Economy

The economy of Gibraltar is managed and controlled by the Government of Gibraltar. Whilst being part of the EU, Gibraltar has a separate legal jurisdiction from the United Kingdom and enjoys a different tax system.

The role of the UK Ministry of Defence, which at one time was the main source of income, has declined, with today's economy based on shipping, tourism, finance centre activities, and the Internet.

In his June, 2005, budget speech, Chief Minister Caruana noted that Gibraltar's Finance Centre continues to grow and remains in healthy shape despite the challenges brought by both the EU's insistence that the territory change its offshore tax regime and the Savings Tax Directive.

Gibraltar will soon have a functioning stock exchange, the GibEX. The unit of currency is the Gibraltar Pound, which is at par with the British pound.

In 2000, Gibraltar had a GDP of over £432 million ($769 million) with a per capita figure of £15,700 ($28,000).

Imports and Exports

The main export markets in 2006 were the UK (30.8%), Spain (22.7%), Germany (13.7%), Turkmenistan (10.4%), Switzerland (8.3%) and Italy (6.7%). Mian import partners were Spain (23.4%), Russia (12.3%), Italy (12%), UK (9%), France (8.9%), Netherlands (6.8%) and the US (4.7%).

Finance

Today, Gibraltar has an extensive service-based economy, dominated by financial services and tourism. Financial services and persons involved in the industry are regulated by the Financial Services Commission, which operates in a similar manner to the United Kingdom Financial Services Authority. In Investment International magazine's 2005 Offshore Finance Centre Awards, readers voted Gibraltar the "Best International Finance Centre".

Gibraltar is a constituent part of the European Union, having joined with the United Kingdom in 1973, under the provisions of the Treaty of Rome relating to European dependent territories. However, it opted out of the Common External Tariff, the Common Agricultural Policy and the requirement to levy Value Added Tax.

A number of British and international banks have operations based in Gibraltar. Recently a number of large bookmakers and online gaming operators have opened offices to benefit from operating in a well regulated jurisdiction with a favourable tax regime.

Subject to notifying the Commissioner, who must be satisfied that they meet certain criteria in accordance with the relevant EU Directive, Gibraltar licensed or authorised financial institutions can provide services throughout the EU and EEA without having to seek separate licences or authorisation in the 'host' Member State. This is known as the "passporting" of financial services.

Defence Spending

The British military traditionally dominated the economy of Gibraltar, with the naval dockyard providing the bulk of economic activity. This has however diminished in the last twenty years, and it is estimated to account for only 6% of the local economy, compared to over 60% in 1984. In 2006, the MoD announced that it would contractorise the provision of services to the military base to make further cost savings.

Tourism

Tourism is a significant industry. Gibraltar is a popular stop for cruise ships and attracts day visitors from resorts in Spain. The Rock is a popular tourist attraction, particularly among British tourists and residents in the southern coast of Spain. It is also a popular shopping destination, and all goods and services are VAT-free. Many of the large British high street chains have branches in Gibraltar, including Early Learning Centre, Marks and Spencer, Mothercare, BHS, Dorothy Perkins, Next and the supermarket Morrisons.

Gibraltar has invested in a new terminal for cruise ships and is popular with this trade. There is also a coach park which caters for day tourists from Spain. There are two daily flights from the UK and since December 2006 daily flights to Madrid. In 2005, there were an estimated 6 million tourists.

Shipping

Situated at the entrance of the mediterranean, adjacent to one of the world's busiest shipping lanes and with more than 7,000 ship calls each year, Gibraltar is home to a wealth of shipping expertise and to many specialist companies offering a comprehensive range of support services.

Other areas of activity are services related to shipping, like bunkering, and ship repair and construction. The economy is considered to be strong and diversified.

Taxation

Gibraltar is a well known and regulated international finance centre and has been a popular jurisdiction for European off-shore companies.

Fiscal advantages, including no tax on capital income, are offered to a maximum of 8,464 offshore qualified companies registered in Gibraltar. Tax exempt companies, which must not trade or conduct any business locally, are taxed at a flat rate of up to £300 a year. Gibraltar has not signed any Double Taxation Treaties. Non-resident businesses do not pay income tax unless the source of this income is Gibraltar proper. There is no tax on capital income.

In Gibraltar there is no capital gains tax, wealth tax, sales tax or VAT. Import duty is payable on most items at 12% The main tax for companies is income tax, and Social insurance contributions. there are also stamp duties on certain transactions, and property taxes ('rates').

Non-resident companies can take advantage of a number of offshore regimes in order to reduce taxation, although after an agreement with the European Union in 2005, this tax-exempt regime is due to disappear on the 31st of December 2010.

Individuals pay quite high taxes on their income in Gibraltar unless they are able to take advantage of High Net Worth Individual status or gain exemption as an expatriate executive. There is a moderately high estate duty, and import duties are quite high on some items.

Assessment and collection of tax is administered by the Commissioner of Income Tax; the tax year runs from first July to the following 30th June.