Monthly Archives: August 2012

Gibraltar will cut taxes for shipping and domicile income

European Tax & Money Havens, , , , , ,

The Gibraltar government has announced a number of tax cuts in the 2012/13 Budget, slashing import duties and cutting personal income tax payable for a number of categories of taxpayers.

In order to be more attractive to foreigners and rise future income, the Gibraltar government has announced a taxpayer-friendly budget, with consolidation efforts instead focusing on restraining government spending.

The most comprehensive changes will come in the area of import duties, which have been reduced or removed entirely for a number of retail goods. Most electrical goods and computer software will be newly exempt from import duties, while duties on perfumes, cosmetics, clothes, jewellery, and mobile phones will be halved.

Import duties on hybrid cars and biofuel are to be removed, and a cash-back scheme will be introduced for persons purchasing environmentally friendly vehicles. In addition, import duties are to be removed on the import of vehicles adapted for use by disabled persons.

In a move aimed at encouraging the registration of super yachts in Gibraltar, seagoing vessels over 18 metres in length will no longer be subject to import duties, while import duties on vessels under 18 meters in length will be subject to a reduced 6% rate. Under the previous regime, vessels of over 80 tons were exempt, while those under 80 tons were subject to a 12% rate.

The only increase to import duties will impact cigarettes. The system of import taxation in this area will be reformed, from a rate applied per kilo, to a rate per packet of 20 cigarettes, with the rate hike adding GBP 0.10 to a packet of cigarettes.

Substantial changes have also been announced in respect of the territory’s two income tax regimes, the Gross Income Based regime and the Allowance Based System.

The government has confirmed its commitment to reducing the maximum rate imposed on personal income tax under the Allowance Based System, to 15% by 2015 / 2016. To begin to reduce effective rates, the rate applicable to the first GBP 4,000 (USD 6,200) of taxable income will be reduced from 17% to 15%. This will exempt taxpayers with earnings of GBP 9,000 or less. Relief will be increased further in 2013, to exempt those with earnings of GBP 10,000 or less.

Taxpayers in receipt of income between GBP 9,000 and GBP 19,500 will receive enhanced tax relief to smooth tax liability disparity between tax-paying and tax-exempt earners. New changes also aim to exempt all disabled working persons from taxation.

Meanwhile, taxpayers under the Gross Income Based system will now benefit from being able to deduct up to GBP 1,000 from their assessable income in respect of mortgage interest payments.

In addition, persons taxed under the Gross Income Based tax regime will be entitled to up to GBP 5,000 in tax relief for approved expenditure incurred on painting, decorating, repair or enhancement, of the frontage of Gibraltar premises, if they are approved by the Town Planner.

Lastly, the cap of GBP 35,000 will be removed in respect of tax relief for private pension contributions.

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Uruguay to attract foreign residents with tax exemption

Central and South American Tax & Money Havens, , , , , , ,

More than a year after introducing tax laws that made certain foreign-source income taxable to all residents of Uruguay, the Uruguayan Government decided to provide a tax exemption for all foreign residents in order to keep the existing foreigners in Uruguay and encourage their continued future immigration into the country.

 The new exemption, enacted in May 2012, provides foreign tax residents (non-Uruguayan citizens who spend more than 183 days per year inside Uruguay) a five-year tax-free window during which they will not be liable for income tax on any foreign source income. Foreign tax residents retain their non-resident tax status for five-years. After the five years expire, foreign tax residents must pay a 12% income tax on foreign interest and dividend income like all other Uruguayan residents; however, all other types of foreign income will still be tax-free, including capital gains, pensions, rents, etc.

In order to ensure that foreign tax residents are not taxed twice on their foreign income, Uruguay has also agreed to forgo taxes on foreign interest or dividends if that income is already taxed by another country. Uruguay will thus provide a full tax credit for any foreign taxes paid. This added incentive is significant because many foreign residents moving to Uruguay are already paying significant taxes in their home country. This is particularly true for citizens of the United States, who pay taxes on their world-wide income.

The news certainly calmed many foreigners still living in Uruguay, many of whom were very upset and frighten by the government’s decision to enact a world-wide tax on interest and dividend income. Some of the foreigners had already left Uruguay and opted for friendlier tax jurisdictions like Chile, Paraguay, Panama, Colombia, Mexico, Central America or the Caribbean. More important many more foreigners was considering to exit Uruguay unless this tax exemption was introduced rather quickly.

This new exemption will entice some of those foreign residents to return to Uruguay. The new tax exemption will certainly encourage prospective foreign residents to consider Uruguay again.

Evidence of Uruguay’s great past (Uruguay was a very rich country in the beginning of the twentieth century with higher average pensions and salaries than that of Italy and France as late as in the 1950’s) can be found in the old city / down town Montevideo with its great architecture. The long term decline of the country since then has made it affordable. Average salaries and pensions are now considerably lower than that of Italy and France giving the country a low cost level compared to Europe. The depression in the last decade was the worse recorded in the history of the country and created an historical opportunity for investment in Montevideo with its architectural treasures.

With great nature, good climate, beautiful beaches, colonial architecture, rich in agriculture commodities and fresh water resources, as well as a renaissance of the old city center /  down town Montevideo, many foreigners are looking at Uruguay as an interesting country. The government’s latest tax exemption shows prospective foreign residents that Uruguay is serious about attracting them to the country.

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