Gibraltar has doubled the eligibility threshold for its residency scheme for wealthy individuals from £2m to £5m.
The move comes as the Brexit Treaty officially comes into force. Since the deal was struck in 2020, the territory has been oversubscribed with applications, leading to a temporary halt on new residency applications by UK and European Economic Area (EEA) nationals last year.
More than 3,000 individuals migrated to Gibraltar between 2022 and 2024, official figures show.
The threshold change is expected to come into effect on July 15, the same day the UK-EU Treaty begins to apply provisionally.
As well as the threshold rise, other entry requirements have been tightened by Gibraltar’s government, such as the cost of applying for the special status, known as Category 2, increasing from £1,233 to £5,000.
The treaty will bring the Rock into the EU’s Schengen border-free area, effectively erasing Gibraltar’s land border with Spain and allowing unhindered movement between the two.
Announcing the threshold reforms, trade minister Nigel Feetham said that Gibraltar was seeing a “strong interest” in high-net-worth applications, known as Category 2.
“We are seeing strong interest in Category 2 status following the Treaty announcement, which reflects growing confidence in Gibraltar’s future. At the same time, it is important that the regime remains aligned with Gibraltar’s broader economic objectives and the opportunities arising from the Treaty.”
He said the changes would “support Gibraltar’s strategic direction” and help it maintain its competitiveness in attracting wealth.
The country has raised the eligibility threshold but has not increased the tax rate. It means fewer high-net-worth people will relocate, so there is no immediate benefit to the Gibraltar exchequer.
High-net-worth individuals who qualify for special tax residency are only taxed on the first £118,000 of their income, effectively limiting their annual tax bill to £37,000
Paul Correa, of Gibraltar-based wealth manager Fiduciary, said: “They are tightening the rules to such a degree that it could kill off high-net-worth relocation to Gibraltar.
“It seems the government wants to slow down demand for people coming over via this route. They’ve reduced the pool of people who can qualify.”
Category 2 applicants are expected to demonstrate an active connection with the Gibraltar economy through employment or business activity, together with suitable accommodation and background checks. They do not have to use their property in Gibraltar as their main residence and there is no minimum physical stay required.
Mr Feetham said the Rock would “continue to attract individuals who can make a meaningful contribution to our economy and community”.
With a population close to 40,000, Gibraltar is considered an attractive destination for high-net-worth residents thanks to its low tax rates reinforced by the increased border fluidity thanks to the UK-EU Treaty.
Income generated outside the jurisdiction, such as investment income, is not taxed. There is also no capital gains tax, inheritance tax or VAT in Gibraltar.
Louis Montegriffo, of Gibraltar estate agency BMI Group, said: “I think around 1pc of the UK is worth about £2m, so therefore the government may have wanted to be a bit stricter to tackle the volumes.
“I don’t think Gibraltar’s economy is dependent on Category 2s coming in. Our mainstay so far is income. It really comes in from financial services, gaming, tourism, shipping. Those are the four main pillars.”
The UK-EU treaty comes into effect next Wednesday, when the land border between the British overseas territory and Spain will be dismantled. It comes more than three centuries after Anglo-Dutch forces seized the fort of Gibraltar during a war against the Spanish.