Company formation:
Gibraltar

Gibraltar, stands as a significant bridge between Europe and Africa, offering strategic advantages for businesses seeking a European base.

Located at the southern tip of the Iberian Peninsula, Gibraltar boasts a rich history as a trade and finance hub. Over the years, it has cultivated a reputation for its robust legal framework, making it a preferred choice for many global entrepreneurs. The British Overseas Territory ensures a politically stable environment, complemented by its world-class infrastructure and strategic geographic position. For businesses, the combination of a transparent legal system, beneficial tax structures, and its EU proximity makes Gibraltar an attractive proposition.

Why opening a company in Gibraltar?

Gibraltar’s strategic location, coupled with its advantageous tax regime, makes it a prime destination for entrepreneurs, especially those looking to tap into European and African markets. Its government has developed policies that are entrepreneur-friendly, ensuring streamlined processes for setting up businesses. Moreover, Gibraltar’s fiscal options cater mainly to businesses involved in international trade, finance, and e-commerce, providing them with competitive advantages in the global market.

Advantages

Gibraltar presents numerous benefits for entrepreneurs and businesses seeking expansion or establishment in the European region:

Disadvantages

While Gibraltar offers numerous advantages, there are also challenges to consider:

Most popular sectors to set up a company in Gibraltar

Gibraltar is particularly favored for sectors like finance, e-commerce, and shipping, given its strategic location, robust infrastructure, and friendly tax policies. Moreover, its status as an international financial center attracts numerous banks, insurance companies, and investment firms.

Fiscal system in Gibraltar

Gibraltar boasts a straightforward and competitive fiscal system. It operates a low-tax regime, attracting numerous international businesses and entrepreneurs. The territory does not charge VAT, making it attractive for trade and commerce.

Taxes

Gibraltar operates a favorable tax regime that is particularly beneficial for businesses. The standard corporate tax rate stands at 10%, which is considerably lower than many European counterparts. Moreover, there’s no capital gains tax or VAT. It’s essential for businesses to understand that while Gibraltar is part of the European Union through the UK, it’s excluded from the Common Customs Tariff, the Common Agricultural Policy, and the requirement to levy Value Added Tax. This unique position provides substantial tax incentives for businesses operating within and through Gibraltar. Furthermore, Gibraltar has pursued a policy of signing Double Taxation Agreements with various countries, ensuring that businesses do not face double taxation on the same income.

VAT in Gibraltar

One of Gibraltar’s significant advantages is the absence of VAT. This makes products and services in the territory competitively priced, benefiting both businesses and consumers. It provides an edge, especially for traders and e-commerce businesses that deal with clients across the globe.

CFC Rules

Gibraltar does not have specific Controlled Foreign Company (CFC) rules. However, it’s crucial for businesses to stay updated with regulations as they may evolve.

Requirement

Local director

A company in Gibraltar is not strictly required to appoint a local director. However, having a resident director can offer some operational and tax advantages.

Local secretary

Yes, companies in Gibraltar are typically required to appoint a local company secretary, ensuring compliance with local regulations.

Annual return

Companies in Gibraltar are obligated to file an annual return, providing an overview of the company’s current officers and share structure.

Audited accounts

All companies in Gibraltar, with some exemptions for smaller companies, are required to have their accounts audited annually. This ensures transparency and compliance with financial regulations.

Company types in the United Kingdom

Private Company Limited by Shares (Ltd)

Private Companies Limited by Shares in Gibraltar are particularly attractive to small to medium-sized businesses and startups. This type of company offers a level of flexibility suitable for a wide range of business activities.

Target Audience: Entrepreneurs, startups, and SMEs find this structure advantageous due to its protective features, cost-effectiveness, and simplicity in operation. This structure is ideal for those looking to protect personal assets from business risks while enjoying a level of privacy in their operations.

Reasons for Choice: The primary reason for choosing a Private Limited Company is the limited liability of its shareholders. This means that personal finances are generally not at risk in the event of business insolvency. Furthermore, the Gibraltar jurisdiction offers non-resident companies tax advantages, provided that the company’s income isn’t derived from Gibraltar itself.

Advantages: Besides limited liability, these companies enjoy corporate tax benefits, no capital gains tax, no VAT, and no sales taxes. There is also no requirement for an annual general meeting if the company chooses so, and only one director and shareholder are required to establish the company. The ease of setting up, combined with a friendly corporate tax regime, provides a conducive environment for business growth and asset protection.

Public Limited Company (PLC)

Public Limited Companies in Gibraltar are structured to allow them to offer shares to the general public. A PLC can be listed or unlisted on the stock exchange, providing wide access to capital.

Target Audience: This type of incorporation is suitable for large businesses looking to raise significant capital. It’s also attractive to companies planning to list on a stock exchange or those that require more substantial investment than can be provided by a private company’s shareholders.

Reasons for Choice: Companies often choose to become PLCs because of their ability to raise funds from the public. This is a significant advantage for expanding business operations or funding large projects. Furthermore, being a PLC can enhance the company’s status and credibility in the eyes of the public and investors.

Advantages: PLCs have access to capital markets and can raise funds through the sale of shares or securities. This provides greater liquidity and financial flexibility. They also benefit from the same favorable tax regime as private companies, with no capital gains tax, no sales taxes, and no VAT. However, they are subject to stricter regulations and transparency requirements, which, while demanding, may increase investor confidence due to the higher levels of corporate governance.

Company Limited by Guarantee (Guarantee Co.)

A Company Limited by Guarantee in Gibraltar is often the preferred choice for non-profit organizations, charities, clubs, and associations. Instead of having a share capital, it has members who act as guarantors.

Target Audience: This corporate structure is primarily targeted at charitable organizations, social enterprises, clubs, and other entities that re-invest profits back into their operations. It’s for entities that require corporate status and limited liability but not capital investment from shareholders.

Reasons for Choice: The choice for a Company Limited by Guarantee often stems from the desire to secure limited liability without a share capital, as the guarantors offer a nominal amount (often just £1) that becomes due only if the company faces winding up. It’s also a choice for those seeking a corporate structure that supports non-profit objectives, allowing generated profits to be plowed back into operations or the community, rather than being distributed to members.

Advantages: The primary advantage is limited liability, protecting member’s personal assets. Despite not being set up for profit, it can still employ staff, enter contracts, and own property. These companies may be exempt from taxes if they have charitable status, although they benefit from Gibraltar’s advantageous tax regime if they do not qualify for exemptions. They also enjoy the reputation and structure of a corporate entity, aiding in fundraising and contract acquisition.

Unlimited Company (Unltd)

Unlimited Companies in Gibraltar are less common and are typically utilized for specific, strategic purposes given the fact that shareholders’ liabilities are not capped, contrary to other corporate forms.

Target Audience: This type of company can be suitable for specific professional practices, family businesses, or joint ventures where the parties seek shared, unlimited liability. It’s also used where corporate participants require or prefer full liability, either for reasons of commercial trust or for specific financial or strategic objectives.

Reasons for Choice: An Unlimited Company is often chosen for its privacy advantages. The absence of a liability limit can mean less stringent reporting requirements, offering a degree of confidentiality. Also, in certain strategic partnerships, all parties may prefer to have the company’s potential liabilities uncap, ensuring maximum commitment from all involved.

Advantages: The key advantage of an Unlimited Company is privacy, as there may be less obligation to publicly disclose financial information. This structure also allows for shared liability among members, which can be advantageous in partnerships where shared responsibility is required or desirable. However, the trade-off is the lack of a liability shield, meaning personal assets are potentially on the line if the business fails.

Limited Partnership (LP)

Limited Partnerships in Gibraltar are attractive vehicles for investors and entrepreneurs looking for flexible and tax-efficient structures, especially for joint ventures, investment funds, or estate planning purposes.

Target Audience: The LP structure is ideal for investors and entrepreneurs who want to participate in the management of the business without exposing themselves to personal liability beyond their contributed capital. It’s also popular among professionals, investment funds, and in estate planning and asset protection schemes.

Reasons for Choice: The primary reason for choosing an LP is the limited liability protection offered to limited partners, allowing them to risk only their investment in the partnership. This structure is also chosen for its tax transparency; income, losses, deductions, and credits flow through the partnership to the partners, who are then taxed individually.

Advantages: LPs offer a flexible management structure and the protection of limited liability for limited partners. They provide pass-through taxation, meaning the profits or losses of the business pass through to the individual partners, avoiding double taxation. Additionally, the formation and operational costs are typically lower than those of corporations. However, it’s important to note that the general partner(s) in an LP have unlimited liability.

Sole Proprietorship

A Sole Proprietorship in Gibraltar is the simplest form of business entity, owned and operated by one individual, where there is no legal distinction between the owner and the business.

Target Audience: This type of business structure is suitable for individual entrepreneurs who want to start a small business, freelance, or offer professional services. It’s best suited for low-risk businesses and for owners who want to test their business idea before possibly transitioning to a formal company.

Reasons for Choice: Entrepreneurs often choose a Sole Proprietorship because of its simplicity to set up and operate. There are fewer forms to file and fewer regulatory and compliance requirements. It also allows the owner to have complete control over the business operations.

Advantages: The main advantages include full control and decision-making power over the business, minimal registration requirements and operational costs, and all profits go directly to the owner. However, the main drawback is that the owner is personally liable for all the business’s debts, and their personal assets can be used to satisfy the business’s liabilities.

*Income from a sole proprietorship is subject to personal income tax rates, which vary based on the level of income and other factors.

Trust

In Gibraltar, a Trust is not a corporate entity but rather a legal arrangement set up by an individual (the settlor) through which assets are held by one party (the trustee) for the benefit of another (the beneficiary). Trusts are widely used for estate planning, asset protection, and privacy.

Target Audience: Trusts are suitable for individuals and families seeking to manage and secure assets for the future, often for estate planning, providing for dependents, or philanthropy. They are also used by corporations for employee benefit plans or to hold assets off-balance-sheet.

Reasons for Choice: The decision to establish a Trust is often driven by the desire for enhanced asset management, confidentiality, and the legal protection of assets. Trusts can offer robust protection from future liabilities, including creditors and legal judgments, as well as provide a means of controlling assets from beyond the grave.

Advantages: Trusts in Gibraltar offer numerous advantages, including asset protection, estate planning, and potentially favorable tax treatment. They provide a high degree of confidentiality and can be structured to suit very specific requirements and conditions set by the settlor. However, they require careful legal construction to ensure they are effective and compliant with regulatory standards.

*The tax implications for Trusts in Gibraltar are intricate and multifaceted. They hinge on various elements such as the residency of the settlor, the beneficiaries, the nature of the assets, and how they are managed. Trusts used for estate planning, asset protection, or charitable purposes might have different tax treatments.

Foundations

Foundations in Gibraltar are independent legal entities and are often used for similar purposes as trusts. They are particularly suitable for holding assets, estate planning, and charitable activities, especially where the founder requires greater control or for jurisdictions that do not recognize trust law.

Target Audience: Foundations are appealing to a wide range of individuals and entities, including family businesses, investors, and charitable organizers. They are ideal for those looking to preserve wealth across generations, protect assets, manage charitable activities, or maintain corporate control in private or family-owned businesses.

Reasons for Choice: Individuals or entities may choose to set up a foundation for various reasons, including a desire for the long-term management of assets, philanthropy, or the preservation of wealth for future generations. Foundations offer a means of consolidating ownership of assets from different jurisdictions under one legal entity.

Advantages: Foundations provide a high degree of control for the founder, robust asset protection, and potential tax advantages. They are particularly useful where trusts are not recognized or are less effective due to legal and tax considerations. Foundations in Gibraltar are also subject to specific regulatory standards, ensuring their activities meet certain legal requirements.

*Foundations in Gibraltar encounter their own unique tax scenarios. The specifics of taxation can vary widely depending on the structure of the foundation, its activities, the origin of its funds, and the residency status of its founder and beneficiaries. They might be subject to certain exemptions or specific tax obligations based on their operations and objectives.

Common Questions