADOPTING THE TWIN PRICIPLES OF “RESPONSIBILITY AND PRUDENCE” AND “DESIGNED TO BE GOOD FOR ALL OF US”. THIS WAS FOLLOWED UP BY THE MINISTER FOR JUSTICE, TRADE AND INDUSTRY, NIGEL FEETHAM KC, WHEN HE ANNOUNCED FURTHER TAX CHANGES ON 2 JULY 2024.
BACKDROP
- EU negotiations – Government remains optimistic to agree a treaty but will only bring back a deal if it is safe secure and beneficial. Result of General Election in UK this week will impact when negotiations re-start.
- Estimated outturn surplus for 2023/2024 of £1.9m (below estimate of £2.5m).
- 2023/2024 third-party revenue £746m, £13m more than projected.
- 2023/2024 £410.8m income tax (personal £255.5m and corporate £155.3m) receipts, £6m more than estimated.
- 2023/2024 £94.9m import duty, almost as estimated at £95m.
- 2023/2024 £6.5m tourist site receipts.
- GDP forecast for financial year 2023/2024 is £2.91 billion.
- Annual GDP per capita £85,614 (US$107,873) per person, 2nd in the World rankings (below Luxembourg). UK US$49,099, Spain US$33,071.
- 27 individuals unemployed (2023: 29).
- 31,523 jobs in the economy.
- Average annual gross earnings £36,050.
- 2024/2025 £3.3m surplus predicted.
- 2024/2025 conservatively estimating revenue of around £733m.
TAX & FISCAL MEASURES
- Personal income tax rates reduce to pre-Budget 2022 rates, removing the 2% increase introduced in 2022 (which was part reduced in 2023).
- Corporate tax rate will increase from 12.5% to 15%.
- In light of approx. £2.1bn accumulated corporate tax losses, legislation will be introduced to restrict the use of carry forward relief of corporate tax losses. Unutilised losses will continue to be able to be carried forward but the rate of set off of these losses will be slowed. This will apply from 1 July 2024 to companies in financial services and gaming (legislation drafted and in final stage of preparation).
- Where 3 or more properties (including off-plan) are owned (other than primary residence or other exempted property) legislation will be introduced to tax the profit or gain derived from the property sales. This will apply from 1 July 2024 (legislation drafted and in final stage of preparation).
- Short-term holidays lets – mechanism to be introduced, every property will need to be registered and inspected. A fee and other conditions will apply. More details will be made available shortly, but it is the Government’s intention to roll out this scheme before the end of the calendar year.
- Changes will be made to the Living Accommodation relocation benefit in kind exemption to allow this exemption to continue to apply even if the individual changes address in Gibraltar. The duration of this exemption will also be reviewed, to be reduced from 7 years, and transitional and anti-avoidance rules considered.
- Student employment income tax exemption will be capped at £11,450 p.a, as an anti-abuse measure.
- 5% increase in both employee and employer social insurance caps.
- A tax computation deduction of an additional 50% in respect of any cost or expense of achieving net zero, subject to the Commissioner of Income Tax considering the deduction reasonable and directly associated with achieving the net zero objective. Any such additional deduction will be capped at a maximum of £10,000 p.a.
- First and second time homebuyers allowance – restricted to properties under £800,000.
- Downsizing incentive for seniors (65+) the equivalent of the first-time home buyers’ allowance will be introduced for those selling after the age of 65 and moving to smaller property.
- Special Stamp Duty should not apply to sales after an acquisition of an affordable home on the open market. It applies to those selling after purchasing from the Government or otherwise not buying with the benefit of the taxpayers subsidy.
- Special Stamp Duty on off-plan purchases – New Purchase agreements and assignments will be registrable instruments with 0.5% payable on Assignment of Purchase Agreement (by the assignor).
- Electric vehicles remain at zero % import duty, along with vehicles propelled by hydrogen or hydrogen fuel cells.
- Mild hybrid vehicles import duty 10%.
- Full hybrid / plug in hybrid vehicles import duty 5%.
- Both of these duties will not apply to vehicles already ordered or ordered before 30th September this year, even if delivered after.
- 5% pleasure-craft import duty, cap at £35k.
- Inflationary increase 2.6% for old-age pensions and disability benefit.
- Minimum wage will increase by 30p to £8.90 ph (£17,355 pa).
- Water and electricity increase by 2.6%.
- Government public sector staff – annual payment of £1,200 (for those earning less than £50k), £900 (for those earning £50k to £75k) and £600 (for those earning £75k to £100k).
- All fees charged by any Government department will increase 2.6% or nearest 50p from 1 August 2024.
OTHER BUDGET ANNOUNCEMENTS/COMMENTS
- McGrail Inquiry costs total paid to date £4.12m.
- Consultation to be held on new Gibraltar Regiment Scholarships to provide financial incentives to any young person resident in Gibraltar who would have been eligible for a mandatory university scholarship and instead opts to join the Regiment and remains in the Regiment for at least five years.
- AquaGib purchase by Government to be finalised this summer.
- 2023/2024 £10.2m tax repayments paid to taxpayers.
- Gibraltar Whitelisted by the Financial Action Task Force.
- Gibraltar entered the OECD BEPS framework.
- Draft legislation for Pillar 2 expected in September 2024, at which point a wider consultation will be undertaken.
FULL BUDGET SPEECH
- The Chief Minister’s Budget Speech can be read here:
THE BUDGET 2024 – CHIEF MINISTER’S ADDRESS – 470/2024 (gibraltar.gov.gi) - The Minister for Justice, Trade and Industry’s Address can be read here:
THE BUDGET 2024 – THE HON MINISTER FEETHAM’S ADDRESS – 481/2024 (gibraltar.gov.gi) - The draft Estimate of Revenue and Expenditure for 2024/2025 is also available online:
DRAFT ESTIMATES BOOK 2024-2025.pdf (gibraltar.gov.gi)
Sovereign Tax Services is a trading name of Sovereign Fiscalis Limited, Sovereign Place, 117 Main Street, Gibraltar, Company Registration Number: 84307.
For further information contact:
Sovereign Tax Services
Sovereign Place, 117 Main Street, Gibraltar, GX11 1AA
Phone: +350 200 76173
Email: tax.gib@SovereignGroup.com
