There has been a continuous increase in the demand for the status of Category 2 residency, since its conception back in February 1992 when the status was introduced as the High Net Worth Individual (HNWI) tax status by the Government of Gibraltar. The rules, forming part of the Income Tax Act, have been reviewed and promulgated several times resulting in the current Qualifying (Category 2) Individuals Rules 2004 (as amended).
Benefits
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. In essence a Category 2 Individual will only pay tax on the first £60,000 of assessable income with a minimum tax payable per annum of £18,000 and a maximum of £21,880. There are no allowances or deductions and any income in excess of £60,000 is not subject to tax.
Only income received or remitted to Gibraltar is taxable and therefore Category 2 Individuals can earn foreign income which would only be taxable if received by the individual for his own use in Gibraltar. Accordingly the Category 2 Individual is able to make full use of Gibraltar’s Offshore Finance Centre whilst at the same time paying the prescribed low tax limits.
Requirements for application – Cat 2 status
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 Vita 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. A non-refundable application fee of £1,000 is payable on submitting an application.
Residency
Residency is easily obtained once the Category 2 status has been granted. An application for residency is made under the Immigration Control Act. The process for obtaining residency however 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 who, it is in the interests of Gibraltar be issued with such a permit and 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.
Requirements for application – Residency
1. Private medical insurance which would cover him and his family in the event of illness in Gibraltar.
2. Approved property, large enough to house his family if applying for residency for dependants.
The advantages derived from obtaining the Category 2 status and residency in Gibraltar is notable. The most significant of all being the tax advantage to such individual and the ability to make full use of Gibraltar’s reputable offshore Finance Centre where no capital gains tax, wealth tax, gift tax or estate duty is payable. Neither is remittance of capital or interest earned from foreign banks and building society deposits and dividends arising from companies quoted on a recognized stock exchange.
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.
Should you require any further information or wish to discuss further please contact Elaine Bingham at elaine.bingham@isolas.gi