Businesses in Gibraltar commonly adopt a corporate form, although they can also operate as sole traders or partnerships depending on the nature and scale of the business.

Companies

Gibraltar companies may be incorporated as:

• companies limited by shares (the most common structure);
• companies limited by guarantee (with or without share capital);
• protected cell companies (PCCs); and
• unlimited companies.

Companies limited by shares may be incorporated as private companies (whose shares or debentures cannot be offered to the public) or public companies (which may offer shares or debentures to the public).

Every type of Gibraltar company has separate legal personality and is taxed as a separate legal entity. For tax purposes, a protected cell company and each of its cells are treated as though each cell were a separate company.

Sole Traders

A sole trader operates a business in their personal capacity and does not have a legal identity separate from the individual. Sole traders must register as self-employed and are taxed as individuals on their business profits.

Partnerships

Gibraltar recognises three types of partnerships:

• general partnerships;
• limited partnerships (LPs); and
• limited liability partnerships (LLPs).

Partnerships are tax transparent, meaning each partner, whether an individual or a company, is taxed on their share of the partnership’s taxable income.

Trusts

Trusts in Gibraltar are governed primarily by the Trustees Act, which incorporates principles of English trust law together with Gibraltar-specific enhancements, such as asset protection trusts. Trustees are, generally, chargeable to tax on any assessable income of the trust.

Foundations

Private foundations are established under the Private Foundations Act 2017. A foundation has separate legal personality, allowing it to hold assets in its own name as absolute legal and beneficial owner. Its constitution consists of a charter and rules, which govern administration, the role of councillors, and any beneficiaries or guardians.

Unlike trusts, the foundation itself is subject to tax on any assessable income of the foundation.

Gibraltar recognises a range of transparent entities, primarily used for tax efficiency, flexibility in management, and suitability for investment and fund structures.

General Partnerships

General partnerships are established under the Partnership Act 1895 and operate as “traditional” partnerships. They do not have separate legal personality, and each partner may bind the partnership in the ordinary course of business. All partners have unlimited liability for partnership debts. General partnerships are commonly used for small, closely held businesses where partners wish to maintain flexibility and minimal administrative burden.

Limited Partnerships (LPs)

Limited partnerships were modernised under the Limited Partnerships Act 2021, replacing the 1927 legislation and significantly enhancing the regime.

Gibraltar LPs allow:

• partnership interests to be represented by shares, bonds, notes or other securities;
• limited partners to take a more active role without losing limited liability;
• the general partner to elect whether the LP has or does not have separate legal personality; and
• voting rights to be aligned with partnership interests unless varied.

LPs are tax transparent. Each partner (corporate or individual) is taxed on its share of the partnership’s income.

LPs are frequently used in:

• investment structures;
• private equity arrangements;
• funds and asset-holding vehicles; and
• cross-border family wealth structures.

Protected Cell Limited Partnerships (PCLPs)

Under the Protected Cell Limited Partnerships Act 2021, an LP used as a fund vehicle may create multiple segregated cells, ring-fencing each cell’s assets and liabilities from the others.

PCLPs are particularly attractive for:

• multi-strategy funds;
• umbrella fund structures; and
• investment managers seeking asset segregation without incorporating multiple entities.

Limited Liability Partnerships (LLPs)

LLPs are established under the Limited Liability Partnerships Act 2009. An LLP is a body corporate with separate legal personality, while members have liability limited to the amount agreed between them (typically their capital contribution).

LLPs combine:

• corporate style limited liability; and
• partnership style flexibility and transparency.

They are commonly adopted for:

• professional services firms;
• joint ventures; and
• international investment groups seeking tax transparency combined with limited liability.

Companies

Under Section 74 of the Income Tax Act 2010, a company is considered “ordinarily resident” in Gibraltar if:

• its management and control is exercised in Gibraltar; or
• its management and control is exercised outside Gibraltar by persons who are themselves ordinarily resident in Gibraltar.

There is no statutory definition of “management and control” in Gibraltar. Instead, the concept is determined by English common law, incorporated into Gibraltar law by the English Law (Application) Act.

Authorities such as De Beers v Howe and Bullock v Unit Construction confirm that residence is determined by where the highest level of strategic decision-making is actually carried out, not the place of incorporation or day-to-day operations. In practice, this usually, though not always, means the board of directors, and the focus is on where real, substantive board-level decisions are made.

Individuals (Relevant for the Company Test)

An individual is ordinarily resident in Gibraltar if they are:

• present in Gibraltar for at least 183 days in any year of assessment; or
• present in Gibraltar for more than 300 days over three consecutive years.

These criteria are relevant because a company managed and controlled outside Gibraltar may still be considered Gibraltar resident if those exercising management and control are ordinarily resident in Gibraltar.

There is no separate legal concept of “residence” distinguished from “ordinary residence” under Gibraltar law.

Transparent Entities (Partnerships)

Partnerships, whether general partnerships, limited partnerships (LPs) or limited liability partnerships (LLPs), are tax transparent. Residence is therefore not applied to the partnership itself but to the partners.

Each partner is taxed based on:

• their own individual or corporate tax residence; and
• their proportionate share of the partnership’s taxable income.

LPs and LLPs may elect separate legal personality under the Limited Partnerships Act 2021, but this does not change their treatment as transparent entities for tax purposes.

Companies

The standard rate of taxation for a company is 15%. Utility and energy provider companies are liable to a higher rate of 20%.

Generally, companies are taxed on a territorial basis of taxation (see 2.1 Taxable Profits).

Transparent Entities

Due to the fact that partnerships are transparent entities for tax purposes, the profits or gains from the partnership are deemed to be the share to which the partner was entitled. The rate to which the partner would be subject would depend on the type of partner (ie, a company or individual).

Individuals

Individual taxpayers have the choice of being taxed under either an Allowance Based System (ABS) or a Gross Income Based System (GIBS). Regardless of the system opted for, upon final assessment the Income Tax Office will apply the system that is most beneficial to the taxpayer.

Allowance Based System

This system enables an individual to claim certain allowances against assessable income, including:

• personal;
• spouse;
• child;
• nursery school;
• medical insurance premiums paid;
• life assurance premiums paid;
• pension contributions paid;
• first-time home purchase;
• mortgage interest;
• low income allowance and credit;
• social insurance contributions paid; and
• pensioner.

The tax rates under the ABS are as follows:

• 14% on the first GBP4,000;
• 17% on the next GBP12,000; and
• 39% on the balance.

Gross Income Based System

Under the GIBS, a taxpayer is entitled to very few allowances/reliefs, but the applicable rates are lower. The allowances/reliefs available under the GIBS include:

• first-time home purchase;
• mortgage interest;
• pension contributions paid; and
• medical insurance premiums paid.

The tax rates under the GIBS are as follows.

• Individuals with gross income of up to GBP25,000:
1. 6% on the first GBP10,000;
2. 20% on GBP10,001 to GBP17,000; and
3. 28% on the balance.
• Individuals with gross income of more than GBP25,000:
1. 16% on the first GBP17,000;
2. 19% on the next GBP8,000;
3. 25% on the next GBP15,000; and
4. 28% on the next GBP65,000.
5. 25% on the balance.

Any taxpayer with income of GBP11,450 or less is not liable to income tax in Gibraltar.

Other Rates of Tax, Duties and Contributions

Stamp duty

Stamp duty applies to the purchase of Gibraltar property and may also apply to the acquisition of shares in a company that owns Gibraltar residential real estate. There is also a fixed duty of £10 on standalone share or loan transactions.

Gibraltar property rates

For first and second time buyers, the stamp duty rates are as follows:

• 0% where the value of the property does not exceed GBP300,000;
• 5.5% where the value of the property exceeds GBP300,000 but is less than GBP350,000;
• 3.5% where the value of the property exceeds GBP350,000 but is less than GBP800,000; and
• 4.5% where the value of the property exceeds GBP800,000.

For third time or more buyers and companies purchasing properties under £200,000, no stamp duty is payable.

For third time or more buyers and companies purchasing properties between £200,000 and £350,000, the stamp duty rate is:

• 2% where the value of the property is between GBP0 and GBP250,000; and
• 5.5% where the value of the property is between GBP250,001 and GBP350,000.

For third time or more buyers and companies purchasing properties over GBP800,000, the stamp duty rate is:

• 3% where the value of the property is between GBP0 and GBP350,000;
• 3.5% where the value of the property is between GBP350,001 and GBP800,000; and
• 4.5% where the value of the property is over GBP800,000.

Mortgages

Stamp duty is also payable on mortgages or further advances secured in Gibraltar, at the following rates:

• mortgage of GBP200,000 or less at 0.13%;
• mortgage of over GBP200,000 at 0.20%; and
• releases of mortgage at 0.03% of the amount borrowed.

Tax on sale of shares of companies

In general, tax is not payable on the sale of shares in a Gibraltar company, unless that company owns real estate in Gibraltar.

Import duty

Goods that are imported into Gibraltar are subject to import duty at varying rates (with some exemptions).

Social insurance

Social insurance contributions are payable by every employee or self-employed person in any week in which they work.

• Employee contributions are 10% of gross earnings, subject to a minimum of GBP14.34 per week or GBP62.11 per month and a maximum of GBP40.79 per week or GBP176.76 per month.
• Employer contributions are based on 18% of gross earnings, subject to a minimum of GBP31.98 per week or GBP138.55 per month and a maximum of GBP56.22 per week or GBP243.65 per month.
• Self-employed contributions are 20% of gross earnings, subject to a minimum of GBP30.45 per week or GBP131.95 per month and a maximum of GBP53.55 per week or GBP232.05 per month.
• Individuals aged 60 and over and those whose statutory occupational retirement age is earlier than 60 are exempt from paying the employee’s share of social insurance contributions.

Territorial Basis of Taxation

Gibraltar taxes companies only on profits accruing in or derived from Gibraltar. “Accrued in or derived from” refers to the location of the activities that give rise to the income. Certain categories of income are statutorily deemed to arise in Gibraltar, including:

• income from an activity requiring a Gibraltar licence, or one passported into Gibraltar;
• intercompany loan interest exceeding £100,000 per annum earned by a Gibraltar registered company; and
• royalty income received by a Gibraltar registered company.

Accounting Profits and Computation Rules

Taxable profits are computed in accordance with the Income Tax Act 2010, using:

• Gibraltar Generally Accepted Accounting Practice (GAAP); or
• where applicable, UK GAAP or International Accounting Standards.

After determining accounting profit, adjustments are made to comply with Gibraltar tax rules.

Accruals Basis

Profits are taxed on an accruals basis, not a receipts or cash basis.

Deductions and Adjustments

A deduction is permitted for any expense wholly and exclusively incurred for the production of income.

Non-deductible items include:

• expenses not incurred for generating taxable income;
• domestic or private expenses;
• capital expenditure;
• any sum recoverable under insurance or indemnity;
• Gibraltar income tax;
• depreciation (capital allowances apply instead);
• contributions to non-approved pension schemes;
• interest not incurred for the purposes of the trade or business; and
• expenses disallowed under anti-avoidance provisions.

Capital Allowances

The following details the current regime – accounting periods ending after 30 June 2023. Capital allowances are available as follows.

Plant and machinery

• First year allowance – up to £30,000 of eligible purchases per accounting period.
• Remaining balance – 15% per annum (reducing balance basis).

Computer equipment

• First year allowance – up to £50,000 of eligible purchases per accounting period.
• Remaining balance – 15% per annum (reducing balance basis).

Industrial buildings

• 4% of the acquisition cost per annum.

Pooling and disposal

• All assets are pooled for capital allowance purposes.
• Disposal proceeds reduce the pool.
• Remaining pool value is carried forward.

New businesses

New businesses may claim 100% of eligible capital allowances in the first year of trade, subject to conditions. This operates as a full deduction against the company’s first year’s corporate tax liability.

Incentives

Gibraltar also provides a range of incentive-based deductions, including:

• approved expenditure on business premises;
• expenditure improving a building’s EPC rating;
• qualifying training costs; and
• approved property investment expenditure.

These may be taken as additional deductions where the statutory criteria are met.

No special incentives exist for technology investments in Gibraltar.

No special incentives apply to particular industries.

General Rules on Loss Relief

A company may carry forward trading losses indefinitely, provided:

• there is no change in ownership; and
• there is no major change in the nature or conduct of the business within a period of three years.

Gibraltar does not permit the carrying back of losses. Losses may only be offset against future taxable profits accruing in or derived from Gibraltar.

Restrictions on Use of Carried-Forward Losses

For certain regulated sectors, Gibraltar now restricts the use of carried-forward losses. Entities carrying out regulated activities under Section 5 of the Financial Services Act 2014, companies operating activities licensable under Section 3(1) of the Gambling Act, and any connected persons to such entities may only offset up to 50% of their taxable profits in any accounting period using losses brought forward. The remaining 50% of profit is fully taxable for that year.

Intra-Group Transfer of Losses

Where a trade or business is transferred as part of a group restructuring, any associated tax losses may also transfer and may be offset against profits of the business in the transferee company.

General Provisions

Any interest incurred for the production of income shall be deductible. Any interest paid or payable to a person that is charged at more than a reasonable commercial rate shall not be deductible.

A deduction is not allowed for any interest paid or payable on money borrowed other than for the purposes of the trade or profession that generates the income, or for acquiring the capital employed in acquiring the trade or profession that generates the income.

Specific Anti-Avoidance Provisions

Thin capitalisation

Interest paid on a loan by a company to related parties (which are not themselves companies), or on loans where security is provided by related parties, where the ratio of the value of the loan capital to the equity of the company exceeds 5:1 is considered as a dividend payment and is therefore not a deductible expense for tax purposes.

Payments to connected parties

The amount of interest paid to connected persons that is in excess of that payable at “arm’s length” is deemed a dividend payment and is therefore not a deductible expense for tax purposes.

Interest limitation rule

The interest limitation rule provides that exceeding interest expenses are deductible up to either 30% of earnings before interest, taxes, depreciation and amortisation (EBITDA) or EUR3 million, whichever is higher.

There are no rules in Gibraltar for consolidated tax groupings.

There is no capital gains taxation in Gibraltar.

On a transaction involving Gibraltar property, there may be property rates payable as well as any possible charge by a landlord for the consent for an assignment. Stamp duty may also be payable (see 1.4 Applicable Corporate and Individual Tax Rates).

Exit Tax applies in the following circumstances:

• a taxpayer transfers assets from its head office to its permanent establishment outside Gibraltar, and Gibraltar, as the head office, no longer has the right to tax the transferred assets due to the transfer;
• an entity transfers assets from its permanent establishment in Gibraltar to its head office or another permanent establishment outside Gibraltar, and Gibraltar no longer has the right to tax the transferred assets due to the transfer;
• a taxpayer transfers its tax residence from Gibraltar to another jurisdiction, except for those assets that remain effectively connected with a permanent establishment in Gibraltar; and
• a taxpayer transfers the business carried on by its permanent establishment from Gibraltar to another jurisdiction, and Gibraltar no longer has the right to tax the transferred assets due to the transfer.

A “transfer of business” is defined as when the entity ceases to have a taxable presence in Gibraltar and acquires a taxable presence in another jurisdiction, without becoming tax resident in that other jurisdiction. A “transfer of assets” is defined as when Gibraltar loses the right to tax the transferred assets, while the assets remain under the ownership of the same taxpayer. For the purposes of the above, a “taxpayer” means an ordinarily resident company that has assessable income under the provisions of the Income Tax Act 2010 or a permanent establishment of such company resident outside Gibraltar.

Tax would be applied at the applicable corporate rate on the difference between the market value of the transferred assets at the time of exit of the assets, minus their value for tax purposes.

Most closely held local businesses operate in corporate form through a company. However, a growing number of local businesses are operating as sole traders.

There are no rules that prevent individual professionals from earning income in a corporate form. Whilst corporate rates (generally 15%) are lower than individual rates (effective rate of 26%), if the individual then draws any income out of the corporation then this income would be taxable in the hands of the individual at the individual rates (either under the PAYE system, in relation to a salary, or as a dividend payment).

Gibraltar also has specific legislation regarding benefits in kind, which are treated as gains from employment and include:

• expense payments;
• vouchers and credit tokens;
• living accommodation;
• cars, vans and related expenditure;
• loans to employees, directors and shareholders; and
• removal benefits and expenses.

There is also a catch-all provision for other benefits that are not specifically listed above.

The employer may opt to pay the tax on the benefits on behalf of an employee at the following rates:

• 0% where the total annual value is less than GBP250;
• 20% where the value is between GBP250 and GBP15,000; and
• 29% where the value is over GBP15,000.

Gibraltar does not have traditional “accumulated earnings tax” rules. However, under the new GAAR provisions introduced by the Income Tax (Amendment) Act 2024, the Commissioner may now counteract or disregard any tax avoidance arrangement involving the accumulation of profits in a closely held company where the purpose or effect is to defer shareholder-level tax.

In particular, where income or profits are accumulated in a company and subsequently distributed to shareholders via a voluntary liquidation, the GAAR provides that the liquidation proceeds will be deemed to be dividends received by the shareholder if the Commissioner considers the arrangement to be tax avoidance. This applies regardless of the form of the distribution and is designed to prevent the use of corporate retention of earnings as a tax deferral tool.

Individuals in Gibraltar are generally taxed on dividends they receive from Gibraltar companies at their normal individual income tax rates, subject to a credit for any Gibraltar corporation tax already paid on the underlying profits. Dividends are not taxable where:

• the individual is not ordinarily resident in Gibraltar; or
• the dividend is paid out of profits on which no Gibraltar tax has been charged, and only to the extent the dividend represents the distribution of such untaxed profits.

Dividends are not taxed in Gibraltar if they are paid by a company whose shares are listed on a recognised stock exchange.

Gibraltar does not apply any withholding tax to interest, dividends and royalties.

Gibraltar and the UK signed a tax treaty (based on the OECD model) in October 2019, which came into force in April 2020.

An international tax agreement between the UK and Spain concerning Gibraltar (with the UK acting in its position as the recognised state responsible for Gibraltar’s external relations) was signed in March 2019 and came into force in March 2021.

It is too early to comment on whether local tax authorities will challenge the use of treaty country entities by non-treaty country residents, as the two agreements listed in 4.2 Key Treaty Jurisdictions for Inbound Investment only came into force relatively recently.

The general anti-avoidance rule in the Income Tax Act should be interpreted in the manner that best secures consistency with the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations and other documents designated as comprising part of the transfer pricing guidelines.

At present, there is no legislation in Gibraltar that governs the use of related-party limited risk distribution arrangements for the sale of goods or provision of services.

The general anti-avoidance rule in the Income Tax Act should be interpreted in the manner that best secures consistency with the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations and other documents designated as comprising part of the transfer pricing guidelines.

At this moment in time, it is too early to tell whether any international transfer pricing disputes will be resolved through double tax treaties and mutual agreement procedures, as Gibraltar’s tax treaties were entered into relatively recently (see 4.2 Key Treaty Jurisdictions for Inbound Investment).

Gibraltar has limited application of specific transfer pricing mechanisms, so the compensating adjustments allowed/made when a transfer pricing claim is settled are unclear.

Local branches of non-local corporations are not taxed differently to local subsidiaries of non-local corporations – the local branch or subsidiary would be liable to tax in Gibraltar on any assessable income that is accrued in and derived from Gibraltar (see 2.1 Taxable Profits).

Gibraltar does not have any capital gains tax.

A change of control of a local entity that owns Gibraltar real estate would trigger stamp duty and property fees (see 2.8 Other Taxes on Transactions). A change in control could result in tax losses not being available for set-off against future profits, provided there is also a major change in the nature and conduct of the business (see 2.4 Loss Relief).

This is not applicable in Gibraltar.

The Commissioner of Income Tax does not apply a specific standard in allowing a deduction for payments by local affiliates for management and administrative expenses by a non-local affiliate. However, if the Commissioner regards a company’s expenses with a connected party as a means to reduce the company’s tax liability, they may apply restrictions on the deduction of said expenses. This restriction may be imposed against 5% of the gross turnover of the company or 75% of the pre-expenses profit, whichever is lower.

There is also a restriction on head office expenses incurred for the common purpose of a branch, at 5% of the branch turnover.

There are no specific rules regarding financing operations between related parties, but limits on interest payments could be made (see 2.5 Deduction of Interest).

Subject to the CFC rules (see 6.5 Controlled Foreign Corporation-Type Rules), Gibraltar follows the territoriality principle, meaning that only Gibraltar sourced income is subject to taxation in Gibraltar (see 2.1 Taxable Profits).

Local expenses attributable to exempt foreign income would not be deductible for tax purposes.

Dividends received by a company from another company are exempt from tax.

Generally, intangibles developed by local companies can be used by non-local subsidiaries in their business without incurring corporate tax in Gibraltar. However, if the Gibraltar company is in receipt of income in respect of the non-local subsidiaries’ use of such intangibles, it may be deemed royalty income and would be subject to taxation in Gibraltar.

CFC rules have been introduced, under which the non-distributed income of a company or permanent establishment arising from non-genuine arrangements that have been put in place for the essential purpose of obtaining a tax advantage must be included as income of the taxpayer for that tax period.

In order for an entity or permanent establishment to be considered a CFC under the Regulations, two conditions must be satisfied:

• first, in the case of an entity, the taxpayer must by itself or together with its associated enterprises hold a direct or indirect participation of more than 50% of the voting rights or capital, or must be entitled to receive more than 50% of the profits of that entity; and
• secondly, the actual tax paid on its profits by that entity or permanent establishment is lower than the difference between the tax that would have been charged on the entity or permanent establishment in accordance with the Income Tax Act and the actual tax paid on its profits.

An arrangement or a series thereof is regarded as non-genuine under the Regulations to the extent that the entity or permanent establishment would not own the assets or would not have undertaken the risk that generates all or part of its income if it were not controlled by a company where the significant people functions that are relevant to those assets and risks are carried out and are instrumental in generating the CFC’s income. Where there is such a non-genuine arrangement, the income to be included will be calculated in accordance with the arm’s length principle.

In order to ensure that there is no double deduction, the following applies:

• where the entity distributes profits to the taxpayer, and those distributed profits are included in the assessable income of the taxpayer, the amounts of income previously included as income of the taxpayer shall be deducted from the income of the taxpayer when calculating the amount of tax due on the distributed profits;
• where the taxpayer disposes of its participation in the entity of the business carried out by the permanent establishment, and of any part of the proceeds from the disposal previously having been included in the income of the taxpayer, that amount shall be deducted from the income of the taxpayer when calculating the amount of tax due on those proceeds; and
• the Commissioner of Income Tax shall also allow a deduction of the tax paid by the entity or permanent establishment in its state of residence or location from the tax liability of the taxpayer in accordance with Section 37 of the Income Tax Act.

Entities or permanent establishments with accounting profits of no more than EUR750,000 and non-trading income of no more than EUR75,000, or those whose accounting profits amount to no more than 10% of their operating costs for the tax period, will not be considered CFCs under the Regulations.

There are no rules applicable to the substance of non-local affiliates.

There is no capital gains taxation in Gibraltar.

Gibraltar has a strengthened and wide-ranging General Anti Avoidance Rule (GAAR), introduced through the 2024 amendments to the Income Tax Act. The GAAR allows the Commissioner of Income Tax to counteract or disregard any arrangement where one of the main purposes is to obtain a tax advantage, where the outcome is inconsistent with the legislative intent of the relevant provision, or where the arrangement undermines the objectives of the Act. This applies a broad substance over form test to all transactions.

The Income Tax Act also retains the traditional anti-avoidance rule enabling the Commissioner to disregard transactions considered “artificial or fictitious”, and provides authority to adjust arrangements that are not consistent with OECD Transfer Pricing Guidelines.

A further notable feature of Gibraltar’s updated regime is the regulatory referral power. The Commissioner may refer advisers, such as lawyers, accountants or corporate service providers, to their professional or regulatory bodies where they have assisted in filing incomplete returns, or where the Commissioner reasonably believes they have promoted, facilitated or advised on an arrangement that contravenes the spirit and purpose of the Act, or acted with a conflict of interest.

Together, these provisions create a modern, robust anti-avoidance framework that businesses, shareholders and advisers must take into account in any Gibraltar tax planning or structuring exercise.

Gibraltar does not have a regular routine audit cycle. It is possible for the Income Tax Office to raise queries, but this normally occurs on an informal basis.

Gibraltar joined the OECD Inclusive Framework on BEPS in 2019 and has since implemented several of the key BEPS recommendations. These include the introduction of country-by-country reporting (CbCR) requirements for multinational groups and the adoption of Mandatory Disclosure Rules (MDR) modelled on the EU DAC6 framework, requiring intermediaries and taxpayers to report certain cross-border arrangements. Gibraltar has also enacted measures aligned with OECD transfer pricing principles, allowing the Commissioner to adjust transactions that are not consistent with the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations.

These measures form part of Gibraltar’s broader commitment to international tax transparency and the BEPS agenda.

Gibraltar has consistently aligned itself with the OECD BEPS agenda, and the government’s stated policy is to adopt further BEPS measures as they are co-ordinated internationally, particularly those aimed at preventing double non-taxation, improving tax transparency, and maintaining Gibraltar’s position as a compliant, reputable international finance centre.

On 31 December 2024, legislation was passed implementing the Pillar Two global minimum tax rules in Gibraltar. The legislation confirms a 15% domestic minimum top-up tax (DMTT), which applies to multinational enterprise (MNE) groups and domestic groups meeting the revenue threshold for financial years starting on or after 31 December 2023. The legislation has also introduced an income inclusion rule (IIR), which applies for financial years starting on or after 31 December 2024.

Although Gibraltar is a small country, tax has a high public profile in the jurisdiction. This is a result of certain sectors of Gibraltar’s economy having a global reach, such as the gaming sector and the growing fintech and distributed ledger technology framework. This is likely to influence the implementation of BEPS recommendations as Gibraltar looks to remain fully compliant with international tax obligations to ensure equivalent standards with the UK and the EU.

The policy of successive Gibraltar governments has been to provide a competitive tax environment that is fully compliant with international best practice. Gibraltar has always been an early complier with OECD and other international initiatives, and that policy is expected to continue.

Gibraltar has a competitive tax system in place that includes the following:

• a partial territorial tax system – companies are only taxed on activities located in Gibraltar;
• a low corporate tax rate of 15%;
• no VAT or sales tax;
• no capital gains tax;
• no withholding tax; and
• tax treaties and agreements with only the UK and Spain.

This is likely to continue to be balanced against any implementation of BEPS recommendations.

Gibraltar’s implementation of hybrid instruments relating to the BEPS recommendations has focused primarily on the implementation of EU Directives focused on anti-tax avoidance.

Under Gibraltar law, payments under hybrid instruments and payments to associated hybrid entities will be disregarded where the deduction or payment benefits from a tax deduction in the payer’s jurisdiction and is not taxed in the jurisdiction where the payment is received.

Gibraltar’s tax system is territorial in nature (see 2.1 Taxable Profits). Gibraltar has interest deductibility restrictions in place (see 2.5 Deduction of Interest).

The OECD’s Action Plan in respect of CFCs builds on the existing fundamental principles of residence-based taxation, which would not align with a traditional territorial basis of taxation. However, Gibraltar has transposed the Anti-Tax Avoidance Directive (ATAD), which includes CFC rules (see 6.5 Controlled Foreign Corporation-Type Rules). Therefore, while Gibraltar’s tax system is largely territorial, it is more hybrid in nature to accommodate domestic goals and international standards. Gibraltar is expected to take a similar approach to any future CFC proposals.

It is highly unlikely that any double tax convention limitation of benefit or anti-avoidance rules will have any impact in Gibraltar, at least for the foreseeable future.

Gibraltar has not yet implemented a full transfer pricing regime in line with BEPS Actions 8–10. However, the Income Tax Act now expressly allows the Commissioner to adjust arrangements that are not consistent with the OECD Transfer Pricing Guidelines, meaning that non-arm’s length transactions, particularly between connected parties, may be challenged under both the traditional “artificial or fictitious” rule and the expanded 2024 GAAR.

Gibraltar has introduced legislation on country-by-country reporting and the automatic exchange of information, indicating the country’s approval of enhancing transparency in combatting BEPS.

Gibraltar has not implemented any changes in relation to the taxation of transactions effected or profits generated by digital economy businesses operating largely outside Gibraltar, nor have any been discussed or proposed.

Gibraltar has not yet stated its position in relation to digital taxation, and no proposals have been put forward.

Gibraltar does not have any specific provisions dealing with the taxation of offshore intellectual property that is deployed within Gibraltar. As a result, it does not impose any withholding tax or tax by direct assessment on the IP owner. It is important to stress the Commissioner’s powers regarding expenses incurred with a connected party (see 5.6 Deductibility of Intra-Group Management and Administrative Charges).