Tax-free Regime in Gibraltar

Gibraltar, probably the cheapest offshore jurisdiction within Europe, offers unique opportunities to do business tax efficiently. It was one of the first British dependent territories, which developed tax-exempt corporate forms for offshore business.

Since then, Gibraltar has established itself as one of the world’s leading offshore financial centres. Unlike many, Gibraltar is not an exotic, far-away island, - it is a part of the European continent. Its sound regulation and attractive fiscal incentives have made it an ideal base for organisations from all around the world, while its proximity to both Europe and Africa makes it easily accessible from many of the world’s business centres. Its European Union membership brings clear commercial benefit to Gibraltar registered companies, which can access the Union financial services market and take advantage of extremely favourable business environment.

Gibraltar possesses and excellent offshore business infrastructure, consisting of numerous sectors - offshore banking, insurance, investment fund management, investment holding companies. There is a good range of professional services in Gibraltar. As there is no exchange controls, investors enjoy complete freedom to remit funds into or out of Gibraltar and to convert funds to other currencies. The currency is Gibraltar Pound, which is on par with the British Pound Sterling.

Gibraltar taxation system is similar to that of the United Kingdom, however there are number of important differences. Key incentives include:

• No VAT or other sales taxes

• No capital gains tax

• No wealth tax

• No inheritance or gift taxes or estate duty

• Tax-efficient opportunities for international business

• Tax-efficient opportunities for high net worth individuals and relocated executives possessing specialist skills.

The most practical type of all offshore corporate entities in Gibraltar is the non-resident company. Until recently, there were two other specialised tax-efficient corporate structures available in Gibraltar: the exempt company and the qualifying company. However, following an agreement between the Gibraltar Government and the EU in 2005, it has been announced the end of these tax-exempt structures. Gibraltar dissolved its qualifying companies tax regime in January, 2005. Later in the month, it was announced the deadline for exempt companies. The currently existing Gibraltar exempt companies can keep their status until 31st December 2010. However, the applications for new exempt companies are no longer available from July, 2006.

After the change of legislation, Gibraltar non-resident company can be used as an excellent alternative to tax-exempt companies. Unlike exempt companies, non-resident companies are not subject to the same due diligence criteria and further are better for most tax planning purposes.

To enjoy the benefits a Gibraltar-registered company has to satisfy the following criteria:

• It must be owned, managed and controlled by non-residents of Gibraltar. Board meetings should be hold outside of Gibraltar;

• It must not trade or carry on business in Gibraltar;

• It must not remit income to Gibraltar.

If the above criteria are satisfied, a company will be considered as Gibraltar non-resident. It will not fall under the Gibraltar tax system by definition and will not be required to register for Gibraltar taxation purposes. Gibraltar corporate tax is demanded only in the case if company’s income is derived from or remitted to Gibraltar.

The non-resident company is cheaper than the previous exempt company as it is not subject to the fixed rate annual duty and other fees which were payable by said exempt companies. It should be noted however that it is generally less convenient to manage due to the requirement to appoint non-resident directors and maintain bank accounts outside of Gibraltar only. At the same time the non-resident company can operate its bank accounts in different offshore jurisdiction – like, Isle of Man, for example. It may also be practical to open the offshore bank account in a country situated closer to the place of the actual business of the company – or to the actual location of its beneficial owners.

Gibraltar companies are also mobile. They can be continued in many other respected offshore financial centres (including Malta, BVI and USA) and reciprocally, companies registered in these territories can be re-domiciled to Gibraltar.

Other factors affecting Gibraltar companies that are worthy of note are as follows:

1. Non-resident company must maintain local registered office with a local corporate secretary.

2. The standard incorporation time for Gibraltar companies is 4 to 5 days.

3. Gibraltar companies are not favourably structured for the provision of Bearer Shares.

4. The identity of the Directors and Shareholders of Gibraltar companies are required to be filed at the Gibraltar Companies Registrar although these can be Nominees.

5. Only one director and one shareholder (corporate or individual) are required to be appointed to a Gibraltar company.

6. A director can be of any nationality.

7. From 2001 a basic Balance Sheets must be filed annually although there is no requirement for them to be audited (unless it is not a usual “small company”).

Gibraltar non-resident company is well suited for many purposes, in particular:

Asset protection and confidentiality. Holding funds, stocks and shares and other investments in company accounts in Gibraltar since the capital invested and the interest earned will not be subject to tax. Owning a yacht or ship in the name of a company so that any profits earned from trading or chartering are not subject to tax. Buying property outside Gibraltar in the name of a company, developing it and reselling by selling the shares of the company, rather than the property itself, thus avoiding capital gains tax and other charges in the jurisdiction where the property is situated. Operating a business with a Gibraltar Company to avoid tax by invoicing so that payments received in Gibraltar are tax-free and re-invoicing to minimise tax liabilities in other jurisdictions. For the holding of family assets using trust structures.

Overall, by choosing Gibraltar as our tax haven we receive political and economic stability for our investment, tax free income and profits for offshore companies.