| Gibraltar is a
peninsula with an area of 2.75 square miles situated at the Southern most
tip of Spain. Gibraltar has been a Crown Colony of the United Kingdom since
1713 when the Territory was ceded to Britain under the terms of the treaty
of Utrecht. Gibraltar is politically and economically stable and although
Spain still maintains a territorial claim over Gibraltar the British Government
has undertaken not to place the people of Gibraltar under the sovereignty
of another state without their free and democratic consent. This consent
is most unlikely to be forthcoming. Britain maintains responsibility for
defence and international affairs but local matters, including company
and taxation law, are the preserve of a locally elected House of Assembly.
Gibraltar is a full member of the European community having been included
as a member when Britain joined in 1973 but Gibraltar is specifically excluded
from the European Common Agricultural Policy, the VAT system and the Common
Customs Union. Gibraltar enjoys a sophisticated range of banking, legal,
accountancy and other professional services. Communications are excellent.
The currency is, for all practical purposes, the British Pound Sterling
(although local Gibraltar Pounds are also issued and trade on a par with
Sterling) and the population is bilingual in English and Spanish which
facilitates the translation of documents for the Spanish speaking market.
There are 2 main types of non-tax paying company available
in Gibraltar:-
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THE GIBRALTAR TAX EXEMPT COMPANY. A company incorporated
in Gibraltar which is owned by non-residents of Gibraltar and does not
transact business with other Gibraltar resident companies or individuals
is eligible to apply for tax exempt status in Gibraltar. Upon successful
application issued with a certificate which guarantees exemption from Gibraltar
taxation for a period of 25 years provided that the company complies with
the conditions of tax exempt status and pays an annual duty to the Gibraltar
Government of £225 p.a. At the end of every year the exempt company
must file a statement attesting to the fact that the company has complied
with the conditions applicable to its exempt certificate. An exempt company
is convenient to administer due to the fact that it may have locally appointed
directors and may maintain Bank accounts within Gibraltar. Thus the whole
of the administration may be located within Gibraltar which helps to prevent
the assumption that the company may be tax resident anywhere else.
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NON-RESIDENT GIBRALTAR COMPANIES. A company which is incorporated
in Gibraltar, owned by non-residents of Gibraltar and managed and controlled
by directors who reside and hold their board meetings outside of Gibraltar
will be considered as non-resident. A non-resident company is not subject
to Gibraltar corporation tax except on that part of the profit which is
remitted to Gibraltar. In practice this means that a non-resident company
may be totally exempt from Gibraltar corporate taxation provided that it
does not maintain Bank accounts within Gibraltar.
TAX RESIDENT OR EXEMPT?
The non-resident company is cheaper as it is not subject
to the fixed rate annual duty and other fees which are payable by the exempt
company (see fee comparison below) but it is generally less convenient
to manage due to the requirement to appoint non-resident directors and
maintain Bank accounts outside of Gibraltar only. This may have tax implications
in the home country of the directors - please see our notes on directors
under the "Optional Services" section. The shares of a non-resident company
would be subject to Gibraltar estate duty whereas the shares of an exempt
company would not. In a world of ever changing fiscal legislation the 25
year guarantee enjoyed by the exempt company may prove particularly useful
in the future. In addition to the above types of non tax paying companies
Gibraltar offers two further types of company structure which may be extremely
useful in a tax planning exercise:-
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THE GIBRALTAR QUALIFYING COMPANY.This type of company is
similar to the exempt company but, instead of being non tax paying, the
company elects its own rate of tax as long as that rate is 2% or above.
This type of company can be useful where it is necessary to show that a
certain minimum level of taxation has been paid in order to gain relief
from taxation in another country. For example, the taxation systems of
certain countries provide that if taxation above a certain minimum level
has already been paid on income remitted to the home country then no further
taxation will be charged on those profits by the home country. The qualifying
company can therefore elect to pay the required minimum level which would
allow that income to be remitted to the home country without further taxation
being suffered on arrival. A Qualifying Company must lodge an amount of
£1,000 with the Gibraltar Government as a guarantee against payment
of future taxation
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THE GIBRALTAR 1992 HOLDING COMPANY. This company was specifically
created to take advantage of European Union Directive 90/435. In simple
terms, this Directive states that dividends may be paid by a subsidiary
company located in one EU state to a parent company located in another
EU state without the imposition of withholding tax as long as the recipient
parent company is not capable of being exempt from tax. The prohibition
against tax exemption would mean that the exempt and non-resident Gibraltar
companies are not suitable to receive dividends from a subsidiary in another
EU state so the 1992 Holding Company was created. The 1992 Holding Company
pays 35% tax on all profits except on dividend income received. Dividends
paid out of the 1992 Holding Company are subject to a 1% withholding tax.
This type of company can be particularly advantageous for non EU countries
who are investing within the EU and are expecting to receive dividend income.
As can be seen the effective rate of tax on that dividend income will be
1% when remitted out of Gibraltar or zero tax when held within Gibraltar.
The fee schedule below does not quote fees for 1992 Holding Companies as
the procedures involved are somewhat complicated and can only be quoted
on a case by case basis.
Gibraltar companies have the following characteristics:
TAXATION
For details of taxation please see the heading applicable
to the relevant type of Gibraltar company.
SHAREHOLDERS
Gibraltar companies must have a minimum of one shareholder
who may be corporate or individual. Details of shareholders appear on the
public file but anonymity can be preserved by the use of nominee shareholders.
Bearer shares cannot be issued.
DIRECTORS
Gibraltar companies must have a minimum of 1 director
who may be corporate or individual. Details of the directors appear on
the public file but anonymity can be preserved by the use of third party
directors.
ANNUAL REPORTING
An annual return must be filed each year showing details
of shareholders and directors. Exempt and non-resident companies do not
have to file accounts on the public file but the Qualifying 1992 Holding
company would need to prepare audited account to the Gibraltar tax authorities.
RESTRICTIONS ON NAME AND ACTIVITY
The following words and their associated activities are
restricted: association, royal, imperial, trust, trustee, bank, assurance,
group, Europe and international.
LOCAL REQUIREMENTS
As a matter of local company law the company MUST maintain
a registered office address within Gibraltar. Additionally, it is a requirement,
practical in the case of a non-resident company and legal in the case of
the other types of Gibraltar company, for a Gibraltar resident company
secretary to be appointed. We would generally provide these services as
part of the domiciliary service fee.
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