Qualifying Company

A company incorporated in Gibraltar or a registered branch of an overseas company is eligible to apply for Qualifying Company status subject to conditions which are largely the same as those applying to an exempt company (see above). A Qualifying Company pays tax on its profits at a rate agreed with the Financial and Development Secretary and stated on a certificate issued to the company. A qualifying company certificate is valid for 25 years from the date of issue.See above for details of the abolition of Qualifying Companies in January 2005.

According to the legislation, a Qualifying Company pays tax at a rate (between 1% and 35%) to be agreed between the company and the authorities. This type of 'designer' tax arrangement is intended to allow a company to slide under the bar of its home tax regime by paying just the amount of tax required to escape anti-avoidance rules. In practice most Qualifying Companies nowadays agree to pay between 5% and 10% tax, and the form has perhaps become more the standard Gibraltar low-tax offshore entity for significant trading companies.

A qualifying company must have minimum paid-up capital of G£1,000 and must deposit G£1,000 with the Accountant-General against future tax liabilities. Qualifying companies in the financial sector have to pay annual fees to the Financial Services Commission:

• Life assurance or collective investment scheme: G£2,000
• Insurance broker: G£3,000
• Investment manager: G£3,000
• Investment adviser: G£1,500

In effect this form broadens the concept of the exempt company and is particularly aimed at helping finance sector companies.

Qualifying companies need to submit accounts to the Gibraltar Commissioner of Income Tax, and normal income tax legislation applicable to resident companies is applied to calculate the assessable profits of the company. Although the qualifying company is subject to tax at a variable rate, as explained above, most of the current qualifying companies are taxed at 5%.

Branch of Overseas Company

If a foreign company intends to establish a branch or a permanent place of business in Gibraltar, it must within one month deposit with the Registrar of Companies a certified copy of its Memorandum and Articles of Association, a list and particulars of its directors and company secretary, and details of one or more resident individuals authorised to receive notices and communications. Once registered, the foreign company will be treated in the same way as a Gibraltarian company, and can take exempt or qualifying status if appropriate.

Non-Resident Company

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 is considered to be non-resident.

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

General Partnership

Partnerships are governed by the Partnership Act (as updated), which is based on the English Partnership Act 1890. Partners may be individuals or companies. In a general partnership, a partner's liability is unlimited. Under the Business Names Registration Ordinance, partnership names must be registered if they differ from the surnames of the partners. Partnership agreements and financial accounts do not have to be filed although a partnership that is resident in Gibraltar must submit accounts annually to the Commissioner of Income Tax. Partnerships are, of course, fiscally transparent. The minimum number of partners is two, and the maximum number 20, although this does not apply to professional firms.

Limited Partnership

Limited partnerships are governed by the Limited Partnership Act, which is based on the English Limited Partnership Act 1907. Partners may be individuals or companies. A limited partnership consists of one or more general partners with unlimited liability, and one or more limited partners, who are liable only to the extent of their capital contributions. A limited partner does not take part in the management of the partnership and is not entitled to dissolve the partnership by notice. A limited partnership must file a statement with the Registrar of Companies giving details of general and limited partners, and the amounts of capital contributed, in order to benefit from limitation of liability.

Sole Proprietorship

The business name of a sole trader, who has unlimited responsibility for his liabilities, must be registered with the Registrar of Companies, if it is other than the name of the sole trader. An annual return must be submitted to the Commissioner of Income Tax.

Trusts

The basic law of trusts is contained in the Gibraltar Trustee Act, which is virtually a copy of English trust legislation. Gibraltarian legislation affecting trusts also includes the Perpetuities and Accumulations Ordinance, the Trustee Investments Ordinance, the Bankruptcy Ordinance and the Trusts (Recognition) Ordinance. Appeal is to the Privy Council.

The Hague Convention has been implemented, but there are no provisions for the exclusion of foreign inheritance laws or for the nonrecogition of foreign judgements.

Under the Bankruptcy Ordinance there is statutory protection against creditors for asset protection trusts, providing the settlor is an individual, and was not insolvent at the time of the disposition, nor became so as a result of it.

Trust documents are in English, and there are no requirements for registration except that Asset Protection Trusts must be registered with the Registrar of Dispositions. There is no stamp duty. The normal perpetuity period of a Gibraltar trust is 100 years. There are no restrictions on the accumulation of income during the perpetuity period.

Foundations

The Gibraltar Private Foundation Ordinance 1999 was intended to establish a regime for foundations as 'vehicles for the holding of private assets endowed on the foundation for the benefit of identified persons or classes of persons', and was scheduled to become effective from 1st January 2000.

However, this legislation appears to have fallen by the wayside, leaving the situation with regard to Gibraltar foundations uncertain, to say the least.