Gibraltar Tax on sale of Gibraltar residential properties – now law from 1 January 2025

Gibraltar Tax on sale of Gibraltar residential properties now law, where owner directly or indirectly owns five or more such properties

On 23 December 2024, Gibraltar introduced new law taxing profits derived from disposals of interest in Gibraltar residential property.

This final legislation, updated from the draft legislation published in July 2024, taxes profits from the sale of Gibraltar residential properties, from 1 January 2025, where the owner owns five or more Gibraltar residential properties, directly or indirectly, other than their primary residence or other exempted property.

Exempted property includes hotels, commercial property, property constructed prior to 1 January 1988 and held by the owner since, 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, amongst other exemptions.

This legislation applies to individuals, companies, trusts, foundations and partnerships, resident anywhere in the world, to any ownership percentage in a Gibraltar residential property, including off-plan property.

It only applies if five or more such property interests are owned, or an aggregate of five 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 five 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: 1 January 2025
• 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. Please do not hesitate to contact us if you or your clients have any queries.

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