The status of HNWI was introduced in 1992 by the
Government in order to encourage wealthy individuals to take up residency in
Gibraltar. Following the
June 2004 amendments HNWI’s became known in 1999
as Category 2 Individuals (Cat 2 Individual). A Cat 2 Individual pays tax only
on the first £50,000 of assessable income. The minimum annual tax payable is
£14,000. Assessable income constitutes income arising in or remitted to
Gibraltar. Worldwide income is therefore not taxable locally. A HNWI could
therefore hold a Tax Exempt or Gibraltar Qualifying Company.
Applications are submitted to the Finance Centre Director together with a £1,000
non refundable application fee.
Several requirements must be satisfied including the availability of approved
residential accommodation in respect of which the Cat 2 Individual has exclusive
Having obtained the aforesaid status an application for Gibraltar residency
under the Immigration Control Ordinance can be obtained with relative ease. The
type of application to be submitted will vary depending on whether the applicant
is an EU national or not. Evidence of private medical insurance applicable to
Gibraltar is paramount as is evidence of the applicant’s financial resources to
independently maintain himself and his family. Permits of residence and Identity
Cards will be valid for specific periods. These are renewable on the production
of evidence that the criteria for the granting of the permit continues to be
Category 2: Residence for Individuals
Net Worth Individuals")
There has been a continuous increase in the
demand for the status of High Net Worth Individual (HNWI) and residency in
Gibraltar. The status of HNWI was introduced in February 1992 by the Government
of Gibraltar through the introduction of new low tax limits for HNWI’s in order
to encourage wealthy individuals to establish a residence in Gibraltar. These
rules, forming part of the Income Tax Ordinance of Gibraltar, have been reviewed
and promulgated several times resulting in the current Qualifying (Category 2)
Individuals Rules 2004. Although these rules revoke and replace the earlier
Rules and provide amongst other changes, higher rates of tax, endorsements of
certificates and an increase in fees, they do not however significantly alter
the original concept of HNWI as contained in the Qualifying (High Net Worth)
Individuals Rules 1992.
The purpose of this article is to consider the implications of the new Rules and
establish the criteria that will be implemented in applying for the status.
Initially referred to, under the 1992 Rules, as HNWIs, these have been
recognised, since 1999, as Category 2 Individuals.
The benefits of the Category 2 status and residency in Gibraltar are attractive
for individuals of countries where levels of personal income tax can be
particularly high, such as British, German, Canadian, Swiss and French
nationals. In essence a Category 2 Individual will only pay tax on the first
£50,000 of assessable income with a minimum tax payable per annum of £14,000. In
the first year of assessment the minimum tax payable under the new Rules shall
be £1,166.66 for each complete or part month for which the certificate is on
force in that year.
Only income received or remitted to Gibraltar is taxable and therefore Category
2 Individuals can still hold a Gibraltar tax exempt company or indeed hold
deposits in their own name in a Bank in Gibraltar and the income from such
companies or Bank accounts would only be taxable if received by the individual
for his own use in Gibraltar.
Additionally British nationals with pensions based in the UK can relocate their
pensions to Gibraltar and make significant tax savings.
Accordingly the Category 2 Individual is able to make full use of Gibraltar’s
Offshore Financial Centre whilst at the same time paying the prescribed low tax
An application for Category 2 status is made to the Finance Centre Director and
a Qualifying (Category 2) Individual Certificate under the Qualifying (Category
2) Individuals Rules 2004 of the Income Tax Ordinance will be issued. In order
for an individual to qualify for Category 2 status he will be required pursuant
to the current Rules to have available for his exclusive use approved
residential accommodation in Gibraltar for the whole of the year of assessment
(July to June).
In addition, an applicant must submit a Curriculum Vitae detailing his
qualifications and work experience and two references one of which must be from
a Banker confirming that the individual’s financial standing is in excess of
£2,000,000. A copy of the applicant’s passport must be included together with
evidence of the ownership or rental of property. There are particular property
developments within Gibraltar which have been identified by the Finance Centre
Director as being suitable for these purposes. A non-refundable application fee
of £1,000 is payable on submitting an application.
The Government of Gibraltar will be looking to ensure that the individual has
sufficient means to maintain himself and his family. Evidence of wealth is
therefore important although it is not necessary for the individual to declare
his worldwide wealth or earnings. In accordance with the bandings contained in
the Rates of Tax Rules a Category 2 Individual would pay tax as follows:-
The first £4,000 of taxable income at the rate of
The next £6,000 of taxable income at the rate of 30%
The next £5,000 of taxable income at the rate of 35%
The remainder of taxable income at the rate of 45%
There are no allowances or deductions. Tax is
payable only up to the maximum assessable income of £50,000. Any income in
excess of £50,000 is not subject to tax.
Additionally, in each year of assessment the
Category 2 Individual will have to make a return to the Commissioner of Income
Tax. The individual can exercise an option before the termination of the year of
assessment and advise the Commissioner that he shall be deemed to have a taxable
income in Gibraltar in that year of assessment of £50,000 notwithstanding that
the income remitted to Gibraltar is less than that amount. The advantage of this
is that no tax return will need to be made to the Gibraltar Authorities. The
difference between the minimum tax payable of £14,000 and the amount of £19,980
which would be payable could be offset against any liabilities for tax in
respect of income dealt with under the rules in the next year of assessment.
Residency is easily obtained once the Category 2 status has been granted. An
application for residency is made under the Immigration Control Ordinance.
However, the process for obtaining residency differs somewhat depending on
whether the Category 2 Individual is an EU National or a non-EU National.
Applications are made to the Governor of Gibraltar. The Governor issues a permit
to any person who in his opinion is of good character and it is in the interests
of Gibraltar that he be issued with such a permit. A permit is valid for such
period as the Governor may specify. Generally, a permit of residence is valid
for a period of one year but may be renewed subject to the continuation of the
Category 2 status certificate, which certificate remains effective so long as
the Finance Centre Director is satisfied, on each anniversary of the issue of
the certificate, that the requirements are still met.
Each applicant will have to satisfy the authorities that he holds private
medical insurance which would cover him and his family in the event of illness
in Gibraltar. The individual and his family must not look to the Government of
Gibraltar for medical treatment. They must be self sufficient in this respect.
The property he holds must also be large enough to house his family.
The advantages derived from obtaining the Category 2 status and residency in
Gibraltar are notable the most significant of all being the tax advantage to
such individual, which is why most applicants are people heavily taxed in their
own countries. In addition a Category2 Individual can make full use of the
Gibraltar Offshore Financial Centre. There is no capital gains tax or estate
duty payable in Gibraltar. Further, whilst the holding of a permit does not
automatically entitle a person to claim citizenship or any social benefit or
social security in Gibraltar children of the family may attend local schools and
enjoy benefits enjoyed by local residents.