Gibraltar Tax on sale of Gibraltar residential properties introduced, where owner directly or indirectly owns three or more such properties

On 25 July 2024, the Government of Gibraltar published draft legislation taxing profits derived from disposals of interest in Gibraltar residential property, a measure announced in Minister Feetham’s Budget address on 2 July 2024.

This draft legislation taxes profits from the sale of Gibraltar residential properties, from 1 August 2024, where the owner owns three or more Gibraltar residential properties, directly or indirectly, other than their primary residence or other exempted property.

Exempted property includes hotels, pre-war properties, properties unfit for habitation or in need of substantial repair if the Commissioner of Income Tax is satisfied that the purchase is for the purpose of development to permit resale or letting.

It applies to individuals, companies, trusts, foundations and partnerships, in Gibraltar or elsewhere (so worldwide owners), to any ownership percentage in a Gibraltar residential property, including off-plan property.

It applies if three or more such property interests are owned, or an aggregate of three or more are owned over a five year period.

It applies on the disposal of the property, and on the disposal of shares, directly or indirectly in a property holding entity (i.e. an entity whose principal activity in the last basis period consists of ownership, holding or management of Gibraltar property).

Property interests of connected persons may taken into account in determining whether the law applies.

Some disposals are exempted e.g. disposal by estate of a deceased person.

Government Guidance is expected to be issued.

Summary

• Who is affected: Any owner (worldwide – individual, company, trust, foundation, partnership) of three or more Gibraltar residential properties (excluding exempted property), regardless of the ownership percentage in the property and whether held directly or indirectly (including through a property holding entity).
• Start date: Deemed to come into operation on 1 August 2024.
• Profit calculation: Costs wholly and exclusively incurred for the purpose of production of the income should apply in calculating the taxable profit, for example, the property interest purchase cost.
• 2024/2025 Applicable Gibraltar Tax Rates:

• Individuals resident in Gibraltar: up to 25% effective rate.
• Category 2 resident individuals: 39%.
• Individuals not resident in Gibraltar: up to 39%.
• All Companies: 15% (20% for fuel supply or utility companies).

Sovereign Tax Services can advise on all Gibraltar property tax matters to ensure ongoing tax and residency compliance.

Sovereign Tax Services is a trading name of Sovereign Fiscalis Limited, Sovereign Place, 117 Main Street, Gibraltar, Company Registration Number: 84307