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1 PERSONAL AND CORPORATE TAXATION J. E. Triay Triay & Triay 28, Irish Town Gibraltar

2 The Basis of Taxation? Income tax is charged on the income of any person (includes a company) which either; Accrues in or derives from Gibraltar; or Is received in Gibraltar; Certain limited types of income that accrues in, derives from or is received anywhere by persons who are ordinarily resident in Gibraltar;

3 Meaning of Accrued in and Derived from? Accrued is synonymous with derived; Need to examine what the taxpayer does to earn profit and where he has done it? thus if you render service or manufacture goods outside Gib then profit would accrue where the service is rendered or goods manufactured; a Gib tax resident company can therefore have a source of income which does not accrue nor derive in Gibraltar not taxable.

4 The Type of Income The Charge to income tax arises in respect; Gains or profits from any trade business, profession or vocation; Gains or profits from employment including allowances perquisites or benefits in kind; Dividends, interest and discounts; Any pension charge or annuity; Rents royalties, premiums and profits arising from property; Income from occupation of property;

5 Principles Applied The letting of property situate outside Gibraltar; Freights, charter hire or other income of shipping company so long as the ship does not carry passengers or cargo to and from Gibraltar; The lending of money outside Gibraltar; Trading in future delivery contracts for the purchase and sale of commodities in markets outside Gibraltar between parties outside Gibraltar; Salvage operations taking place outside Gibraltar; The oversight of construction operations outside Gibraltar;

6 Special Features and Exemptions Investment income exemption; Dividend income received from a quoted company; Dividends paid to non Gibraltar residents; Dividends paid or payable by a company ordinarily resident to a company; Dividend falling within the Parent/subsidiary directive; Income received from a CIS available to the general public; Income of a trust or beneficiary where settlor and beneficiary are both non resident or settlor is a CAT 2;

7 Other Special Features No Withholding tax on dividends paid by Gibraltar company; No withholding tax on non situs Gibraltar loans; No CGT; No Capital duty; No Exchange Control; No IHT; No Transfer Tax; No Stamp duty except on real property in Gibraltar; No VAT; No Wealth taxes

8 Deductions and Allowances In calculating assessable income, all outgoings and expenses wholly and exclusively incurred in the production of the income are deducted;

9 New Corporate Tax Rate Corporate regime rate decreased gradually /07 35% 2007/08 33% 2008/09 27% 2009/10 22% As from 1 st January 2011 tax rate 10% with no fundamental change in basis of taxation; New Companies established after 1 st July %

10 New Personal Taxation Regime Gross Income based system no allowances; First 20% Next 29% 35% Thus person earning 100K will pay average 26.75% (down from 27.5%) Allowances Based system provides personal allowances, deductions for children, health insurance, life insurance premium, mortgage relief; Top rates less generous and tops out at 40% Taxpayer elects but CIT will apply one that produces less tax!

11 Gibraltar Top rates Compared Denmark 59% from 40,250 Sweden 56.7% 43,120 Japan 50% 125,750 Britain 50% 150,000 Australia 45% 87,750 China 45% 10,020 Germany 45% 225,600 Italy 43% 67,600 France 40% 62,600 Gibraltar 35% 100,000 USA 35% 225,450 India 30% 6,850 Brazil 27.5% 13,305 Switzerland 22% 392,250 Hong Kong 17% 9,350 Russia 13% Flat rate

12 Individuals enjoying special concessions High Net Worth Individual or Cat 2 - only first 70,000 assessable income taxable with minimum and maximum taxes applicable of 20K and 26K; High Executive possessing specialist skills (HEPSS), tax payable will be limited to first 100K of assessable income thus tax limited to 26,750; Conditions relating to residential accommodation and previous residency apply to both.

13 Investment Manager 10% tax on profits HEPSS Employees tax limited 26,750 No Tax on Dividend Fund HoldCo Fees Dividends Employees Investment Manager

14 Private Client Dividend Exempt S6(8)(a) Rental Income does not accrue or derive in Gibraltar -Not taxable Cat 2 or non resident settlor Property outside GIb Non-resident beneficiaries or Cat 2 Gib Trust(ee) Gib HoldCo Bank deposits, investments Stocks and shares Exempt Income Rule 3(27) Dividend Exempt S6(8)(j) Interest/Investment S6(8) Income Tax Act Income exempt

15 Conclusions Flexible, user friendly tax environment within Europe providing certainty; Attractive low rate of corporate tax; Attractive tax provisions for individuals.