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Exempt Company

Gibraltar legislation concerning tax exempt companies has changed; please read important information on the changes in Gibraltar exempt company registration procedures. The purpose of this chapter is to provide you historical information on the Gibraltar exempt companies and their benefits.

Exempt company is the original company form in Gibraltar: the concept was introduced in 1967 in the Companies (Taxation and Concessions) Ordinance. Later on it was taken by other jurisdictions. Its significant characteristic is low set up cost, which makes it the most suitable form for property and investment holding, international trading and sales agencies, especially for trading between two high tax jurisdictions.
The Gibraltar tax exempt company is a limited company, which has obtained a certificate of tax exemption from the Gibraltar Financial and Development Secretary.
Only companies having a share capital can be exempt. The company is qualified as tax exempt if it does not carry business in Gibraltar and if its beneficial owner does not reside in Gibraltar. Still, the company can be managed and controlled from Gibraltar; it is possible to have board of directors resident in Gibraltar. This does not effect company’s tax-exempt status.

Fixed Annual Tax

For tax exempt companies there is fixed amount of year payment, with a 100% penalty for late payment. Fee should be paid on 1 April of each year.

· £225 if the company is ordinarily resident.
· £200 if the company is not ordinarily resident.
· £300 in the case of a registered branch of an overseas company.

Advantages of Gibraltar Exempt Company

The benefits deriving from having tax exempt status are that the company or branch will be exempt from the following:
· Corporate taxation on profits.
· Withholding taxes on interest, fees and other payments to non resident directors or to other persons, and dividends paid to its shareholders.
· Estate duty as it has been abolished in Gibraltar.
· Stamp duty on the transfer of shares.

Uses for tax exempt company

The tax offshore exempt company, due to its low administrative and set up costs, can be used for a wide range of trading activities or investment holding purposes. These are some of the possible applications:

Property holding

Usually is for the purpose of owning commercial or residential property for which income is to be derived by way of rent. The individual's asset then becomes the shares in the company situated in Gibraltar and not the property situated in another country. The ownership of the property in the country the property is situated is still the same company, and therefore normally no taxable event occurs here either.

Investment holding

Used for confidential investments in the shares of a company or in the Stock Market generally.
Exempt companies in Gibraltar are not subject to either capital gains or income tax. Investment holding companies can therefore accumulate income and capital gains without any erosion due to taxation.

International trading

Exempt companies may be used to carry out international trading between third parties in different countries (usually from high-tax territories). They then receive commissions, or alternatively re-invoice for goods or services. Profits earned by the company in such a way will not be subject to any taxation in Gibraltar.

Banking

Opening a confidential bank account also is included in our services. Bank accounts can be used for the purpose of everyday use or investment. Such accounts remain totally confidential and all interest earned is totally tax free, subject only to exchange control regulations there may be in the country in which it is intended to open the bank account.

Tax Exemption Certificate is issued for a period of 25 years. A company incorporated in Gibraltar, as well as registered branch of an overseas company, may apply for a Tax Exemption Certificate subject to the conditions set out below. Possession of such certificate will, in return for the payment of a fixed annual tax, exempt the company or branch from further taxation in Gibraltar.

Insurance

Gibraltar licensed insurance companies are able to take advantage of the single European Insurance Market by either:

· Establishing a branch operation in any EEA member state without having to be licensed there, or
· Insuring risks directly in any EEA member state.

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