Gibraltar Crypto Tax

Gibraltar Crypto Tax

Gibraltar Crypto TaxGibraltar is currently in the process of levelling up its crypto regulatory framework, but that shouldn’t prevent licensed crypto companies from accessing the country’s favourable tax environment where taxes aren’t levied on capital gains, sales, gifts or wealth. Even VAT isn’t part of the country’s taxation framework. Dividend withholding tax and crypto-specific tax aren’t imposed either, which raises the question of what taxes crypto companies are actually required to pay.

Depending on their legal structure and type of activities, crypto companies are obligated to comply with current taxation principles and pay 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

Gibraltar’s taxes are collected and administered by the Income Tax Office and the tax year runs from the 1st of July to the 30th of June.

At the moment Gibraltar has only one agreement on the elimination of double taxation, which is made with the United Kingdom. Additionally, the country has signed several tax information exchange agreements, the model of which was developed by the Organisation for Economic Cooperation and Development (OECD) to enable implementation of transparency in cross-border taxation.

Usually, the tax treatment is dependent on the company’s nature of economic activities and its residency status. A company is considered a tax resident in Gibraltar if it’s managed and controlled (by making corporate level decisions) from Gibraltar or from outside Gibraltar by persons who are ordinarily residents of Gibraltar.

The following crypto-related economic activities are regulated in Gibraltar and should be subject to taxation:

  • Exchange between virtual assets and fiat money
  • Exchange between virtual assets
  • Transfers of virtual assets
  • Administration of virtual assets or instruments allowing control of virtual assets (e.g. crypto wallet services)
  • Participation in and provision of financial services related to an issuer’s offer and/or sale of a virtual asset

Corporation Tax

In Gibraltar, the Corporation Tax is regulated by the Income Tax Act of 2010. Companies are generally taxed on a territorial basis of taxation, which means that the Corporation Tax is levied on profits that derive from income accrued in and derived from Gibraltar. This means that income-generating economic activities are subject to the Corporation Tax only if they predominantly take place in Gibraltar. If you’re not sure whether your crypto-related activities are subject to the tax, the team of Regulated United Europe (RUE) will be more than happy to provide a tailored consultation.

A company whose income is sourced from an underlying activity that requires a licence and is subject to regulation under any law of Gibraltar (in this case under the Distributed Ledger Technology Framework), or which is licensed in another country but has availed of passporting rights into Gibraltar, is considered a company whose profits derive from income accrued in and derived from Gibraltar.

Generally, any expenditure incurred for the production of income is allowable as tax-deductible expenses which include interest expenses, qualifying bad debts, wear and tear allowance for computer equipment.

Crypto companies may be able to avail of the following capital allowances:

  • A first year allowance for plant and machinery of up to 60,000 GBP of purchase or, in the case of higher costs, 50% of expenditure in the period is fully deductible
  • Computer equipment up to 100,000 GBP of purchase or, in the case of higher costs, 50% of the expenditure in the period is fully deductible
  • A pool allowance of 25% annually on a reducing balance basis

According to the Income Tax Act of 2010, all companies registered in Gibraltar must file annual tax returns. The deadline is nine months after the end of the month in which the accounting period ends. Companies with annual gross income of 1,250,000 GBP or more are required to file their tax returns along with audited accounts. If the annual gross income is less than 1,250,000 GBP, the returns must be submitted along with accounts accompanied by an independent accountant’s report.

Social Insurance

If a Gibraltar-registered crypto company is also registered as an employer with the Employment Service and actually employs staff, it will inherently have to pay Social Insurance contributions regardless of the location of its employees. The employer’s share of contributions is based on a percentage of an employee’s salary.

The Social Insurance consists of the following contributory schemes:

  • The Employment Injuries Insurance Scheme (covers accidents at work)
  • The Social Security Short-Term Benefits Scheme (related to maternity, death and unemployment)
  • The Social Security Open Long-Term Benefits Scheme (related 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 rules:

  • Standard rate – 20% of gross salary
  • Contributions are payable weekly
  • At least 28 GBP per week and no more than 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 levied on the transfer or sale of any real estate situated in Gibraltar or shares in a company owning real estate situated in Gibraltar on an amount based on the market value of the real estate.

The rates vary as follows:

  • If the value of the property doesn’t exceed 200,000 GBP – 0%
  • If the value of the property is more than 200,000 GBP but doesn’t exceed 350,000 GBP – 2% on the first 250,000 GBP and 5,5% on the balance
  • If the property is valued more than 350,000 GBP – 3% on the first 350,000 GBP and 3,5% on the balance

Tax Credits and Incentives

In addition to the very favourable tax rates, Gibraltar offers a variety of credits and incentives, designed to accelerate capital investments and business growth in the country.

Crypto companies can avail of the tax relief which is available to those who are liable to pay the Corporation Tax under the Income Tax Act of 2010 but can prove to the Income Tax Office that they have paid or are liable to pay income taxes in another jurisdiction on the same profits or gains.

In Gibraltar, all startups can claim 100% of their eligible capital allowances in the first year of their economic activities. A startup with up to 20 employees can receive a credit of 100 GBP per employee in the first year in relation to the Social Insurance. Small businesses with up to 10 employees can also claim this credit.

Training costs incurred by employees studying for a qualification relevant to the job are allowed as an expense deductible against the profits of a business at the rate of 150%.

New businesses are also supported through the employment incentive, where a further deduction is available based on 50% of the fixed salary cost of new employees hired after the 1st of July 2021. The scheme excludes such employee incentives as bonuses, overtime and various allowances.

Companies registered in Gibraltar can also claim a deduction of 50% of marketing and promotion costs, provided that they can prove to the Income Tax Office that these costs have been incurred by active marketing or promotion of products or services to consumers for the purpose of the generation of income of the business operating in or from Gibraltar.

If you’re determined to take advantage of Gibraltar’s taxation framework but aren’t sure where to start, highly qualified and experienced consultants of Regulated United Europe (RUE) will be delighted to assist you in structuring your taxes. We strive to ensure that our clients not only comply with local regulations, but also operate in a tax efficient way.  Moreover, we’re more than happy to help you with the company formation, crypto licensing and financial accounting. Book a personalised consultation now.

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