an Offshore EU Jurisdiction
Gibraltar is a dependent territory of the United Kingdom , and is a promontory attached to southern Spain at the junction of the Atlantic Ocean and Mediterranean Sea .
GOVERNMENT Gibraltar is governed by a constitution that allows the local legislature, known as the House of Assembly, a large degree of autonomy over internal affairs. Elections to the House of Assembly take place every four years. The Governor, who is appointed by the Queen, has certain reserve powers which have never been used in relation to defence and foreign affairs.
Gibraltar has its own legal system and judicature with the final court of appeal being the Privy Council in London .
The laws of Gibraltar are based on common law principles derived from the United Kingdom .
Historically, the local economy has been supported by the presence of a large military garrison guarding the maritime route between the Atlantic and the Mediterranean . In recent years, however, with the development of more sophisticated weaponry and a sustained period of general peace, the importance of “The Rock” as a military garrison has diminished. In 1972, Gibraltar became a part of the European Union when it joined the (then) EEC with the United Kingdom . It is not a member state in its own right but, rather, a territory of the EU as a result of its relationship with the UK , which has always been and remains the member state responsible for its affairs, both within and outside the EU. Gibraltar is thus an EU territory and recognised as such in the Treaty of Rome and subsequent treaties. Hence, the modern economy of Gibraltar relies heavily on its highly experienced financial services industry, supported by a comprehensive regulatory framework which covers banking, insurance, financial services and trustee and company management services. There is a Financial Services Commission which supervises the activities of the local finance industry.
In addition to the banking, insurance and finance services, there is a thriving company management sector. There are three basic types of company that may be incorporated in Gibraltar :
– a company limited by shares;
– a company limited by guarantee (which may or may not have a share capital) and;
– an unlimited company.
The type used will depend on the objectives and circumstances of the shareholders. However, the most usual form is the private company limited by shares.
Gibraltar also has well established general trust laws. Asset Protection Trusts, designed for the preservation of family wealth, are a notable feature.
The official language of Gibraltar is English, although Spanish is of equal currency among the local population. There is a large pool of local trust companies, law firms, accounting firms and banks, and the financial planner can be comfortable that healthy competition for his business exists and professional advice is readily available on a comprehensive and timely basis.
Situated in Europe and a territory of the EU, Gibraltar presents many interesting planning, administrative opportunities for the inward investor into Europe and boasts a workforce equal in talent to any other similar centre in the world.
THE GIBRALTAR PRIVATE COMPANY LIMITED BY SHARES
A Gibraltar private company is one which, in its Articles of Association, restricts the right to transfer its shares (the directors must approve such transfers), prohibits any invitation to the public to subscribe for shares and limits the number of its members to fifty.
Formation of companies in Gibraltar is generally considered to be easy and user-friendly. A standard formation may take three days but it is possible, upon payment of an emergency fee, to have a company formed within 24 hours, providing the name chosen is available. There are restrictions on the use of certain “sensitive” words for which the permission of the Registrar of Companies is required. Generally, however, most names can be checked and approved very quickly online.
– All Gibraltar companies must have a registered office in Gibraltar ;
– The rule of “ultra vires” no longer applies;
– Directors need not be residents of Gibraltar but their residency may affect the tax status of the company;
– The directors are required to keep proper books of account which may require to be audited depending on whether the company is considered a small, medium or large company;
– A company registered in Gibraltar must make a return each year, stating the capital structure and the names and addresses of registered shareholders of the company (who need not be the beneficial owner) as well as its directors. Any mortgages or charges over company assets must also be recorded in the Annual Return;
– There is a statutory obligation on a company to maintain a register of shareholders at its registered office, available for inspection by members of the public, together with a copy of its last annual return;
– The company must hold an annual general meeting of shareholders each calendar year unless the shareholders unanimously adopt a resolution not to do so;
– Share capital may be denominated in any major currency;
– Share of no par value are not allowed;
– Bearer shares are permitted but their transferability is restricted;
– It is possible for the shareholders, by Special Resolution, to increase, decrease, consolidate and sub-divide the share capital. It is also possible for shares to be issued at a premium at whichever rate is considered appropriate and no capital duty is payable on such premium;
– Shares may be issued in different classes and series; and
– Shares may be issued unpaid, partially paid and/or fully paid.
Gibraltar companies, resident for tax purposes, are generally taxed at the rate of 35% on their profits wherever they arise. However, an interesting feature of the Gibraltar test of management and control is that a non-exempt company, the directors of which are non-residents of Gibraltar, may be prima facie deemed to be managed and controlled from outside Gibraltar, and therefore treated by the tax office as not being liable to taxation on its profits, notwithstanding that it does not possess an exemption certificate. It would normally be advisable, however, to obtain the prior view of the tax office and obtain an informal ruling to this effect before trading is commenced.
Companies beneficially owned by non-residents, and which do not trade with residents, may apply for tax-exempt status. An exempt company will not be subject to any Gibraltar taxes, notwithstanding the fact that it is managed and controlled from Gibraltar . A number of exempt companies have established a “bricks and mortar” presence in Gibraltar employing large numbers of local staff. Such companies are only permitted to trade with non-residents, and exempt status is therefore particularly appealing for trading companies or companies carrying out administrative functions such as invoicing, commission earning or acting as the principal on behalf of trading entities or agents.
Dividends and interest paid by an exempt company are not subject to Gibraltar withholding taxes. The annual Government charge for exempt status is £225.
Apart from confirmation that the company is beneficially owned by, and only trades with, non-residents, an applicant for exempt status must disclose details of the beneficial ownership of the company and will be accompanied by professional references on those owners. Changes of beneficial ownership must be notified in advance to, and approved by, the Finance Centre Director. The law requires that the Finance Centre Director keep this information confidential.
Companies incorporated outside Gibraltar may apply for tax-exempt status in Gibraltar , providing they meet the same information requirements as exempt companies i.e. they must provide Companies House with full details of directors, shareholders and persons authorised to accept service of legal process in Gibraltar .
SOME USES OF THE GIBRALTAR PRIVATE COMPANY AT THE TIME OF PRINTING
CHCL fiduciary group
Membership has enabled Gibraltar to establish itself as an important low/zero tax finance centre within the EU. Recent developments include the ability to enable institutions to “passport” financial services throughout the EU. This means that companies establishing themselves in Gibraltar by obtaining a licence from the Gibraltar Financial Services Commission may then sell their services throughout the EU without having to obtain separate licences in each jurisdiction. These services currently include insurance, banking and certain investment services.
On behalf of Gibraltar , the UK has ensured that the Gibraltar passporting regime will be accepted in all other member states, including Spain . All member states have recognised the independent competent authority of the Gibraltar regulators and agreed that licences (financial services “passports”) will be accepted in all other EU member states.
Parent / Subsidiary Directive
In 1991, Directive 90/435 on Parent and Subsidiary Companies was enacted into Gibraltar law as the Parent and Subsidiary Company Rules of the Income Tax Ordinance.
The Rules enable a subsidiary company incorporated within the EU to pay dividends free of all withholding taxes to a parent based in another member state of the EU. At the same time, the parent is exempted from taxation on the dividends received.
This is known as a “participation exemption” and, in order for the Gibraltar Rules to apply, the shares in the subsidiary undertaking must have been held for more than four months. In addition, the participation by the parent must exceed 25% of the voting share capital of the subsidiary. Such a holding is defined as a “relevant participation”.
As a result of the absence of capital duty on share premium and thin capitalisation rules in Gibraltar, it is possible for non EU companies to contribute (often substantial) assets to a Gibraltar company, whether exempt or not, on which a very low capital duty is paid and for the same assets to then be contributed onto another EU company with no further capital tax being paid, as the recipient country will consider capital tax to have been paid already within the EU.