How to run payroll in Gibraltar, including PAYE, social insurance, employee registration, benefits in kind, employer reporting and the new residence permit link.
October 28, 2026
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min read
Since 14 July 2026, an employee's right to reside has depended in part on the employer's own standing. Under the Residency Regulations 2026, an applicant must be employed by a Gibraltar business that is actively trading, holds the necessary licences and is compliant with government filing and payment obligations. Advance deposits calculated by reference to tax and social insurance contributions apply where the employer is newly established or the employee falls below the salary threshold.
Payroll accuracy therefore carries consequences beyond the Income Tax Office. An employer whose filings are not in order has created a problem for its own recruitment. This article sets out what Gibraltar payroll involves and where the risk sits.
A business employing staff in Gibraltar must register withthe Income Tax Office for PAYE purposes, supported by its EmploymentRegistration Certificate and certificate of incorporation.
Employees must also be registered. The Income Tax Office issues a tax code for each employee, which determines the tax and social insurance deductions applied to their pay. Registration is where most avoidable problems begin, usually through delay rather than error.
PAYE requires employers to deduct income tax from employeewages and remit it to the Income Tax Office.
The employee's tax code determines the deduction. Where no code has been issued, the employer must apply the required default deduction until the correct code is available, and payroll must be updated when the employee's circumstances change. A default deduction is a holding position rather than a settled one. Leaving an employee on that basis for months produces a correction later and an uncomfortable conversation in the meantime.
Social insurance is separate from PAYE and applies toemployees gainfully employed in Gibraltar. Both sides contribute.
Employee contributions are calculated at 10% of grossearnings and employer contributions at 18%, each subject to the publishedminimum and maximum amounts. Where the employee is 60 or over, or has retiredat 55 by operation of law, only the employer's share is payable.
The employer contribution is a real cost of employment andshould be modelled at the point of offer. It now carries a second consequence,since advance deposits under the residence framework are calculated byreference to tax and social insurance contributions.
Payroll obligations continue well beyond the monthly salary calculation. Income tax and social insurance deductions must be remitted to the Income Tax Office by the monthly deadline. Employers must also submit annual declarations and the forms covering areas such as benefits in kind and pension contributions.
Records should be maintained across the year rather than reconstructed when annual returns fall due. An employer's compliance record is now visible in a context where it previously was not.
Salary is not the only form of remuneration with tax consequences. Benefits in kind can include employer provided health insurance, food vouchers, clothing allowances and private use of an employer provided vehicle.
Their value may need to be included when determining taxable income. Identifying them within the normal payroll cycle is more reliable than treating them as a year end exercise, particularly for senior packages where the benefit element is significant.
Payroll responsibilities apply at the end of employment aswell as during it.
The employer must complete form P7A, provide the relevantsections to the departing employee and submit the required information to theIncome Tax Office. The final payroll should account for outstanding salary,taxable benefits and other payments arising on termination.
There is a further consideration for employers of permitholders. Where employment ends, an employee residence permit will generally berevoked sixteen weeks afterwards unless qualifying alternative employment issecured. A prompt and accurate exit process carries consequences for theindividual that go beyond their final payslip.
Running payroll internally requires sustained attention totax codes, deductions, social insurance, records and deadlines.
For companies with a small workforce or no dedicated payrollfunction, bringing payroll together with accounting and tax compliance reducesthe number of places an error can originate. Where that work is outsourced, accounting, payroll and tax services processing alongside the related tax and reporting obligations.
This is most relevant to Gibraltar employers recruitinginternationally, to newly established businesses and to advisers supporting aclient setting up operations in Gibraltar.
Three checks are worth running. Whether filings and payments are current, since this is now a condition attached to employees' permits. Whether the employer contribution and any advance deposit are built into the cost of hiring. And whether salaries sit at or above the published average gross annual earnings figure used in the residence framework, currently £37,500.
Payroll administration has become part of a company's ability to recruit and retain staff. That is a reasonable argument for treating it as a governance function rather than a clerical one.
• Under the Residency Regulations 2026, employee permitsrequire the employer to be actively trading, appropriately licensed andcompliant with government filing and payment obligations.
• Gibraltar payroll combines registration, PAYE, socialinsurance, benefits reporting and end of employment procedures.
• Employee social insurance is charged at 10% of grossearnings and the employer contribution at 18%, each subject to publishedminimum and maximum amounts.
• Advance deposits apply where the employer is newlyestablished or the employee falls below the salary threshold, calculated byreference to tax and social insurance contributions.
• Benefits in kind should be identified during thepayroll cycle rather than at year end.
• Where employment ends, an employee residence permit isgenerally revoked sixteen weeks later unless alternative qualifying employmentis secured.
Acquarius provides accounting, payroll and tax compliance for Gibraltar businesses, working alongside the employment and immigration advisers engaged on recruitment and permit applications. The emphasis is on records that are current and defensible rather than assembled at year end.
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Email: enquiries@acquarius.gi
Telephone: +(350) 200 50418
Address: as per acquarius.gi
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