What some say will prove to be the biggest single boost to the local property market is the agreement  signed in September 2006 between the UK, Gibraltar and Spain. The three governments came to agreements over pensions for Spaniards living in the British colony, Gibraltar’s airport, telephones and transit zone. Spain and the UK are to share the use of the Gibraltar airport, which had been the center of heated debates because the terminal and runway are located on land that was not included in the 1713 Treaty of Utrecht. Spain also agreed to improve the amount of telephone lines into Gibraltar and to expedite customs procedures. This will hopefully mean the end of the passenger transit delays caused by tight border controls, and more importantly encourage buyers to use Gibraltar instead of Malaga. Thus, adding convenience to Gibraltar’s already duty free purchases. Gibraltar is a part of the European Union by virtue of Britain's membership; however, Gibraltar is outside the Customs Union so travelers from EU member states can still enjoy duty free purchases now banned to travelers within the EU. Also exciting are plans for a new Disney resort close to Gibraltar, all making now seem an ideal time for property investment.

According to the CIA World Fact Book, Gibraltar benefits from offshore banking, an extensive shipping trade, and its position as an international conference center. The British military presence has been greatly reduced and now contributes only around 7% to the local economy, compared to 60% in 1984. Tourism, shipping services fees, duties on consumer goods, and the financial sector also generate revenue. Tourism, the shipping sector, and the financial sector, contribute from 25% to 30% of GDP each. Another 10% comes from telecommunications. Actually growth in the technology sector is showing potential with many big gaming and betting companies taking advantage of the good telecommunications facilities and low-tax regime. However, this corporate tax regime for non-resident controlled companies is due to be phased out by 2010. Even so, with one of Europe’s highest GDP’s per capita and new land renovation projects underway, Gibraltar is full of brilliant property developments. .

Practical Advice:

The following persons can hold land or property in Gibraltar: a British national, a citizen of a member state of the EU who holds a valid residence permit issued under the Gibraltar Immigration Control Ordinance, a United Kingdom registered company, a Gibraltar registered company, or a company incorporated under the law of a member state of the EU and which has and exercises the right of establishment in Gibraltar.

The most common method for foreign nationals/companies, from EU countries or not, is to purchase property in Gibraltar through a Gibraltar company. Reason being is there is no restriction on the nationality of persons who may own a Gibraltar registered company. Furthermore, there are not any restrictions on the nationality of the persons who may be directors of a Gibraltar registered company. Thus, it is typical for a foreign purchaser to incorporate a wholly owned subsidiary, which may also have its tax advantages.

Tax Highlights:

Sales Tax
There is no sales tax in Gibraltar.

Wealth Tax
There is no wealth tax in Gibraltar.

Value Added Tax (VAT)
There is no VAT in Gibraltar.

Capital Gains Tax
There are no capital gains taxes in Gibraltar. Profit made on the sale of a property is free of all taxation provided that the company is not actually trading in property. For example, this could occur when a company purchases five properties and sells the properties individually over a period of time. If the company buys five properties and sells all five properties at the same time, there will be no income tax liability. If the company sells the five properties at different times however, then the Commissioner of Income tax will likely consider the company to be trading and calculable to income tax at the company rate of 35%. This can be avoided by purchasing each property in separate Gibraltar companies.

Income Tax
35% is the corporate tax rate on profits after all deductions. If the property is intended for renting, it is an advantage to purchase by obtaining a loan facility because full mortgage interest relief is given against income received. In some situations it may be possible for the mortgage to be obtained by a foreign entity; however, there may be liability to withholding tax.

Stamp Duty
The stamp duty payable is about 1.26% of the full purchase price.

Credits & Mortgages:

Gibraltan mortgages are available for the majority of Nationalities for home purchase, re-financing for home improvements and other purposes on a case-by-case basis.

The types of Gibraltan mortgages are Repayment & Interest only. The minimum is £20,000, and maximum is £2 million; however, cannot exceed 90% of valuation or purchase price (whichever is lower), or 85% for "Buy-to-Let" products. Terms are up to 40 years with a maximum age of 80 on a Repayment basis or 70 for Interest only plans. Current interest rates are from about 5.49% fixed for 3 years, or from about 6.24% variable. Proof of income is required in most cases and can be earned income, investment, pension, or rental income. Keep in mind, the lender may not always consider each of these incomes when determining the maximum loan available. Non-Status mortgages are not currently available. Currency is in Sterling only.