Cat 2 net worth requirement increased from £2m to £5m

The Gibraltar Government has announced changes to the Category 2 regime, increasing the application fee and raising the minimum net wealth requirement for new applicants as Gibraltar enters what it described as “a new phase of opportunity” as a result of the treaty.

Under the changes, the current application fee will rise from £1,233 to £5,000, while the minimum net wealth requirement for new applicants will increase from £2 million to £5 million.

Existing Category 2 individuals will be grandfathered and will not be affected by the revised net wealth threshold.

The Government said the reforms are intended to modernise the high net worth individual regime and ensure Gibraltar continues to attract people able to make what it described as “a meaningful and sustained contribution” to the economy and wider community.

It also reaffirmed that Category 2 status does not confer entitlement to publicly funded schooling or healthcare services.

The new changes will also provide that a person who does not maintain their Category 2 status will not have a right to continue to be resident in Gibraltar.

“Following consultation on the proposed reforms, the Government has decided to adopt a measured approach to updating the Category 2 regime,” said the Minister for Justice, Trade and Industry, Nigel Feetham.

“While a range of views was expressed on thresholds and possible wider reforms, we have chosen to make targeted changes only.”

“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.”

“I have worked closely with the Chief Minister and the Minister for Business to ensure that these reforms support Gibraltar’s strategic direction, maintaining competitiveness while ensuring we continue to attract individuals who can make a meaningful contribution to our economy and community.”

The Government said the measures form part of its wider commitment to ensuring Gibraltar remains internationally competitive, fiscally responsible and well positioned for long-term success.

In respect of the property market, the real constraint is not the £5 million wealth threshold but the availability of suitable housing. Demand for premium properties has increased significantly over the last two years and, given Gibraltar's land scarcity, I suspect supply will struggle to keep pace. That will naturally cap the number of Category 2 residents Gibraltar can attract, regardless of how strong international demand becomes.

This news after a pause on residency applications has been broadly welcomed by estate agents in Gibraltar who understand the need to increase the minimum net wealth requirement.

BMI Managing Director Louis Montegriffo said he expected an increase of £2m to £5m, adding that the minimum net wealth requirement had been pegged at £2m for too many years.

He pointed out how this requirement has been in place for over 20 years and had not kept up with the increase of high value net worth clients over the period.

“It’s only normal and right to make those rules a little bit stricter,” Mr Montegriffo said.

He said it was “great to have a clear picture” after residency applications were paused last October and he agrees with the “philosophy, strategy and sentiment” of the changes to the criteria.

“I agree wholeheartedly that if people are coming to Gibraltar they have to add value,” he said.

He questioned whether the tax paid on income for Category 2 residents would also increase has this has not been announced.

Currently the income tax rate stands at £40,000 annually for Cat 2’s and Mr Montegriffo expects this will rise.

He highlighted that Gibraltar is an attractive destination for Cat 2 residents particularly post treaty implementation with increased border fluidity and access to Schengen.

He expects this change to criteria to affect the property market’s middle to high end sector with more demand for properties in areas like Ragged Staff, Kings Wharf and Midtown.

Chestertons Director Mike Nicholls told this newspaper that the changes are “much less dramatic than some had feared”.

He said a £5 million net wealth requirement remains internationally competitive, adding that the previous £2 million threshold was relatively modest by global high net worth residency standards.

Furthermore, he added, the £5k application fee should not be a deal breaker with those seeking Category 2 residency.

“Interestingly, there is no indication that the tax payable by Category 2 individuals will increase, despite the strong demand for Gibraltar residency following the Treaty announcement,” Mr Nicholls said.

“The clarification that Category 2 status does not provide access to publicly funded healthcare or education also seems entirely reasonable given Gibraltar's excellent private healthcare and schooling options.”

“Perhaps the most significant point is the confirmation that individuals who cease to qualify as Category 2 residents will no longer be able to remain in Gibraltar through an alternative residency route, unless 20 years of Cat means Gibraltarian status is possible. That may cause some applicants to think more carefully about their long term plans, as it effectively requires them either to maintain their Category 2 status or leave Gibraltar in later life.”

Mr Nicholls said the Government has “chosen evolution rather than revolution”, preserving the attractiveness of a regime that has served Gibraltar well for many years.