The tax efficient Mediterranean Lifestyle
By Gavin Gafan, Assistant Manager, Tax Department & Hannah Clark, Manager, Tax and Company Services, Deloitte
It is safe to say that we currently live in a fast-pace society. One only has to take an early morning walk through any bustling metropolis in order to witness the flood of suits regimentally marching to their own respective offices, traffic squeezing through practically choked city streets, and public transport that barely manages to cope with an incessant stream of commuters. Fixed on the inner side of a train, bus or the tube, among other adverts, you might observe an invitation to visit a Mediterranean destination, and the lure is simple yet effective. A close-knit family, all smiling and with healthy-blushed skin, gathering around a table laid with healthy dishes, behind which sprawls the yellow sands of an idyllic beach setting. Therein lies the concept of the Mediterranean lifestyle, a perfect balance between work and leisure, family and great food.
However, is this concept of an idyllic lifestyle attainable? From a professional perspective it could be perceived that sunnier countries might not offer this perfect work-to-leisure balance, thus detracting from the go-get mentality prevalent in successful Northern European countries.
Then there is also that soul-destroying word that would demotivate any entrepreneur, professional or business-person wishing to relocate their family to a Mediterranean country, ”bureaucracy,” which like the sun can become more evident the further south in Europe you travel to.
But what if there were a southern jurisdiction that combined sun and sea with a northern European way of doing business.
Well hold on tightly to the inside of that congested train, bus or metro because your answer may lie only a stone’s throw away. Or rather ‘Rock’ in this instance, the Rock of Gibraltar.
Pillars of Hercules
Gibraltar is a British overseas territory situated at the southernmost tip of Spain, flanked by both the Mediterranean Sea and the Atlantic Ocean. The territory is a short distance from northern Africa as evidenced by the beautiful Moroccan mountain Jebel Musa which can be viewed clearly from Gibraltar, and which together with the Rock of Gibraltar form the legendary “Pillars of Hercules”. Suprisingly to some, Gibraltar is not an island, it is connected to southern Spain, one of the world’s premier leisure destinations, by a land frontier. Travelling to the jurisdiction is easy, with direct daily flights from London and other UK airports or through the several Spanish airports that are no further than a 2 hour drive, namely Malaga, Jerez and Seville.
It is a small, friendly and safe place, offering a mild climate with an average of over 300 days of sunshine each year. The local community approximates 30 thousand people which include both the native Gibraltarian as well as expatriate residents. Gibraltarians constitute a homogenous ancestral mix of Maltese, UK, Italian, Moroccan and Spanish, which has resulted in a British population which is very Mediterranean it its outlook to life, especially when it comes to family, food and social life, but with a professional work system.
Given its size it is unsurprising that it has a negligible crime rate. By the same token unemployment levels have also remained very low, an encouraging thought when considering the current global economic climate.
To an extent, it’s current economic success can be attributed to the large number of resident professionals who have helped to foster a dynamic local business model as well as promoting healthy employment levels.
Gibraltar is also unashamedly British whilst boasting its own Mediterranean charm, unsurprisingly it is therefore an attractive jurisdiction for those wanting the stability of a British way of life in the sunshine.
From a business perspective, the jurisdiction operates within the same Common Law framework as the UK. Likewise the local education system is also in line with the UK, with pupils sitting GCSE and A Level examinations. Furthermore, Gibraltar has also recently established a local University for students who wish to further their academic pursuits but who do not wish to travel abroad.
Tax legislation
In addition, Gibraltar is also a member of the European Union (EU) and therefore all the freedoms as per the Treaties of the European Union, including the freedom of movement of people and services apply. It has transposed all EU Directives into its legislative framework.
Not only has Gibraltar ratified all EU Transparency Directives to its local legislation, but it is also among the first wave of international jurisdictions to have adopted global transparency and exchange of information initiatives with the aim of encouraging responsible taxation. In line with other major finance centres, it prides itself on adhering to statutes conforming to the highest international standards ensuring that companies operating from the jurisdiction are meeting their fiscal obligations.
Gibraltar’s current tax legislation however allows for effective tax planning, in that unlike other jurisdictions, it does not charge wealth tax, gift tax, inheritance tax or death duties. Investment income as well as capital gains falls out of the chargeability of its taxation. From a corporate perspective, it offers an attractive headline tax rate of 10% on taxable profits.
High net worth individuals considering relocating to Gibraltar to benefit from the lifestyle or low tax status may be also be pleasantly surprised to find that they can also benefit from a special tax status called the Category 2 status (more commonly referred to as Cat2) which limits the amount of assessable income chargeable to Gibraltar tax in any given tax year (01 July to 30 June) to £80,000, translating to a maximum tax charge of £27,560 (for 2015/2016) with a minimum tax payable of £22,000.
Accordingly, Cat2 individuals already paying the maximum Cat2 tax in Gibraltar can opt to declare their worldwide income in the jurisdiction; by doing so they would not be liable to further income tax charges in Gibraltar.
Professional wealth structuring and planning helps to preserve your family assets, enhance control over your financial position, while allowing for an orderly succession of assets across jurisdictions. One of the biggest concerns of very successful entrepreneurs, who have built thriving businesses is “how do I succeed in efficiently transferring what I have built to the next generation?”
Gibraltar, as a leading Finance Centre, offers world class solutions to assist in succession planning, the distribution of family wealth as well as the protection of assets for individuals who reside in politically or socially unstable environments, to name a few.
Legal framework
It should be noted that Gibraltar’s legal framework boasts robust legislation that covers Companies, Trusts, Purpose Trusts and Private Trusts Companies. Legislation in respect of Foundations is also imminent, as well as firewall legislation which seeks to provide a secure environment for law trusts.
Whatever the reasons behind relocating, Gibraltar, as a leading finance centre, is very aware that all its clients need to have access to first class professional services and has developed a suite of services aligned with these needs. Good working relationships with local Government and Private Bodies, can make relocation effortless and keep bureaucracy to a minimum. Services include tax planning and compliance, succession planning, monitoring and reporting on investments, managing payments and also extend to general concierge services to ensure a smooth relocation and trouble free living.
The fact is that we do live in a fast-pace society, many of us having to travel further from home in order to conduct our business or work duties in notoriously congested cities. If you are sitting in the inside of a congested train, bus or the tube, reading this article, packed-lunch in briefcase and standing amidst solemn-faced commuters transfixed on their mobile phones, perhaps you might yearn to take a leap into that Mediterranean advert. If so, then Gibraltar can provide a hub from which you can enjoy that idyllic way of life, as well as providing bespoke professional services required for conducting effective day-to-day business. If you are truly interested in a tax efficient southern lifestyle then Gibraltar could be your perfect port of call.
