Thursday, June 23, 2005

Resume of Taxation measures

Taxation Measures

1. Tax on Savings Income is abolished

• In order to encourage people to save for their old age and to also encourage personal investment, Income Tax is abolished on all savings income. For these purposes savings income means: -
(a) dividends arising from investments quoted in a recognised stock exchange.
(b) interest paid directly or indirectly –
(i) by banks, building societies or other financial services institutions licensed in Gibraltar or in any other recognised jurisdiction to undertake deposit-taking or investment business; or
(ii) arising from investments quoted on a recognised stock exchange; or
(iii) by the Gibraltar Government Savings Bank.

2. All Senior Citizens’ Allowances increased to £10,000

• Tax Allowances for all senior citizens will be topped up to £10,000 irrespective of the level of income.
• Under the present Senior Citizens tax scheme introduced by this Government a couple of years ago, men aged 65 or over and women aged 60 or over are exempt from tax on income upto £8000, with tapering off provisions upto £13,495. Senior Citizens with income between £8000 and £13,495 get a reducing benefit and Senior Citizens with incomes above £13,495 get no benefit at all.
• With effect from 1st July all men aged 65 or over and all women aged 60 or over will get additional allowances over and above their existing personal and wife allowances so that the total of their age, personal and wife allowance is £10,000.
• In effect therefore all Senior Citizens of state pensionable age, regardless of their level of income will have personal allowances of £10,000 and pay no tax on the first £10,000 of their income.

3. Personal Allowances

• All personal tax allowances are increased by 3%.

4. Child Abroad Allowance

• The allowance for child studying abroad will now be the same irrespective of the number of children studying abroad. Accordingly all such children will attract the allowance at £1015 p.a.

5. Disability Allowance

• The present disability allowance of £1470 is increased to £2500.

6. Dividends & Interest paid by Companies

• Taxation is abolished on dividends paid by one Gibraltar Company to another Gibraltar Company.
• Taxation is abolished on dividends and interest paid by a Company to a non resident recipient.
• The requirement to withold tax from dividends in accordance with Section 39 of the Income Tax Ordinance is abolished.

8. Unilateral Tax Relief

• The unilateral tax relief provisions will be extended to all countries.

9. IBNR Deductible

• Incurred but not reported claims (IBNR) will be allowable deductions for insurance companies.

Other Budget Measures

1. Rates payable by Clubs & Societies

• Premises occupied by Clubs, Associations and Societies that do not operate on a commercial “for profit” basis will be exempted from Rates.

2. Rates Payable on Commercial Premises

• The existing 20% discount for early payment of commercial rates is reduced to 10%.

3. Gaming Tax

• The cap on gaming tax is increased to £425,000 with the minimum payable remaining at 20% of the cap figure. The actual rate of Gaming Tax remains unchanged.

4. The Elderly

The following measures are introduced for the benefit of the elderly, in addition to the £10,000 tax allowance that I have just described: -

• Medical tests for the renewal of driving licences for persons over 70 will be carried out free of charge by the GHA;
• Where the registered tenant or owner of a property, or the spouse thereof, is over 65 years of age, TV licences will be free.
• Where a man aged 65 or over, or a woman aged 60 or over, works they will no longer have to pay the employee’s share of Social Insurance Contribution. At present such persons pay £10.81 per week in respect of GPMS contribution. This will nolonger be payable.
• The Elderly Persons Minimum Income Guarantee is increased by 3% from £95.40 to £98.26 per week for a single person and from £127.20 to £131 per week for a married couple.

5. Minimum Wage

The Statutory Minimum Wage will increase from £4 to £4.50 with effect from 1st July 2005.

6. Stamp Duty

• Stamp duty will be abolished on all transactions except real estate and share capital transactions.
• Stamp duty on share capital, whether on initial creation or subsequent increase will be £10.
• In order to further assist buyers of affordable homes real estate property that costs less than £160,000 will be exempt from stamp duty; for those worth between £160,000 and £200,000 it will remain at 1.26%. Stamp duty will be increased for properties worth more than £200,000 to an amount, not yet decided, but which will not exceed 2.5%.

7. Annuities

• At present only 25% of the capital value of a money purchase scheme may be withdrawn on retirement. The balance of 75% has to be used to purchase an annuity unless it purchases a pension of less than £1000 p.a. This is now increased to £2000. At present interest rates, this means that if the capital value amounts to less than around £53,000 it can all be withdrawn.

Related Articles:

Budget Speech by the Chief Minister The Hon Peter Caruana QC to the House of Assembly on 23rd June 2005

Budget Speech response by the Joe Bossano GSLP / Liberal Alliance Opposition Leader to the House of Assembly on 23rd June 2005


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