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Hiring in Gibraltar
Gibraltar is a British Overseas Territory located on Spain’s south coast. Its currency is the Gibraltar pound. Gibraltar has an extremely low unemployment rate. The main sectors of Gibraltar’s economy are financial service, online gambling, shipping and tourism. Moreover, Gibraltar also has a small manufacturing sector. Its main trading partners are Spain, the United States, India, Italy and Netherlands. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Gibraltar’s legal and tax regulations. Employment regulations including probation, holidays and termination are covered by the Labor Code. The Labor Code stipulates that employees are entitled to 15 days of paid annual leave. Income tax is charged on income accruing in or derived from Gibraltar. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with Gibraltar’s Labor Code and tax laws.
statutory labor requirements
Probation Period
- The first week of any employment is a probationary period and can be legally terminated at the end of the week.
Annual Leave
- The minimum paid annual holiday entitlement is 15 days for employees working at least five days a week, increasing to 25 days once the employee has eight years of service.
Public Holidays
- New Year's Day (1st January)
- Commonwealth Day (9th March)
- Good Friday (10 April)
- Easter Monday (13th April)
- Worker's Memorial Day (28th April)
- May Day (1st May)
- Spring Bank Holiday (25th May)
- Queen's Birthday (15th June)
- Late Summer Bank Holiday (31st August)
- Gibraltar National Day (10th September)
- Christmas Day (25th December)
- Boxing Day (28th December)
Maternity Leave
- Employees are entitled to 14 weeks' maternity leave from the 11th week before the expected week of childbirth.
- For those with at least one year's continuous employment by the 11th week before the due date, there is a right to additional maternity leave of up to 29 weeks after the baby is born.
Paternity Leave
- There is no statutory right to paid paternity leave.
Sick Leave
- In a 12-month period, an employee is entitled to a statutory minimum sick pay entitlement of two weeks at full pay and four weeks at half pay, provided that all the following conditions are met:
-
- The employee has been continuously employed for at least three months.
- The employee reports illness within three days of absence from work.
- The employee supplies a medical certificate.
Work Hours
- The average working time over 17 weeks must not exceed 48 hours a week, although employees can contract out of the Act, subject to the employer complying with certain conditions.
- Workers aged between 15 and 18 years old cannot work for more than 40 hours a week.
- A night worker's average normal hours of work must not exceed eight hours in each 24-hour period.
Overtime
- Overtime rates are a matter for agreement between the employer and employee or on an industry-wide basis.
- There are certain minimum statutory levels and overtime pay varies from business to business.
- Typical rates for overtime are:
- weekdays and Saturdays – time and a half;
- Sundays and public holidays – double time (Sunday shop workers may be an exception); and
- Christmas Day and New Year's Eve – double time and above.
Notice Period
- After the first week the notice period is governed by the length of service and the pay frequency as detailed below:
Employees
-
- Paid monthly: minimum of one month's notice
- Paid weekly or fortnightly: one week's notice
Employers
-
- Monthly: minimum of one month for up to 8 years’ service, two months for 8 to 10 years’ service and three months for 10+ years.
- Weekly or fortnightly: minimum of one week for less than 2 years, two weeks for 2 to 5 years, four weeks for 5 to 8 years, eight weeks for 8 to 10 years and 13 weeks for 10+ years.
Severance
- Fixed-term employees who are dismissed before the expiry of their contract are entitled to 50% of the sum that would have accrued during the unexpired period of the contract.
income tax
- Income tax is charged on income accruing in or derived from Gibraltar.
- The 'accrued in and derived from' principle is softened for individuals who carry out activities in Gibraltar for a period of less than 30 days in aggregate during the year of assessment, so that such individuals will be reimbursed for taxes paid on the income from their activities in Gibraltar.
- Income tax is also charged on certain income accruing in, derived from, or received in any place other than Gibraltar by any person ordinarily resident in Gibraltar.
- Individuals have the choice of being taxed under either an Allowances Based system or under a Gross Income Based system and will be assessed under the system that results in the lower tax.
Allowance Based System
- Under the Allowances Based system, the individual will be taxed on their income less allowances
- For the 2019/20 tax year, the applicable tax rates are:
|
Taxable income |
Rate of tax (%) |
|
First GBP 4,000 |
14 |
|
Next GBP 16,000 |
17 |
|
Balance |
39 |
- Persons whose taxable income does not exceed GBP 11,450 per annum are exempt from tax.
- A tapering relief is available for individuals whose taxable income is between GBP 11,451 and GBP 19,500.
Gross Income Based System
- Under the Gross Income Based system, the applicable income bands and tax rates for the 2019/20 tax year are as follows for income up to GBP 25,000:
|
Taxable income |
Rate of tax (%) |
|
First GBP 10,000 |
6 |
|
Next GBP 7,000 |
20 |
|
Balance |
28 |
- The income bands and tax rates for income above GBP 25,000 are:
|
Taxable income |
Rate of tax (%) |
|
First GBP 17,000 |
16 |
|
Next GBP 8,000 |
19 |
|
Next GBP 15,000 |
25 |
|
Next GBP 65,000 |
28 |
|
Next GBP 395,000 |
25 |
|
Next GBP 200,000 |
18 |
|
Balance |
5 |
deductible expenses
Allowance based system (ABS): Personal allowances and deductions:
- Personal relief is granted on submission of a claim to the tax office when applying for a tax code under the ABS
- The main allowances (which are reduced by 1/12 for each complete calendar month that the individual is not resident in Gibraltar during the year of assessment) for the 2019/20 tax year are as follows:
|
Allowance |
GBP |
|
Personal allowance |
3,455 |
|
Spouse |
3,455 |
|
One parent family |
5,960 |
|
Child |
1,190 |
|
First child studying abroad |
1,355 |
|
Disabled individuals |
9,475 |
|
Nursery school allowance |
5,400 |
|
House purchase allowance (1) |
13,000 |
|
Additional home purchase allowance (2) |
4,000 |
|
Life insurance premiums (3) |
100% |
|
Mortgage interest (4) |
100% |
|
|
- In addition to the above allowances, individuals taxed under the ABS may also deduct expenses from their assessable income on the following:
- Pension contributions paid to approved schemes, subject to restrictions.
- Premiums paid on health insurance policies (up to a maximum of GBP 5,395).
Gross income based system: Deductions
- Persons under the Gross Income Based system may also benefit from deductions from their assessable income, as follows:
- Up to a maximum of GBP 1,500 in respect of approved mortgage interest payments.
- Up to a maximum of GBP 1,500 per annum in respect of pension contributions.
- Up to a maximum of GBP 5,000 in respect of approved expenditure incurred on the enhancement of the frontage of their property.
- Up to a maximum of GBP 7,500 in respect of approved expenditure incurred towards the purchase of their home (this benefit is available to first-time home buyers only).
- Up to a maximum of GBP 3,000 per annum in respect of expenditure incurred towards private medical insurance premiums.
- Up to a maximum of GBP 3,000 over two years in respect of expenditure incurred towards the installation of solar energy for boilers.
immigration
- Under the Control of Employment Act, the government may control the employment of “non-entitled” workers by means of work permits.
- An “entitled” worker is a worker who is one of the following:
-
- A national of a country belonging to the European Economic Area (EEA)
- A non-EEA national who has been working in Gibraltar since before 1 July 1993
- A non-EEA national authorized to work in Gibraltar under the Immigration Control Act A “non-entitled worker” is a worker who is not an entitled worker.
- EEA nationals may stay in Gibraltar for three months.
- After this period, they are granted a renewable residence permit for five years if they have found suitable employment or established a business.
- A work permit is granted to a non-entitled worker if no entitled workers are able and willing to take up the particular employment.
- Such individual may be granted a residence permit on an annual basis and are normally renewable only if the individual is still in possession of a work permit.
- A non-EEA national may be refused permission to buy real estate in Gibraltar; such permission cannot be refused to residents of EEA countries.
- Work permits for non-EU nationals are only issued after a (refundable) deposit is paid to the Employment Service to cover any repatriation costs and other costs that may be required.
- A non-EEA national who wants to set up a business and reside in Gibraltar needs to register with the Income Tax Office as a self-employed person.
- After the work permit is granted, the individual may apply to the Civil Status and Registration Office in Gibraltar for a residence permit.
- An EEA national has the right to enter Gibraltar on the production of a valid passport or national identity card and remain for three months in order to seek employment or to establish himself or herself under any other qualifying category.
- Other nationals require both work permits and residence permits.
- Any individual not having a right to reside in Gibraltar may be refused admission (or after admission be required to leave) in the interests of public policy, security or health.
- Residence permits may be granted at the governor’s discretion to non-EEA nationals who do not have a work permit if the governor is satisfied that the applicants are of good character and that it is in the interest of Gibraltar that residency should be granted.
- Non-EEA nationals who have obtained Category 2 individual tax status are likely to obtain residence permits on this basis.
- At the governor’s discretion, citizens of the United Kingdom can be granted a certificate of permanent residence if they are of good character and if they are likely to be an asset to the community.
|
Type of Visa/ Permit |
Documentation |
Validity |
Eligibility |
|
Work Permit |
|
12 months (can be renewed) |
|
|
Residence Permit |
|
12 months (renewable validity of 5 years) |
|
value added tax
There is no VAT in Gibraltar.
withholding tax
- Gibraltar does not levy withholding tax on dividends, interest, royalties, or technical service fees, nor does it levy a branch remittance tax
termination
- The employer must file a Notice of Termination with the Employment and Training Board within seven days of dismissal. Failure to do is subject to a fine of GIP£750.
- To avoid breach of contract claims, the employer must comply with any contractual obligations regarding termination.
- A fair process must be conducted to avoid claims for unfair dismissal.
- Although not a statutory requirement, the Employment Tribunal will consider the process followed by the employer.
- For example, in misconduct cases, the procedure should usually include the following steps:
-
- Conducting a reasonable investigation.
- Informing the employee of the allegations against him or her.
- Holding a disciplinary hearing.
- Providing an opportunity to appeal.
- After the first week the notice period is governed by the length of service and the pay frequency as detailed below:
Employees
-
- Paid monthly: minimum of one month's notice
- Paid weekly or fortnightly: one week's notice
Employers
-
- Monthly: minimum of one month for up to 8 years’ service, two months for 8 to 10 years’ service and three months for 10+ years.
- Weekly or fortnightly: minimum of one week for less than 2 years, two weeks for 2 to 5 years, four weeks for 5 to 8 years, eight weeks for 8 to 10 years and 13 weeks for 10+ years.
- Fixed-term employees who are dismissed before the expiry of their contract are entitled to 50% of the sum that would have accrued during the unexpired period of the contract.
statutory benefits
- These are mandatory benefits as postulated by law
- These include probationary period, annual leave, public holidays, sick leave, maternity leave, and severance pay
- Statutory benefits also include social security benefits
|
Statutory Benefits |
|
Probationary Period |
|
Annual Leave |
|
Public Holidays |
|
Maternity Leave |
|
Sick Leave |
|
Severance Pay |
|
Social Security Benefits |
payments and invoicing
- The tax year for individuals in Gibraltar runs from 1 July to 30 June.
- Income tax and social insurance contributions on the cash earnings of employees are normally collected under the PAYE system.
- All employers must use the PAYE system to deduct tax and social security contributions from wages or salaries.
- Any additional tax due, including tax due on benefits in kind, is generally payable by the employee after it is assessed by the Commissioner of Income Tax.
- Income from self-employment is payable under a self-assessment system.
- The taxpayer must make two payments on account by 31 January and 30 June of the tax year. Each installment equals 50% of the tax payable for the preceding tax year.
- If a taxpayer believes that the amount of the advance payments calculated on this basis will exceed the liability payable for the year, the taxpayer may apply to be discharged in whole or in part from the obligation to make the advance payment.
- However, if it is subsequently determined that the application has been made erroneously and that the final liability is higher than predicted by the taxpayer, a surcharge on the late payment of the difference may apply.
- Any balance remaining is payable by 30 November following the end of the tax year.
- Late payment of tax results in a surcharge of 10% of the tax payable on the day immediately after it is due.
- After 90 days, a further surcharge of 20% of the amount unpaid (tax plus initial surcharge) is imposed.
- Individuals are required to file their tax return for a tax year by 30 November following the end of the tax year.
- Individuals with income from self-employment must prepare their accounts for the tax year ending 30 June.
- A fixed penalty of GIP50 is imposed if an individual does not file the return by the applicable deadline, with a further penalty of GIP300 if the failure continues for three months and a further penalty of GIP500 if the failure continues for an additional three months.
employee accruals
| Christmas Bonus% |
0% |
| Christmas Bonus Over Vacations % |
0% |
| Severance per Year % |
Fixed-term employees who are dismissed before the expiry of their contract are entitled to 50% of the sum that would have accrued during the unexpired period of the contract (Subjective) |
| Vacations % | Employees are entitled to 15 days of annual leave (4.1% of annual salary) |
| Notice % |
Employees are entitled to one months notice period (8.33% of annual salary) |
| Christmas Bonus Over Notifications% | 0% |
| Vacations Plus% | 0% |
| Total percentage of Salary (yearly) | The total employment accruals as a percentage of salary per anum are equal to 12.4% |
employer accruals
Employer Accruals Additional information
| Employment Accruals | ||
| Annual Leave | The minimum paid annual holiday entitlement is 15 days for employees working at least five days a week, increasing to 25 days once the employee has eight years of service. | This equals 4.1% (15/365 days) of annual income |
| Maternity Leave | Employees are entitled to 14 weeks' maternity leave from the 11th week before the expected week of childbirth. | This equals 26.9% (14/52 weeks) of annual income |
| Sick Leave | In a 12-month period, an employee is entitled to a statutory minimum sick pay entitlement of two weeks at full pay and four weeks at half pay | This equals 3.84% (2/52 weeks) of annual income |
| Severance |
Fixed-term employees who are dismissed before the expiry of their contract are entitled to 50% of the sum that would have accrued during the unexpired period of the contract. | Subjective |
| Social Security | Employer's contributions are calculated as 20% of gross earnings, subject to a minimum of GBP 18.15 per week (GBP 78.65 per month) and maximum of GBP 40.15 per week (GBP 173.98 per month). | This equals 20% of annual income |
