Company Formation Gibraltar

Offshore Company Formation: Company Formation Gibraltar

Gibraltar (pronounced) is a self-governing British overseas territory located on the southern end of the Iberian Peninsula and Europe at the entrance of the Mediterranean overlooking the Strait of Gibraltar. The territory covers 6.843 square kilometres (2.642 sq mi) and shares a land border with Spain to the north. Gibraltar has historically been an important base for the British Armed Forces and is the site of a Royal Navy base.

A one-year investigation and analysis of 235 countries and territories by Jane’s Country Risk listed Gibraltar as the top stable and prosperous British Territory, in 5th position overall.[3] The sovereignty of Gibraltar has been a major bone of contention in Anglo-Spanish relations. Gibraltar was ceded by Spain to the Crown of Great Britain in perpetuity, under the 1713 Treaty of Utrecht, though Spain asserts a claim to the territory and seeks its return. The overwhelming majority of Gibraltarians strongly oppose this, along with any proposal of shared sovereignty. The British government has stated that it is committed to respecting the Gibraltarians’ wishes.

The name Gibraltar is derived from the Arabic name Jabal al-Tāriq (جبل طارق), meaning “mountain of Tariq”. It refers to the geological formation, the Rock of Gibraltar, which in turn was named after the Berber Umayyad general Tariq ibn-Ziyad who led the initial incursion into Iberia in advance of the main Moorish force in 711 under the command of Umayyad Caliph Al-Walid I. Earlier, it was known as Mons Calpe, one of the Pillars of Hercules. Today, Gibraltar is known colloquially as Gib or The Rock.

Gibraltar Scope Of Corporation Tax

Corporation (income) tax was levied under the Companies (Taxation and Concessions) Ordinance. Ordinarily resident companies pay income tax on their worldwide income. As applied to a company, ‘ordinarily resident’ means:

  • a company the management and control of whose business is exercised in Gibraltar; or
  • a company which carries on business in Gibraltar and the management and control of which is exercised outside Gibraltar by persons ordinarily resident there within the meaning of the Ordinance; or
  • in the case of an investment company (ie whose income mainly arises other than from the gains or profits derived from any trade, business or employment), which is domiciled anywhere outside Gibraltar, where control of the company, through shares or voting powers, is exercised by persons ordinarily resident in Gibraltar.

A non-resident company was defined as: 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.

A non-resident company paid Gibraltar corporation tax only on its income derived from or remitted to Gibraltar.

Gibraltar Corporate Tax Rates

Taxable profits were charged with corporation tax at 35%. From the 1999/2000 tax year there was a scale of lower rates between 20% and 35% for companies with profits between £35,000 or less and £105,000, providing 80% of turnover is from trading activity.

Gibraltar Calculation of Taxable Base

For companies, corporation tax was normally assessed for income arising in the previous fiscal year.

Allowable expenditure needs to be incurred ‘wholly and exclusively’ for the business; however, mixed private/company expenses can often be apportioned.

The rules for depreciation of business assets were as follows:

  • for fixtures and fittings, plant and machinery acquired after 30/6/87: 15% on the reducing balance;
  • ditto, acquired before 30/6/87: 25% on the reducing balance;
  • office machinery: 20% on the reducing balance;
  • industrial buildings: 4% of cost per annum;
  • ships: 10% of cost per annum;
  • capital payments for leasehold premises: over the period of the lease, up to 12 years maximum.

Disposal proceeds above w.d.v. count as taxable income, but balancing allowances are available if new, cheaper equipment replaces obsolete equipment.

Although Gibraltar has no double tax treaties, relief is given in respect of UK tax paid on income also chargeable in Gibraltar, and to a lesser extent on similar Commonwealth tax. By concession, other foreign tax paid on remitted income is allowed as a deduction.

Under the EU Parent/Subsidiary Directive 90/435, a Gibraltar company holding more than 25% of the shares of another normally-taxable EU company does not pay tax on dividends received; similarly a tax-paying Gibraltar company holding more than 25% of the shares of another EU company does not have to deduct withholding tax on dividends paid to that other company. Qualifying and tax-exempt companies are not covered by this rule.

Companies in receipt of Development Aid, or active in Tax-Deductible Property Zones may be entitled to further allowances.

In the 2005 budget, Gibraltar extended unilateral tax relief provisions to all countries.

There is a gaming tax set at 3%; in the 2005 budget the cap on the gaming tax was increased to £425,000 with the minimum payable remaining at 20% of the cap figure.

Gibraltar Taxation of Trusts

Trust income is exempt from tax under the Income Tax (Allowances, Deductions and Exemptions) Rules 1992 if:

  • the trust is created by or on behalf of a non-resident person; and
  • the income either accrues or is derived outside Gibraltar, or in the case of income received by a trust would, if it had been received directly by the beneficiary, not be liable to tax under the Income Tax Ordinance; and
  • except in the case of a trust created before 1/7/83, the terms of the trust expressly exclude residents of Gibraltar (as beneficiaries).

NB: Interest income received from a Gibraltar bank is normally exempt from taxation.

Gibraltar Filing Requirements and Payment of Tax

Assessments are issued by the Commissioner of Income Tax; 50% of the tax payable is due within three months of the issue of the assessment, and the remainder within six months, or by 30th April in the year of assessment, whichever is the later.

Gibraltar Withholding Tax

Resident companies must generally deduct withholding tax at the standard rate from dividends paid out; if the tax deducted is more than the company’s mainstream tax bill, the excess is payable; if the tax deducted is less than the company’s mainstream tax bill, the difference is carried forward and set off against any future excess.

In Gibraltar’s 2005 budget, the following changes were made:

  • Taxation was abolished on dividends paid by one Gibraltar Company to another Gibraltar Company;
  • Taxation was abolished on dividends and interest paid by a Company to a non resident recipient;
  • The requirement to withold tax from dividends in accordance with Section 39 of the Income Tax Ordinance was abolished.

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