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Taxation inGibraltarThe Budget 2014

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Corporation tax

There is no change to the corporate taxrate of 10%.

Personal tax

Loans to shareholders and directors areno longer taxed as earnings if arranged atarm’s length terms and approved by theCommissioner of Income Tax.

There is an increase in the low incomeearners allowance so that any tax payerwith income of £10,500 or less will notpay any tax.

A tax free allowance up to £3,000 overtwo years is introduced for all taxpayersfor the installation of solar energy forboilers.

In respect of the allowance based system,specifically, the following changes wereannounced:

The tax rate for the taxable bracket of£4,001 to £16,000 has been loweredto 18% from 24%;

Personal and spouse allowances haveboth increased to £3,100

Allowances for, blind persons,medical insurance premiums,nursery school payments and oneparent family have increased to£4,000.

The disabled individuals allowancehas increased to £6,000.

In respect of the gross income basedsystem, the following changes wereannounced:

Taxpayers will be entitled to adeduction from their assessableincome up to £2,500 in respect ofprivate medical insurance premiumsand a deduction from assessableincome up to £1,200 in respect ofcontributions towards an approvedpension scheme;

First time home buyers will benefitfrom a deduction of £6,000.

Stamp duty on properties

No Stamp Duty will be payable by first-time and second-time buyers on the first£250,000 of the cost of their property,irrespective of the total cost of their newhome.

Standard rate of tax

The standard rate of tax has been reducedfrom 30% to 20% for individuals and from30% to 10% for trusts.

Pensions

Pension scheme guidelines are to beamended to permit members of approvedschemes to continue as active membersand make contributions, even whilst nolonger in employment.

A summary of the key taxation changes announced inthe Chief Minister’s budget on 30 June 2014

PwC Tax

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Our tax experts provide support toindividuals and businesses on allcurrent tax issues and on resolvingthe complex issues involved in taxplanning.

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Statutory minimum wage

This is increased to £6.11 with effect from1 August 2014.

Commercial property rateincentives

New business start-ups will benefit froman early payment discount of 65% for thefirst year of trading.

The discount for early payment forOffices, Workshops, Construction andManufacturing Industries, and Transportand Distribution Industries, will beincreased to 15% with effect from 1st July2014.

For bars and restaurants, the discount willbe increased to 40% between 1st October2012 and 30 September 2013 and to 30%between 1st October 2013 and 30September 2014.

Changes in import duty rates

Import duty on the following goods hasbeen exempted:

Artwork LED lighting Mobile phones Writing implements Pet food Fertilizers Paper-based stationery Umbrellas Musical instruments Pleasure craft, yachts and other

seagoing vessels, under 18 metres inlength, including jet-skis and kayaks

Import duty on natural and culturedpearls has decreased from 12% to 4.5%.

Import duty on all domestic appliances orwhite goods with a C or D rating isdoubled from 6% to 12%.

Import duty on rolling tobacco has beenincreased by 20% to £42 per kilo.

Import duty is introduced on thecommercial importation of single useplastic bags and single use paper bags notmade from recycled paper, at the rate of5p per bag.

Import Duty discount and cash-back onhybrid vehicles is extended to purelyelectric vehicles. The cash back isincreased to £750 for cars and introducedat the rate of £150 for motorcycles.

Import duty on furniture and furnishings(including textiles) as well as domesticappliances payable by locally registeredcompanies with a valid trade licence isreduced from 6% to 3%.

Passenger tax at Gibraltar Airport isabolished for passengers who are joiningvessels in Gibraltar.

Construction of high valueaccommodation incentives

Last year’s incentive of capital allowanceson the cost of construction of officeaccommodation has this year beenextended to high value accommodationalso where ground is broken before 2015.

Other tax measures

The Payroll Giving Scheme which wasannounced in last year’s budget in orderto enable tax free charitable donations tobe made regularly and automaticallythrough employment earnings toapproved charities of their choice will beshortly implemented. Donations to thescheme will be capped at £5,000 pertaxpayer per annum.

The Government has commissioned areview and report of the Category 2 statusand will publish its results in due course.

For more detailed information, please

do not hesitate to contact:

Colin Vaughan

+350 200 66842 Ext 120

colin.p.vaughan@gi.pwc.com

Edgar Lavarello

+350 200 66842Ext 301

edgar.c.lavarello@gi.pwc.com

Patrick Pilcher

+350 200 66842 Ext 309

patrick.s.pilcher@gi.pwc.com

Charles Bottaro

+350 200 66842 Ext 302

charles.a.bottaro@gi.pwc.com

Or your usual PwC contact