Under the Companies
Ordinance 1930 all incorporated
companies in Gibraltar are required
to prepare accounts and have them
audited by independent accountants.
Auditors, who are
individuals, are appointed by the
directors of a company, must be
independent of the company, and
must be registered under the Auditors
Registration Ordinance.
The European Commission
announced in 2001 that it would
begin a review of Gibraltar's exempt
and qualifying company regimes,
but after Gibraltar sued the Commission
to prevent the review, the European
Court of Justice ruled in Gibraltar's
favour in April 2002.
However, in July,
2002, Gibraltar's Chief Minister,
Peter Caruana announced the territory's
new corporate taxation policy (which
was to have been applied from July
2003, but fell by the wayside),
which included the abolition of
the existing corporate forms which
allowed zero taxation, the Exempt
and Qualifying companies.
In March, 2003, the
EU's Council of Finance Ministers
confirmed that the reforms did not
constitute harmful tax measures.
However, in April, 2004, the Commission
argued that the new rules would
give companies domiciled in Gibraltar
an unfair advantage over their counterparts
in the UK, under a principle known
as 'regional selectivity'. The Commission
also took issue with the fact that
since the taxes were to be based
on payroll and the occupation of
business premises, offshore companies
registered in Gibraltar would be
unlikely to incur any tax liability.
The EC therefore rejected the reforms,
effectively suggesting that for
taxation purposes, Gibraltar should
be considered part of the United
Kingdom.
Chief Minister, Peter
Caruana slammed the EC for suggesting
that the jurisdiction was fiscally
part of the United Kingdom, pointing
to its 1969 constitution, which
gives the territory fiscal autonomy.
Gibraltar dissolved
its qualifying companies tax regime
in January, 2005, as negotiations
continued in Brussels. In a move
that cost the Gibraltar government
an estimated GIP1.5 million in annual
tax revenues, the remaining qualifying
companies, of which there were about
80, switched to the ‘exempt’ companies
regime. “Each qualifying company
has been dealt with on an individual
basis and alternative arrangements
made,” said the government.
Later in the month,
it was announced that Gibraltar
had been given until 2010 (2007
for new companies) to phase out
its exempt company tax regime after
the European Commission ruled that
the scheme violated EU state aid
rules.
The government of
Gibraltar welcomed the European
Commission's approval of the Exempt
Company Status Agreement as an acceptable
compromise.
Then in June 2007,
further major changes to Gibraltar's
corporate tax regime were announced
in Peter Caruana's Budget speech.
Mr Caruana explained
that:
"The Tax Exempt
Company has been the backbone of
the development and growth of both
our finance centre and the online
gambling industry, and thus of a
very significant part of our economy.
It continues to underpin thousands
of jobs in Gibraltar and large amounts
of Government revenue."
"In order to
comply with EU law we must phase
out the tax exempt company in 2010.
However, in order to sustain our
successful economic model we must
retain a commitment to a very competitive
corporate tax model."
"Since it is
no longer legally acceptable to
have one tax model for ‘local’
companies and a different one for
‘foreign’ companies
it is necessary to have a low tax
system for all companies because
without a low tax system for overseas
companies they will leave, and our
economy will suffer hugely. Thousands
of jobs would be lost, as well as
significant Government revenue.
I have therefore already said, and
I reaffirm now, that the Gibraltar
Government is irrevocably committed
to the principle of ‘low tax’
for our economic operators."
"By mid-2010
the Government will have introduced
an across the board flat, low corporate
tax rate. This will most probably
be set at 10%, but in any event
not higher than 12%. This will be
similar to arrangements that already
exist in Ireland, Cyprus, Malta
and other EU Countries."
Caruana explained
that he envisaged a further cut
in the rate next year, before moving
to the rate of between 10% and 12%
from 2010, adding that: "My
strong preference will favour the
bottom end of that range."
In December 2008,
the European Court of First Instance
ruled in favour of Gibraltar, stating
that the European Commission was
wrong to argue that the tax reforms
proposed in 2002/03 were in breach
of state aid rules, and effectively
giving the jurisdiction licence
to set its own tax rules.
The Court dismissed
the EU Commission’s case,
and stated that although the UK
is representative of Gibraltar,
Gibraltar does, however, have fiscal
autonomy from the UK, and therefore
can introduce its own individual
tax system (the aforementioned 10-12%
corporation tax).
In a statement to
the press at the time, Peter Caruana,
Gibraltar's Chief Minister, said
he was "overjoyed" by
the outcome.
"The Court has
found in Gibraltar’s favour
and has accepted our arguments on
each and every issue, relating both
to regional selectivity and material
selectivity, and has ordered the
commission to pay the Gibraltar
government’s legal costs.”
“This needs
to be clearly understood. Had Gibraltar
lost the Regional Selectivity case,
we would have had to adopt the UK’s
company tax system and company tax
rates. That would result in the
bulk, if not all, of the finance
centre and gambling companies leaving
Gibraltar. That would have meant
the loss of thousands of jobs throughout
our economy, and a very large fall
in government revenue. This in turn
would have rendered unsustainable
our current level of public services
and public sector employment.”
“This is a
huge and vital victory for Gibraltar.
A threat to our economic, social,
and thus political well-being, has,
once again, been successfully seen
off. I believe that the economy
of Gibraltar now has the opportunity
to forge ahead to the next level
of growth and development, to fulfil
its great potential and thus to
guarantee that we shall bequeath
economic and social prosperity and
stability to our children, grand
children and future generations.
“
”Once again,
this small community has demonstrated
that, when right is on our side,
and we hold our nerve and we behave
reasonably and intelligently, we
have the ability and determination
to defend our rights and interests
as a people, even when they are
challenged by more powerful entities
and forces.”
”On behalf
of the people of Gibraltar, I wish
to thank all those companies in
the financial services and gambling
sectors and other sectors of the
economy that have had the faith
and confidence in us to stay with
Gibraltar during these difficult
and uncertain times.”
“The threat
that Gibraltar has faced cannot
be understated, nor therefore, can
the importance of this victory to
Gibraltar and its people and our
future.”
In his 2009 budget
speech, Caruana confirmed that a
10% corporate tax would apply in
the jurisdiction from January 1,
2011, and that the Exempt Company
regime would be rescinded by the
end of 2010.
"It is essential
for Gibraltar’s socio-economic
prosperity that our corporate tax
rate should be as competitive as
is compatible with government’s
revenue needs. Without this there
would be large scale loss of economic
activity and job losses,”
he told the House.
“Existing corporate
taxpayers will be huge windfall
beneficiaries of the need to eliminate
tax exempt status, and its replacement
with a low rate for all companies.
The new rate will be 10%. Energy
and utility providers will pay a
10% surcharge and will thus suffer
a rate of 20%. These will include
electricity, fuel, telephone service
and water providers,” he explained.
Caruana reassured
that the government would allow
existing Exempt Status Companies
to keep their tax benefits until
'the last possible minute': "Most
Exempt Status companies currently
hold exemption certificates that
are valid, subject to repeal of
the legislation, for 25 years. The
Government therefore feels honour
bound not to remove the tax benefit
provided by the exemption certificate
until the last possible moment.
That will therefore occur at midnight
on December 31, 2010, by means of
a repeal of the Companies (Taxation
and Concessions) Act."
The remainder of this
page deals with the corporate
regime prior to the aforementioned
changes.
Gibraltar Private Company
Limited by Shares
Gibraltar Limited Companies
are incorporated under the
Gibraltar Companies Ordinance
1930 which is based on the
English Companies Act 1929.
The basic rules are as follows:
- A private company limited
by shares is required
to have at least two members,
who can be individuals
or companies; one shareholder
can be a nominee company
holding a share on trust
for the other shareholder;
the maximum number of
members is 50; the Memorandum
and Articles of Incorporation
state that the company
is private, restrict the
transfer of shares, and
prohibit public offerings
of the shares;
- Annual returns must
be made to the Registrar,
and details of the shareholders
and capital structure
are held on the public
files;
- Only one director is
required; secretaries
are not mandatory, and
they may be corporate;
- There must be a registered
office in Gibraltar where
the statutory books are
kept;
- There is no requirement
for accounts to be filed;
tax-resident companies
however have to submit
accounts to the tax authorities;
- A Gibraltar company
can be incorporated within
7 working days and ready
made companies are available
for immediate use.
- There is a 0.5% duty
on authorised share capital
(minimum duty GIP10);
- There is an annual tax
of GIP225 (at the time
of writing) payable by
a limited company.
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Gibraltar Company Limited by
Guarantee
The Company Limited by Guarantee,
and its sibling, the Company Limited
by Guarantee and having Shares,
have the nature of mutual companies,
and as such have normally been
used essentially for charitable
and non-profit purposes.
Lately they have come to be
used sometimes for private family
foundations in place of discretionary
trusts. In addition, they have
been used for proprietary and
members' clubs in the international
leisure and timeshare resort industry,
where they meet all the requirements
of modern EU (and Spanish) law.
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Gibraltar Exempt Private Company
The Exempt Company status
ceased from January 1, 2011 -
See above for changes to the Exempt
Company regime
It was Gibraltar that originated
the exempt company form, which
has been widely copied by other
jurisdictions (see above for details
of negotiations with the EC over
the future of exempt companies).
The low set up cost made them
ideal for property and investment
holding, international trading
and sales agencies, particularly
if trade was being carried on
between two high tax jurisdictions.
The exempt company was the
main offshore vehicle in Gibraltar.
An exempt company could be
either incorporated in Gibraltar
under the Gibraltar Companies
Ordinance, or incorporated
outside Gibraltar but registered
as an overseas company under
Part IX of the Companies Ordinance.
If a company obtained exempt
status, the company was be
exempt from corporate tax
and stamp duty (save in certain
specific instances) in Gibraltar
under the Companies (Taxation
and Concessions Ordinance)
1984 (as amended).
Shares in an exempt company
could be transmitted free
of estate and stamp duty on
the death of the shareholder.
An exempt company paid a flat
rate annual fee regardless
of profits. A company incorporated
in Gibraltar which was ordinarily
resident paid a flat rate
fee of GIP225 per annum, whilst
a non-resident company incorporated
outside Gibraltar paid a flat
rate fee of GIP200. Fees payable
to non-resident directors
and dividends paid to its
shareholders were not subject
to a withholding tax. For
a company to obtain and retain
its tax exempt status, it
had to fulfil the following
conditions:
-
Its paid-up
share capital at all
times could not be less
than GIP100 or the foreign
currency equivalent
thereof;
-
No Gibraltarian
or resident of Gibraltar
could have any beneficial
interest in the shares
of the exempt company
except as a shareholder
in a public company
which was registered
in a country other than
Gibraltar;
-
If the
company was incorporated
in Gibraltar, it had
to keep its register
of shares within Gibraltar
and have a provision
in its Memorandum and
Articles of Association
to the effect that its
register would not be
kept elsewhere. If the
company was incorporated
outside Gibraltar, it
had to keep a true copy
of its register of members
within Gibraltar;
-
The company
could not, without the
approval of the Financial
and Development Secretary,
carry on any trade or
business in Gibraltar
or with Gibraltarians
or residents of Gibraltar
except where these were
other exempt companies.
An exempt company could,
however, manage and
control its business
from Gibraltar and have
an office and staff
locally; and
-
Its auditors
had to be approved by
the Government of Gibraltar,
who had to confirm annually
that the company was
not in breach of the
provisions of the Companies
(Taxation and Concessions)
Ordinance.
The privacy of exempt companies
was protected by Section 14
of the Companies (Taxation and
Concessions) Ordinance 1984,
which states:
14(1). ... the Financial and
Development Secretary and every
person having an official duty
in the administration of this
Ordinance shall regard and deal
with all documents, information
and declarations relating to
the identity of the beneficial
owners or persons interseted
in any shares, or bearer certificates
or coupons issued under the
provisions of this Ordinance
as secret and confidential.
Disclosure is permitted for
the purposes of any criminal
or civil proceedings in which
such document, declaration,
matter or thing is material
(Section 14(3)).
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Gibraltar Public Company Limited
by Shares
A public company is defined
as one which is not a private
company and which has at the end
of its name the words 'Public
Limited Company' or 'P.L.C.'.
A public company must have a minimum
of two members.
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The Gibraltar 1992 Company
The Gibraltar 1992 Company was
introduced to implement the EU
Parent/Subsidiary Directive 90/435.
See Direct
Corporate Taxation for
details of the considerable tax
advantages accruing to a 1992
Company. The 1992 Company is a
normal private company limited
by shares which conforms with
the following conditions:
-
the company's main objective
must be to invest in holdings
in other companies incorporated
in or outside Gibraltar amounting
in each case to a minimum
of 5% of the voting share
capital;
-
at least 51% of the company's
annual income should be derived
from such investments;
-
the company must have
business premises in Gibraltar
of at least 400 sq.ft and
employ a minimum of two employees;
-
persons who are normally
resident in Gibraltar cannot
own shares in the company;
-
the company must maintain
a satisfactory debt to equity
ratio (not defined).
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Gibraltar The
Qualifying Company
See above for details regarding
the abolition of Qualifying Companies
in January 2005.
A company incorporated in Gibraltar
or a registered branch of an overseas
company was eligible to apply
for Qualifying Company status
subject to conditions which were
largely the same as those applying
to an exempt company (see above).
A Qualifying Company paid tax
on its profits at a rate agreed
with the Financial and Development
Secretary and stated on a certificate
issued to the company. A qualifying
company certificate was valid
for 25 years from the date of
issue.See above for details of
the abolition of Qualifying Companies
in January 2005.
According to the legislation,
a Qualifying Company paid tax
at a rate (between 1% and 35%)
agreed between the company and
the authorities. This type of
'designer' tax arrangement was
intended to allow a company to
slide under the bar of its home
tax regime by paying just the
amount of tax required to escape
anti-avoidance rules. In practice
most Qualifying Companies agreed
to pay between 5% and 10% tax,
and the form became more the standard
Gibraltar low-tax offshore entity
for significant trading companies.
A qualifying company had to
have a minimum paid-up capital
of GIP1,000 and deposit GIP1,000
with the Accountant-General against
future tax liabilities. Qualifying
companies in the financial sector
had to pay annual fees to the
Financial Services Commission:
- Life assurance or collective
investment scheme: GIP2,000
- Insurance broker: GIP3,000
- Investment manager: GIP3,000
- Investment adviser: GIP1,500
In effect this form broadened
the concept of the exempt company
and was particularly aimed at
helping finance sector companies.
See Offshore
Legal and Tax Regimes
for further details.
Qualifying companies needed
to submit accounts to the Gibraltar
Commissioner of Income Tax, and
normal income tax legislation
applicable to resident companies
was applied to calculate the assessable
profits of the company. Although
the qualifying company was subject
to tax at a variable rate, as
explained above, most of the current
qualifying companies were taxed
at 5%.
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Gibraltar Branch
of Overseas Company
If a foreign company intends
to establish a branch or a permanent
place of business in Gibraltar,
it must within one month deposit
with the Registrar of Companies
a certified copy of its Memorandum
and Articles of Association, a
list and particulars of its directors
and company secretary, and details
of one or more resident individuals
authorised to receive notices
and communications. Once registered,
the foreign company will be treated
in the same way as a Gibraltarian
company, and can take exempt or
qualifying status if appropriate.
The annual fee for a branch registration
at the time of writing is GIP300.
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Gibraltar Non-Resident
Company
A company which is incorporated
in Gibraltar (whether or not exempt),
owned by non-residents of Gibraltar
and managed and controlled by
directors who reside and hold
board meetings outside Gibraltar
is considered to be non-resident.
A non-resident company pays
Gibraltar corporation tax only
on its income derived from or
remitted to Gibraltar.
A non-resident company pays
an annual tax at the time of writing
of GIP200.
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Gibraltar General
Partnership
Partnerships are governed by
the Partnership Act (as updated),
which is based on the English
Partnership Act 1890. Partners
may be individuals or companies.
In a general partnership, a partner's
liability is unlimited. Under
the Business Names Registration
Ordinance, partnership names must
be registered if they differ from
the surnames of the partners.
Partnership agreements and financial
accounts do not have to be filed
although a partnership that is
resident in Gibraltar must submit
accounts annually to the Commissioner
of Income Tax. Partnerships are,
of course, fiscally transparent.
The minimum number of partners
is two, and the maximum number
20, although this does not apply
to professional firms.
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Gibraltar Limited
Partnership
Limited partnerships are governed
by the Limited Partnership Act,
which is based on the English
Limited Partnership Act 1907.
Partners may be individuals or
companies. A limited partnership
consists of one or more general
partners with unlimited liability,
and one or more limited partners,
who are liable only to the extent
of their capital contributions.
A limited partner does not take
part in the management of the
partnership and is not entitled
to dissolve the partnership by
notice. A limited partnership
must file a statement with the
Registrar of Companies giving
details of general and limited
partners, and the amounts of capital
contributed, in order to benefit
from limitation of liability.
A limited partnership must have
its principal place of business
in Gibraltar.
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Gibraltar Sole
Proprietorship
The business name of a sole
trader, who has unlimited responsibility
for his liabilities, must be registered
with the Registrar of Companies,
if it is other than the name of
the sole trader. An annual return
must be submitted to the Commissioner
of Income Tax.
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Gibraltar Trusts
The basic law of trusts is contained
in the Gibraltar Trustee Act,
which is virtually a copy of English
trust legislation. Gibraltarian
legislation affecting trusts also
includes the Perpetuities and
Accumulations Ordinance, the Trustee
Investments Ordinance, the Bankruptcy
Ordinance and the Trusts (Recognition)
Ordinance. Appeal is to the Privy
Council.
The Hague Convention has been
implemented, but there are no
provisions for the exclusion of
foreign inheritance laws or for
the nonrecogition of foreign judgements.
Under the Bankruptcy Ordinance
there is statutory protection
against creditors for asset protection
trusts, providing the settlor
is an individual, and was not
insolvent at the time of the disposition,
nor became so as a result of it.
Trust documents are in English,
and there are no requirements
for registration except that Asset
Protection Trusts must be registered
with the Registrar of Dispositions.
There is no stamp duty. The normal
perpetuity period of a Gibraltar
trust is 100 years. There are
no restrictions on the accumulation
of income during the perpetuity
period.
Legislation has not yet been
introduced to provide for purpose
trusts.
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Gibraltar
Foundations
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