21 Nov 2022
Category 2 & HEPSS Status offer individuals the ability to limit their tax liability to a maximum of circa £44,740.00 for the former and £43,140.00 for the latter. Given Gibraltar’s enviable position at the entrance to the Mediterranean, its British heritage and easy accessibility there are compelling reasons to consider the opportunities Gibraltar presents.1
Every jurisdiction applies its own particular rules to determine an individual’s country of residence. In fact choosing your country of residence is, from a tax planning point of view, the most important decision you will ever take because this will determine not only the country which is entitled to tax you but also, in many cases, the system of taxation which will, thereafter, apply to you. It is obvious therefore that a person who is about to engage in any tax planning or re- structuring of his private affairs will have to consider carefully where he wishes to establish his residence in the context of the plans that he may wish to implement.2
Once you are regarded as a resident in any country, it is likely, that country’s taxation system will seek to impose tax upon you under various heads, which may include your worldwide income (income tax), your worldwide capital gains (CGT), your wealth and, in the event of death, inheritance tax on your estate (IHT).2
Gibraltar offers great attractions to anyone considering the establishment of a new country of residence whether in the context of a personal tax re-structuring, for estate planning purposes or simply for a change of life. Quite apart from a friendly, relaxed lifestyle and perfect Mediterranean climate, Gibraltar offers tremendous fiscal advantages which make it an extremely tax efficient as well as desirable place to live.3
So Gibraltar provides what is potentially an excellent base from which to plan your personal affairs. Furthermore, by applying for what is known as ‚ ‘Category 2’ or ‘HEPSS’ status, upon taking up residence in Gibraltar you will immediately be able to enjoy the following benefits:
• Limit your Income Tax – as a Category 2 you will pay income tax only on the first £118,000.00 of your assessable income with a minimum amount of £37,000.00 and a maximum threshold of £44,740.00 & as a HEPSS, the tax payable is limited to the first £160,000 of earned income and thus limiting your tax liability in Gibraltar to a maximum of circa £43,140.00;
• Residence in a tax neutral jurisdiction – as a Category 2 or HEPSS you will be resident in Gibraltar’s tax friendly environment, with no exposure in Gibraltar to any of the other taxes listed above. In fact you will have no exposure to any other direct form of taxation in Gibraltar at all (Triay Lawyers, 2022);
• Business Interests – in the case of a Category 2 you will also be entitled to continue to carry on your trade, business or employment with no tax consequences of any sort, so long as these are conducted outside Gibraltar. You may even be able to carry on your business from Gibraltar through a Gibraltar company, so long as you are able to meet certain criteria. In the case of a HEPSS, you must possess skills that are deemed to promote and sustain economic activity which is of value to Gibraltar. Furthermore as a HEPSS individual, you must be employed in Gibraltar for that purpose and earn more than £160,000 per annum (Triay Lawyers, 2022).
It will be seen therefore that by taking up residence in Gibraltar coupled with securing Category 2 or HEPSS status you will, in one move, have achieved the two limbs of an efficient plan: limited income tax and reduced exposure to other forms of tax (Triay Lawyers, 2022).3
In order to achieve the special tax privileges of Category 2 or HEPSS status the applicable rules require that you satisfy the following requirements:
When the Category 2 or HEPSS Status Certificate is issued you will then need to apply for the issue of a Civilian Registration Card and a Permit of Residence. The rules require that you satisfy the following requirements:
Exclusions to Category 2 Status
You cannot be a Category 2 if:
Exclusions to HEPSS Status
You cannot be a HEPSS if you have been gainfully occupied or resident in Gibraltar in any part of the thirty six month period immediately preceding the year in which the application is made.5
A fee of £1,100 is payable on submitting the application for Category 2 or HEPSS status. In the case of a Category 2 application a deposit equal to the maximum rate of income tax due will also need to be made. This would be reimbursed pro rata against any tax due when the status is relinquished. Properly presented applications are usually granted within 14 days. Certificates are issued valid for an indefinite period subject only to continuing compliance with the applicable qualifying rules.5
If you are looking for a luxury CAT 2 Property, look no further than EuroCity. Architecturally striking, ideally located, and offering outstanding residential, commercial and retail space to the designs of an internationally acclaimed team, EuroCity is a new benchmark of quality at the heart of Gibraltar’s central business district. As exclusive agents for the developer, we have an unparalleled choice of apartments, from studios to 5 bedrooms, available for sale and rent. Register your interest here.
Gibraltar provides a perfect platform to restructure your private holdings efficiently limit your taxes in a tax friendly environment and at the same time enable you to conduct your business from Gibraltar. Naturally as a Category 2 or HEPSS you could continue to be or otherwise become liable to taxes in other countries in which you are or may be deemed to be resident. That will depend on how you choose to manage your affairs.6
1 Gomez, J. (2022, July 27). Why Take up Residence in Gibraltar? Triay Lawyers.
2 Gomez, J. (2022, July 27). Why Take up Residence in Gibraltar? RESIDENCE & TAX. Triay Lawyers.
Gomez, J. (2022, July 27). Why Take up Residence in Gibraltar? WHY GIBRALTAR? Triay Lawyers.
4 Gomez, J. (2022, July 27). Why Take up Residence in Gibraltar? APPLYING FOR CATEGORY 2 OR HEPSS STATUS. Triay Lawyers.
Gomez, J. (2022, July 27). Why Take up Residence in Gibraltar? APPLYING FOR CIVILIAN REGISTRATION CARD AND PERMIT OF RESIDENCE. Triay Lawyers.
Gomez, J. (2022, July 27). Why Take up Residence in Gibraltar? CONCLUSION. Triay Lawyers.