E.2 Company Taxation
Non-Resident Controlled Companies, Exempt Companies and Qualifying Companies
Non Resident Controlled Companies
Non-resident owned and controlled companies incorporated in Gibraltar which do not trade, earn or remit income to Gibraltar are not liable to company taxation. Annual accounts must be submitted to the tax authorities, together with a letter of confirmation of the foregoing.
On the other hand, non-resident companies are taxable on income accruing in, derived from, or received in Gibraltar, as well as on income arising directly or indirectly through their agents, except that non-residents are not taxable in Gibraltar on:
An exempt company is one which is incorporated in Gibraltar and registered under the Companies (Taxation and Concessions) Ordinance 1983 (hereinafter cCTCO`). Such registration entitles the company and/or beneficial owner to be exempt from all taxes in Gibraltar as long as the following conditions are complied with:
The annual tax payable by the company is either GBP 225 (if it is ordinarily resident in Gibraltar) or GBP 200 (if it is not ordinarily resident).
A registered branch of an overseas incorporated company can also obtain exemption status under the CTCO provided it conforms with the above requirements and is liable to an annual tax at the rate of GBP 300.
No tax is charged on or payable on any dividend, interest, directores fee, annual payment or other sum payable by the company to any person who is not either a Gibraltarian or a resident of Gibraltar.
The only restriction on the appointment of directors or officers of an exempt company is that the company secretary or a director must be resident in Gibraltar. Other than this, meetings may be held inside or outside Gibraltar thus allowing companies to be managed and controlled from Gibraltar. In addition, an exempt company can maintain and administer office premises in Gibraltar to transact business with non-residents or similar companies.
Captive or general insurance companies carrying on business under
the Insurance Companies Ordinance would fall into this category.
There is a secrecy provision in the CTCO that prevents the disclosure of details concerning the beneficial owners of exempt and qualifying companies other than as stated above.
A qualifying company is one which is incorporated in Gibraltar or
is a registered branch of an overseas incorporated company and is
registered under the Income Tax (Qualifying Companies) Rules
1983. Such a company incorporated in Gibraltar may issue bearer
shares as long as these are deposited with a Gibraltar bank.
Taxation shall be charged on the profits of the company at the prescribed rates which shall be at a level between 0% and not more than 35%.
Taxation on any directorse fees or annual payments made by the qualifying company to a non-resident person other than a permitted individual is at the prescribed rate with the exception of loan interest which is exempt from taxation. Any dividends declared by the company are subject to tax at the same rate at which the company is liable to pay tax on profits.
As with exempt companies, (see previous pages) there are no restrictions on the holding of meetings or the servicing of office premises, but the company secretary or a director must likewise be a resident of Gibraltar. Stamp duty is not payable on any document relating to the issue, allotment, renunciation, transfer, assignment or disposition of shares in a qualifying company, but is payable at the rate of 50p per 100 or part thereof on the authorised share capital.
There are no capital taxes in Gibraltar. In particular there is
no estate duty, capital gains tax or wealth tax.
Gibraltar Resident Companies
Corporation Tax Accounting
The taxable base of a resident controlled company is as defined in Section E1 with the addition of any interest, dividends or emoluments of office accruing in, derived from or received in, any place other than Gibraltar after deduction of all expenses which are wholly and exclusively incurred in the production of income.
Rate of Corporation Tax
Taxation of incorporated entities is now officially termed Corporation Tax. The rate of tax charged on the adjusted profits of an incorporated entity is currently fixed at 35% (1997/1998).
Depreciation of Business Assets
In addition, the amount paid to the principal landlord in acquiring leasehold premises may be written off over the period of the lease, provided the lease is for 12 years or less.
Any disposal proceeds in excess of the tax written down value are liable to taxation at the standard rate as income of the company.
A balancing allowance may, on the other hand, be made if an asset is replaced because of obsolescence. This allowance is the difference between the written down value and any sum received from the sale of the asset or from an insurance contract. If the cost of the new asset is lower, this value is taken for the purposes of computing the balancing allowance.
Other significant allowable expenses
There is no capital gains tax legislation in Gibraltar and capital gains are not subject to taxation. However, any disposal proceeds in excess of the tax written down value of plant, machinery, fixtures and fittings, industrial buildings and ships are liable to taxation as income of the company.
Losses can be carried forward indefinitely to be offset against future profits arising from the same or similar trade, profession or vocation. There are no provisions for carrying back such losses.
Dividends Paid to Shareholders of Resident Companies
Taxation at the corporation tax rate of 35% must be deducted from all dividends paid. If the total tax so deducted in a year of assessment exceeds the tax chargeable on the companyes profits, that excess must be accounted for to the Commissioner. If the tax deducted from the dividends is less than the tax on the profits, the difference can be carried forward and set off against the first excess that arises on a future occasion.
Opening and Closing Year Rules
Due to the fact that business profits or losses are assessed on a preceding-year basis, special rules are invoked during the first three tax years after commencement and the last two tax years to cessation. (These rules do not apply to Qualifying companies which are assessed on an actual basis)
The tax-payer may opt for the second and third years to be
assessed on an actual basis if this proves more favourable.
Double Tax Relief
There are no double tax agreements in force between Gibraltar and
any other country. However, tax relief is available in respect of
UK income tax paid, deducted from or liable to be paid on income
which is similarly chargeable to Gibraltar tax, up to the lower
of Gibraltar tax or UK tax on the income.
This latter relief is, however, not available if the other
country does not grant a similar relief.
Standard rate tax (individual 30%, company 35%) must be deducted from any interest payments made by a company in respect of a mortgage, debenture or loan of a capital nature and accounted for to the Commissioner of Income Tax. The standard rate in this instance refers to the applicable rate of the recipient. There are provisions available for the waiver of this requirement where the loan is with a recognised bank or financial institution.
Service fees paid to non-residents Where any payment is due to a non-resident under an agreement for management or consultancy services or services of a similar nature, tax must be deducted at the standard rate (30%) if paid to an individual or at the corporation tax rate (35%) if paid to a company.
Parent-subsidiary rules and the Gibraltar 1992 Company
Effect has been given to European Community legislation regarding
dividends paid across borders between member states. Any
Gibraltar registered company holding more than 25% of the voting
capital of a company registered in another member state does not
pay corporation tax on any income derived from that company.
Similarly any dividends paid by a Gibraltar registered company to
a company in another member state holding more than 25% of the
Gibraltar companyes voting capital do not suffer withholding tax.
It should be noted that a Gibraltar 1992 company is generally taxed in a similar manner to a company ordinarily resident in Gibraltar, any income not exempted under the Parent- Subsidiary Rules being taxed at 35%. However the combination of the Parent- Subsidiary Rules and the concession on tax withheld from dividends paid out by a Gibraltar 1992 Company makes this a tax- efficient vehicle for remittance of profits to a non-EU parent.
The Development Aid Ordinance provides that licences may be granted for certain development projects. Applications for a Development Aid licence must be made to the Development Aid Advisory Committee which is headed by the Minister for Trade and Industry. If the application is successful and a Development Aid licence is granted, the Development Aid Advisory Committee will determine what portion (in percentage terms) of the total capital expenditure is available for tax relief. The percentage reflects the perceived economic and social benefits that the project will bring to Gibraltar.
The Development Aid licence entitles the developer to exemption from income tax in respect of any gains or profits from the relevant development until aggregate gains less losses first exceed the approved portion of capital expenditure on the project. The profits of the concern may also be distributed to the beneficial owners free of any taxes up to the amount granted under the licence. Also, interest received on loans made to any person for the purposes of a development project to which Development Aid applies is exempt from income tax, provided the terms and conditions of the loan have been approved by the Financial and Development Secretary.
In addition, occupiers of property relating to a project which
has been granted a Development Aid licence are automatically
entitled to relief on the rates payable.
Joint Venture Companies
Amounts invested in companies of which the Gibraltar Government is a member may, subject to such conditions as the Governor prescribes, be offset against assessable income.
Tax Deductible Property Zones
Expenditure which has been approved and certified by the Town Planner is fully allowable as a deduction in computing the claimants income chargeable to tax. This deduction is in addition to any deduction, relief or allowance which may be available in accordance with any other provision of the Income Tax Ordinance in respect of the same expenditure. The expenditure must have been incurred between 1 January 1996 to 31 December 1998 in respect of buildings situated in Main Street and between 1 July 1997 to 31 December 1998 in respect of buildings situated in
The expenditure must relate to painting, decorating, repairing and, in general, enhancing the appearance of the frontage of the premises.
For other tax incentives given to companies (see Section E.2 Exempt Companies, Qualifying Companies; sec E.3, High Net Worth Individuals, Relocated Executives Possessing Specialist Skills).