Gibraltar proposes to tax gains on sales of certain residential real estate

Changes proposed to Gibraltar's tax legislation would impose tax on gain realized when an entity or person who holds an interest in three or more residential properties disposes of any of those properties.

Following an announcement by Gibraltar's Minister for Justice, Trade and Industry on 3 July 2024, a Bill was published on 25 July, setting out the planned changes to Gibraltar's tax legislation.

Key highlights of the announcement are summarized below.

Key highlights

Where any person or entity owns or holds, directly or indirectly, three or more "taxable properties," in whole or in part, the income from the disposal of any of those properties would be taxable to the individual or entity upon disposal of the property.

A "taxable property" is defined as a residential property located in Gibraltar. This includes the rights to acquire a beneficial interest in a property not yet complete or not yet assigned ("off-plan" purchases). There are some specific exemptions — for example:

• A property used exclusively as the primary residence of its beneficial owner
• Commercial properties, or property that is predominantly of commercial use
• Hotels
• Property that is unfit for human habitation, or certified as being in need of substantial repair; in either case, the Commissioner of Income Tax must be satisfied that the purchase of the property is for the purpose of development to permit resale or letting
• Properties that are, or have been subject to, Part II of the Housing Act 2007 (i.e., properties built before 1 March 1959 that are subject to rent control, or would be rent controlled were it not for the issuance of a certificate by the Rent Assessor to exempt the property from rent control)

The disposal of property by the estate of a deceased person is excluded from this tax measure.

If the Bill becomes law in its current form, it will be effective as from 1 August 2024.

There is no specific tax rate proposed to be imposed on gain from the disposal taxable properties, so these gains would be taxable at the personal or corporate tax rates that generally apply to the vendor of the property.

The new tax would apply irrespective of whether the direct owner or beneficial owner is resident in Gibraltar.