Gibraltar residency is highly sought after. It is one of the premier destinations in Europe, particularly among UK citizens, residents, and holidaymakers. It’s a great place to vacation, and live, with a thriving nightlife, active social scene, and plenty of sports-themed entertainment.
Like any other territory, Gibraltar has rules and regulations, particularly about fiscal matters. For retirees, it’s crucial to consider pensions in Gibraltar in terms of tax considerations.
In Gibraltar, income derived from or accrued in this British territory is subject to income tax. This is known as the accrued in and derived from principle of taxation in Gibraltar. However, it is less punitive for individuals who conduct business-related activities in this small British overseas territory for less than 30 days during the entire year under review.
These people are fully reimbursed for taxes paid on income from Gibraltar-based activities. Notably, specific income that is accrued in Gibraltar or derived from/received anywhere else other than Gibraltar by any legal person who resides in Gibraltar is also subject to income tax.
There are two tax systems at work in Gibraltar – the gross income-based or the allowances-based system. Individuals have a choice about the tax system they wish to be assessed by. With the gross income-based system (2024 and 2025), the following taxable income and tax rates apply:
Gross income-based system
- Up to £10,000 – 6% tax rate
- £10,000 – £17,000 – 20% tax rate
- £17,000 and over – 28% tax rate
Anyone earning £25,000 or more is subject to the following tax brackets in Gibraltar (under £100,000):
- Up to £17,000 – 16% tax rate
- £17,001 – £25,000 – 19% tax rate
- £25,001 – £40,000 – 25% tax rate
- £40,001-£105,000 – 28% tax rate
The balance of assessable income is charged at a tax rate of 25% in Gibraltar.
Allowances based system
- Up to £4000 – 14% tax rate
- £4001 to £16,000 – 17% tax rate
- £16,001 and over – 39% tax rate
Individuals whose taxable income is less than £11,450 per year are exempt from taxes in Gibraltar. There is also a tapering system for individuals whose taxable income falls between £11,451 and £19,500.
*Source: PWC Worldwide Tax Summaries
Pensions in Gibraltar
Gibraltar accommodates different types of pensions. These include QNUPS and QROPS (imported pensions), savings plans for local pensions, and options for people outside of Gibraltar. The Government of Gibraltar has strict policies to regulate the pensions industry. It collaborates with the Gibraltar Association of Pension Fund Administrators (GAPFA) and the Gibraltar Financial Services Commission (GFSC).
*Source: https://www.gibraltarfinance.gi/pensions
The Government of Gibraltar designates pensioners into two categories vis-a-vis taxation:
- A working pensioner:
There is a 0% tax rate on pensionable income in Gibraltar. However, individuals who derive any income from work-related activity will be taxed according to their tax code. It’s important to mention that qrops and qnups pensions in Gibraltar which are in drawdown pay tax at a flat rate of 2.50%. State pensions and old-age pensions, as well as community care payments, are fully exempt from taxes in Gibraltar.
- A nonworking pensioner:
Anyone aged 60+ is subject to a 0% pensionable income tax. This means that pension income has zero tax liability in Gibraltar. Individuals under 60 years old must pay income tax on their pension. The Government of Gibraltar stresses the importance of maintaining an updated tax code status to ensure the correct tax is deducted from the pension.
People who were compulsorily retired at 55 years of age, perhaps working in essential services like the Royal Gibraltar Regiment, Royal Gibraltar Fire Services, or Royal Gibraltar Police, face a 0% taxation on pension from employment.
Notably, individuals who are 60 years of age, still working, but do not receive a pension will receive a £4000 tax credit from the government of Gibraltar. This comes in the form of a reduced tax liability credit. However, this reduced tax liability credit does not apply to individuals who earn £6000 per annum from annuities or occupational pensions.
Further, this pension does not apply to individuals who receive occupational pensions/annuities greater than £6000 per year on their retirement. If a person 60 years or older has chosen to be taxed according to the Gross Income Based System, this tax credit does not apply.
Understanding tax in Gibraltar
Individuals who choose to make Gibraltar their home must comply with the specific rules and regulations of the tax code. There are critical tax compliance issues whenever you relocate from one country, territory, or jurisdiction to another.
Whether you are retiring to Gibraltar from the UK mainland or you are a pensioner with Gibraltar residency, it’s essential to understand the tax laws. An incomplete understanding of tax obligations can materially affect your available funds for retirement.
It is imperative to get your financial affairs to ensure you’re not overpaying on taxes in Gibraltar or underpaying based on your Gibraltar residency.
Remember that there are many attractive tax-related advantages for residents in Gibraltar. These typically include no capital gains tax, low personal tax rates, and a variety of tax incentives. It is essential to consult with a tax adviser for optimal tax planning in Gibraltar.
