Category 2 tax residents have their tax capped at a maximum of approximately £26,000 per annum. This capped amount is calculated based on a total income of £70,000, but the capped amount varies from year to year due to changes in the tax band. Therefore, the maximum tax payable for the current 2009/2010 tax year is calculated as follows:
£4,000 x 17% =
£680
£12,000 x 30% =
£3,600
£54,000 x 40% =
£21,600
Total tax payable
£25,880
Therefore the total tax payable for a Category 2 resident for 2009/2010 is £25,880.
If as a Category 2 resident there is no Gibraltar source income then you would pay the minimum £20,000.
In addition, there is no capital gains tax, inheritance tax, wealth tax or sales tax in Gibraltar. This makes it a very attractive low tax location for individuals.
The key
conditions of obtaining Category 2 status are as follows:
The Category 2 individual must be of
substantial and sound financial standing and have a minimum net worth of
£2 million.
The Category 2 resident must either own or
rent approved residential accommodation in Gibraltar.
The accommodation must be approved by the Gibraltar Finance Centre and be
used exclusively by the Category 2 individual and his direct family. His
direct family includes his spouse, children, brother, sister, parents and his
spouse’s parents. Therefore, the Category 2 individual cannot rent the
property and is limited to occasionally allowing others to stay there,
otherwise he will not be deemed to have “exclusive use” and would consequently
lose his status.
The Category 2 individual cannot have been
resident in Gibraltar during the five years
immediately proceeding the year of assessment. Previous residency (as
defined in the Category 2 rules) includes 183 days in any tax year during
the previous 5 years or an average of 90 days in any three of the previous
5 years.
The Category 2 individual is not allowed
to engage in a trade, business or employment in Gibraltar.
Exceptions to this rule include where duties are incidental to a business
outside of Gibraltar or the Category 2 resident is a director of a
Gibraltar Exempt Company or a director of a Company which does not
transact any trade or business in Gibraltar.
The Gibraltar Finance Centre has issued guidelines in the form of a
circular confirming the list of permissible activities that a Category 2
individual may in principle carry out. In addition to this, it is also
possible to apply for a ruling to determine whether proposed activities
would contravene the Category 2 rules.
Category 2
status is granted on an indefinite basis, but the Category 2 residency
certificate needs to be sent to the Gibraltar Finance Centre for endorsement
every three years.
The Category 2 individual must have private medical cover in Gibraltar.
There is
no minimum stay in Gibraltar for a Category 2 resident individual, therefore as
long as the individual fulfills all of the above conditions he will retain
his Gibraltar residency without the need to spend any time in Gibraltar.
If you wish to apply for category 2 status then your next step will be to contact a local Category 2 adviser in Gibraltar to commence the application process.
