The Government of Gibraltar has announced a significant change to its new property tax law. Initially set to apply to those owning three or more residential properties, the threshold has now been raised to five or more properties. This change, introduced by Minister for Trade and Justice Nigel Feetham, aims to ensure fairness in the property market and provide a clear, legislated threshold.

Key Points

Who is Affected

• The new tax will now apply to anyone owning five or more taxable properties.
• Taxable properties exclude:
  • A primary residence.
  • Commercial properties or those used primarily for commercial purposes.
  • Hotels.
  • Properties unfit for habitation or needing substantial repairs, provided they are purchased for redevelopment.
  • Properties sold by the estate of a deceased person.

Rationale for the Change

Minister Feetham emphasised that the adjustment provides clarity, reducing reliance on judicial interpretations.

Opposition Stance

The GSD’s Roy Clinton criticised the measure as "unnecessary" and indicated the Opposition would vote against it at its third reading.

Effective Date

The law will still take effect from 1st August 2024.

Residency Rules

The tax applies to all individuals and entities, whether or not they are residents of Gibraltar.

Deductions

General tax rules apply, allowing for deductions like purchase and improvement costs from sale proceeds to determine taxable income. There is no provision for inflation adjustments.

Tax Rates

• Gibraltar-resident individuals: up to 25%.
• Companies: 15% (20% for fuel supply or utility companies).
• Non-resident individuals: up to 39%, though generally capped at 25% if they have other Gibraltar income.
• Category 2 individuals: 39%.

Anti-Avoidance Rules

Connected persons’ property interests will be attributed to the taxpayer if they are not genuine or are used to avoid tax.

Background

The measure, announced in the July Budget, aims to tax income from property sales fairly and curb speculative activities in the property market. By raising the threshold to five properties, the Government seeks to target those with substantial property holdings while leaving smaller property owners unaffected.