GIBRALTAR
OFFSHORE INCORPORATION

EXEMPT COMPANIES

vs

NON RESIDENT COMPANIES

Gibraltar Exempt Company (now defunct)

A Gibraltar Exempt Company was a fairly popular offshore corporate vehicle until recently, when a phase-out of this type of company was announced by the Gibraltar Government.

The currently existing Gibraltar tax-exempt companies will keep their status until 31st December 2010. New exempt companies can still be registered, but only until 30th June 2006.

Therefore, while it is still technically possible to incorporate an exempt company in Gibraltar, we do not recommend choosing it, as its future is clearly limited. As soon as a comprehensive domestic tax reform is finalized in Gibraltar, an alternative vehicle will probably become available.

The above does not in any way affect the status and options available in regards the non-resident type company.

DETAILED FEATURES OF THE NON-RESIDENT COMPANY

GENERAL OVERVIEW

The Gibraltar non-resident company is the simplest and cheapest type of all offshore corporate entities available in Gibraltar.

The Gibraltar non-resident company has been long recognized as an excellent alternative to the Irish non-resident company which itself was very popular as offshore vehicle until 1999. As a matter of fact, many of the Irish non-resident companies have since been re-domiciled to Gibraltar. The Gibraltar non resident company is also in many ways similar to the pre-1988 non resident company of the UK.

A Gibraltar non resident company only pays a GBP 30 annual filing fee to the Registrar of Companies, payable at the time of filing of the Annual Return. Quite often the non-resident company is directed by the beneficial owners themselves, or by nonresident third-party directors appointed by the owners. The non-resident company will still need to maintain a registered office in Gibraltar and to have a Resident Secretary - these functions are provided by us at a competitive fee.

Gibraltar non-resident company is probably the most cost efficient offshore vehicle in Europe as of now. It also competes very well worldwide under the same criteria.

NON-RESIDENT COMPANY

The non-resident company is usually preferred by more relaxed clients whose personal or business circumstances allow them to be at relative ease from tax scrutiny. Such clients would often be individuals who spend most or all of their time outside their home jurisdiction – for instance, management consultants, software engineers or other professionals who tend to travel between various countries on short-term assignments. Just as well, a clients' business may be purely international and not particularly tied-up to his home country – like many internet businesses are. A non-resident company may also be sufficient for use by clients whose home country does not have the sophisticated “management and control” tax-rules – this is still the case in many countries of the world. And, finally, there is no need to use a sophisticated tax-exempt company when there is no tax planning purpose – for example, when the company is simply used as a personal asset-protection vehicle to passively hold some property or investments.

In all these cases the simpler, cheaper non-resident company could be a choice well made. The non-resident company is not subject to the fixed rate GBP 450 annual duty and other fees (notably, management fees) which are payable by the exempt company. Just in case, it can also be transformed into an exempt company if and when the circumstances require.

DETAILED FEATURES OF THE NON-RESIDENT COMPANY

To be a non-resident company, a Gibraltar-registered company has to satisfy the following criteria.

The company must be owned by persons, who are not resident in Gibraltar.

The company must be controlled (directed) by persons who are not resident in Gibraltar.

The company may not trade or carry on business in Gibraltar with residents of Gibraltar. It may however trade with other exempt or qualifying companies or non-resident persons.

The company must maintain its Company Register, Registered Office and Resident Secretary in Gibraltar.

The company must not remit income to Gibraltar.

The last requirement effectively means that in order to maintain its no-tax status a Gibraltar non-resident company should not hold any bank accounts in a Gibraltar-situated bank. This simply means that the non-resident company would usually operate its bank accounts in another country. Often it would be just a different offshore jurisdiction – like, Isle of Man, for example. It may also be practical to open the offshore bank account in a country situated closer to the place of the actual business of the company - or to the actual location of its beneficial owners.

If the above four criteria are satisfied, a Gibraltar company will be considered "non-resident". As such, it will not fall under the Gibraltar tax system by definition and will not be required to register for Gibraltar taxation purposes. This also means that, unlike the tax-exempt company, the non-resident company can in no circumstances be considered as a Gibraltar taxpayer.

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