Gibraltar Crypto Tax

While Gibraltar is levelling up its crypto regulatory framework, that does not mean a licensed crypto company cannot use its favourable tax environment where taxes are not levied on capital gain, sales, gifts, or wealth. Even value-added tax is included in the country’s taxation framework. Neither dividend withholding tax nor crypto-specific tax is imposed. It is, therefore, begged to answer what tax is expected to be paid by crypto companies.

Depending on the legal structure of a crypto company and of the kind of activities developed, it has to comply with current principles of taxation, paying the head of the following general taxes:

• Corporation Tax (CT) – 12.5%
• Social Insurance (SI) – 20%
• Stamp Duty (SD) – 0-3% for real estate or 10 GBP per share

The Taxes in Gibraltar are collected and administered by the Income Tax Office. The tax year in Gibraltar commences on 1 July and runs to 30 June.

Currently, Gibraltar has only one agreement on the avoidance of double taxation, which was concluded with the United Kingdom. Moreover, the country has signed several agreements on the exchange of information on taxation, the model of which has been prepared by the Organisation for Economic Cooperation and Development (OECD) and enabled the applying of transparency in cross-border taxation.

Normally, the treatment of taxation depends on the nature of economic activities of the company and its residency status. A company will be considered a tax resident of Gibraltar if it is managed and controlled from Gibraltar or from outside Gibraltar by persons who are ordinarily resident of Gibraltar.

The following crypto-related economic activities are licensed/regulated in Gibraltar and hence must be subjected to taxation:

• Exchange between Virtual Assets and Fiat Money
• Exchange between Virtual Assets
• Transfers of Virtual Assets
• Administration of Virtual Assets or instruments enabling control of Virtual Assets
• Participation in and Provision of Financial Services Related to an Issuer’s Offer and/or Sale of a Virtual Asset

Corporation Tax

Corporate tax in Gibraltar is at the mercy of the Income Tax Act 2010. As a general rule, companies are taxed on a territorial basis, and corporate tax is levied on profits derived from and derived from Gibraltar. Consequently, income-producing activities will be liable for corporation tax if the activities constituting such income are more or less run within Gibraltar. If you are in doubt whether your cryptography-related activity is subject to tax, the team of Regulated United Europe (RUE) will be happy to provide advice concerning your particular case.

Company whose income comes from a core activity requiring a license and subjected under any Gibraltar law in this case under the Distributed Accounting Technology System. A company which has obtained a license in another country but has been given transit rights to Gibraltar shall be considered as a company whose profits are derived from the profits accrued and derived from Gibraltar.

Generally speaking, any expense incurred in relation to the derivation of income is a tax-deductible cost, including interest, bad debts, computer equipment wear and tear.

The following are some of the Capital Gains that may be accessible to crypto companies:

• A maximum allowance of GBP 60 000 for the first year of use of plant and machinery from the date of acquisition or, at a higher cost, 50 percent of the cost for the period is fully allowed to be deducted against the amount.
• Computer equipment purchase up to GBP 100,000 or, in case of higher costs, 50 per cent of the cost for the period is fully deducted from the amount.
• Reserve of 25 percent per annum on a balance-sheet basis.

Under the Income Tax Act 2010, all the companies registered in Gibraltar needed to file annual tax returns. The deadline is nine months after the end of the month in which the reporting period ends. Companies with an annual gross income of £1,250,000 or more must submit their tax returns together with audited accounts. If the annual gross income is less than £1,250,000, the declarations must be submitted with the accounts accompanied by an independent accounting report.

SOCIAL INSURANCE

Where a crypto company is registered in Gibraltar and also registered as an employer with the Employment Service and, in practice employs staff, it will automatically be obliged to pay Social Insurance contributions, regardless of the location of its employees. The employer’s contribution is payable on the basis of a percentage of an employee’s salary.

The Social Insurance comprises the following contributory schemes:

• The Employment Injuries Insurance Scheme (insurance against accidents at work)
• The Social Security Short-Term Benefits Scheme-applicable to maternity, death, and unemployment.
• The Social Security Open Long-Term Benefits Scheme-applicable to widowhood, old age pensions, and benefits for guardians of orphans.

According to the Social Security (Insurance) Act (Amendment Of Contributions) Order 2021, companies are subject to the following regulations:

• Standard rate – 20% of gross salary
• Contributions are payable weekly.
• At least 28 GBP per week and up to 50 GBP per week
• Maximum annual contribution – 2,600 GBP

Exemption from the Social Insurance applies in the following cases:

• An employee is also employed elsewhere in Gibraltar and their contributions are fully paid by another employer.
• An employee holds a valid A1 certificate issued by another EEA country, where their contributions are paid.

STAMP DUTY

Stamp Duty is payable on any transfer or sale of any real estate situated in Gibraltar or shares in a company owning real estate situated in Gibraltar based upon an amount of the market value of the real estate.

TAX CREDITS AND INCENTIVES

Apart from very favourable tax rates, a number of credits and incentives were offered to encourage and stimulate investment and business growth within the country.

Crypto companies may avail themselves of the tax benefits that accrue under the Income Tax Act 2010 to persons liable to pay corporate tax, provided their case is such that they can satisfy the tax office that for the identical profit or receives income tax was paid or is payable in another jurisdiction.

The Gibraltar policy provides for startups to claim 100% of their eligible capital subsidies within the first year of the economic activity. The loan entitlement, though, extends to £100 per employee, maximum twenty employees for one year from the beginning of social insurance. In addition, small enterprises with up to ten employees are able to claim this credit.

In addition to these, expenses incurred to train employees in occupations related to the activity would be deductible from the profit of the enterprise at 150 percent. Another type of startup encouragement is the Employment Promotion Programme, which provides an additional deduction for a fixed wage of 50 percent for the employees employed after 1 July 2021. Incentives such as bonuses, overtime, and other types of allowances given to employees do not fall into this setup.

Companies incorporated in Gibraltar can also deduct 50 percent of marketing and advertising expenses, on condition that they are able to prove to the Tax and Income Tax Administration that the said expenses are out of active marketing or promotion of goods or services to consumers for the purpose of generating income from business activities in Gibraltar or from Gibraltar.

How to pay taxes on crypto in Gibraltar in 2024?

Taxation of cryptocurrency gains in Gibraltar, which aims to be among the most active centers for blockchain and cryptocurrency companies, is governed by a special legal regime. In 2024, the tax policy of Gibraltar continues to focus on creating an enabling environment for investors and companies of digital assets while providing a clear and transparent environment from a tax perspective.

Taxation of Cryptocurrency Transactions

This is because Gibraltar does not charge any tax on capital gains, gifts, inheritances, or sales, making it a very attractive place to invest in and trade cryptocurrencies. However, this again does not imply complete absence of tax liability for individuals and companies dealing in cryptocurrency.

For Individuals

Any income earned by individuals from mining or trading in cryptocurrencies in the course of their general activities would likely be subject to taxation as part of their ordinary income tax. Note, however, that there is a maximum income tax threshold for Gibraltar, which may prove beneficial for large traders and investors.

For Companies

Companies incorporated in Gibraltar, and undertaking cryptocurrency activity, are subject to corporation tax at the headline rate of 10% on profits accrued both in Gibraltar and elsewhere, provided the said activity is managed and controlled in Gibraltar.

Regulation and Licensing

It has also introduced licenses for blockchain and cryptocurrency firms, certainly indicative of the need to reach high standards of transparency and consumer protection. Anyone operating in this space must undergo a licensing process with the Gibraltar Financial Services Authority.

Reporting and Accounting

Both individuals and corporate entities are required to correctly record every cryptocurrency transaction with the intention of declaring those transactions for the purpose of taxation. Even though cryptocurrencies are not deemed to be legal tender in Gibraltar, they are, nonetheless, considered assets and the profits gained are liable for declaration in the respective return of income tax.

It boasts one of the most progressive and crypto-friendly tax environments, striving to be among the best in global blockchain regulation. While there is much the investors and crypto companies in Gibraltar may enjoy, they also have to be very observant of local tax requirements and regulations. Awareness of tax obligations and active engagement with local tax advisers can help maximise benefits accruable and ensure compliance.

Table with main tax rates in Gibraltar

These are the rates that reflect the peculiar Gibraltar tax structure targeted at attracting enterprise and investment into the region, especially within the financial technology and cryptocurrency industries. The non-existence of such things as capital gains tax, value-added tax, and inheritance and gift tax makes Gibraltar an appealing jurisdiction for many investors and businessmen.

If you want to benefit from the structure of taxations in Gibraltar but do not know where to start, the highly qualified consultants of Regulated United Europe (RUE) will be glad to assist you in structuring your taxes. Our main goal is that our clients not only be compliant with local regulations but also operate in such a way that their taxation is efficient.  Furthermore, we’re more than happy to support you in the company setup, crypto licensing in Gibraltar, introduce you to all cryptocurrency regulations in Gibraltar and financial bookkeeping. Order a personal consultation now.

Also, lawyers from Regulated United Europe provide legal assistance to crypto projects and assistance regarding adaptation to MICA regulations.