Gibraltar: Import/Export Trading Company Package

Last Updated: 20 September 2011
Article by Jonathan Stagnetto

RE-BILLING PROCEDURES FOR IMPORTERS AND EXPORTERS

Re-Billing Procedure For Exporters

Suppose Spanish exporter (a) sells to Hong Kong importer (b) at $100. And suppose the exporter is running a very profitable business. His taxes in Spain will be very high.

In order to reduce the amount he would need to pay in taxes, the exporter could make the profit in Gibraltar rather than in Spain. The system he would use would work as follows :

Instead of billing directly to Hong Kong at $100, he would bill to a Gibraltar Company at $90. This will reduce his income in Spain by $10 or 10% of his Gross Sales. Very few companies make a profit equal to 10% of Sales. So that under-billing will probably wipe out his profit entirely. Of course the amount billed to Gibraltar can be anything: $90, $95, or whatever the figure required to result in Zero tax payable in Spain.

The Gibraltar Company then bills to Hong Kong at the $100, originally contracted. So the Hong Kong company gets its goods at the agreed price. The Gibraltar Company then makes 10% "profit" but the cost of running and administering the Gibraltar Company must be taken into account by the Spanish Company. If Spanish tax is 40% and the management of the Gibraltar Company also costs 40% of the $10 profit siphoned off to Gibraltar, then the exercise is fruitless. So all this has to be assessed at the beginning.

Re-Billing Procedure For Importers

A Spanish importer would do the exact opposite. He contracts to purchase something from Hong Kong for $100 which he intends to sell at $120, for example.

The Hong Kong contact would then bill the importer's Gibraltar Company at the agreed $100. The Gibraltar Company then bills the importer at $110, thereby siphoning off 50% of his gross profit.

This system, however, is not as simple as the Export situation for the following reason:

If the Spanish importer imports goods at $110 instead of $100, then he will have to pay import duty on $110 instead of $100.

If the duty rate is very low, say 1%, then he would only have to pay 1% extra duty on $10, whereas he may have to pay 40% tax on $10 profit. But suppose that the import duty is 40%, then he will have to pay 40% on the $110, instead of on just $100, and another 40% on his profits.

Ultimately, if the import duty plus the cost of managing the Gibraltar Company, equals the profits tax rate, then there is no real tax "saving". Indeed, on the contrary, there is a disadvantage because the Spanish importer has to pay duty immediately, whereas he only has to pay profits tax at year end. Therefore, a careful analysis of the pros and cons is essential from the outset.

IMPORT/EXPORT TRADING COMPANY PACKAGE

This package is perfectly suited to Import/Export Trading Companies set-up outside Gibraltar that wish to fine-tune their tax affairs. The package is structured so that the business can take full advantage of our know-how in this field, and make use of the banking facilities on offer in Gibraltar to secure its management and control in Gibraltar.

The Package consists of:

  1. A Gibraltar Company

    Capital duty is payable at the rate of 0.5% of the authorised share capital. The minimum duty payable on incorporation is £10. For this reason, a Ready-Made/Shelf Company, would be incorporated with a minimum Nominal Share Capital of £100, or up to £2,000. It is possible to increase the authorised share capital of the company, or to incorporate a new company with any particular share capital. The company would have in its Memorandum of Association, a primary object clause which would emphasize that it is to act as a Generally Empowered Trading Company.
  2. One Nominee Shareholder

    There is a statutory requirement for a minimum of one shareholder and for the details of shareholders to be put on public record. It goes without saying, that a watertight Import/Export Trading Company, should ensure that management and control of this Company should be fixed in Gibraltar. For this reason, we would recommend that you employ the services of our Nominee Shareholder so that management and control can be seen to be established in Gibraltar.
  3. A Nominee Shareholders Agreement

    Upon taking on the duties of Nominee Shareholder, we would hold your shares on trust in the form of a Nominee Shareholders Agreement or Trust Deed. Our Nominee Shareholders Agreement would recognise your Beneficial Ownership of the Company and secure your anonymity by ensuring that your details are not put on public record at the Company's Registry. The basic concept for our Nominee Shareholders Agreement is the same as for any Trust, and it performs precisely the same function.
  4. One Corporate Director

    There is a statutory requirement for a minimum of one director, but a Company Secretary must also be appointed who cannot also be the Sole Director of the company. The details of Directors also appear on public record.

    Although it is true that Directorship does not necessarily indicate Ownership, by acting as a Director of your own company, you would not be in a position to establish the management and control of your operation in Gibraltar. Therefore, upon opting for our Import/Export Trading Company Package, we would recommend the appointment of our Corporate Director so that management and control can be seen to be established in Gibraltar. Upon applying for our services as our Corporate Director we would provide you with a signed and undated Directors' Letter of Resignation, so that you may always feel free to remove our Directors if you are displeased with our service, or if you would prefer to transfer the management of your Company to a different Company Manager. In addition to the above, we would ask you, as Beneficial Owner(s) of the Import/Export Trading Company, to sign a Letter of Indemnity indemnifying our Corporate Director against all liabilities incurred by us by virtue of being so registered.
  5. The Opening Of A Bank Account

    Upon opting for our Import/Export Trading Package, you may take advantage of our experience regarding the different types of accounts and services offered by banks in Gibraltar. Actual management of your corporate account as Corporate Directors would consist of the following:

    • The transferral of funds from one account to another.
    • The balancing of accounts.
    • Establishing Standing Order Payments.
    • Any other service involved with the maintenance or operation of the bank account.

A corporate mandate for the opening of your company's bank account would be provided with this service.

Breakdown Of Start-Up And Annual Costs associated with the services described above.

* N.B. Please note that all costs listed below are presented in Pounds Sterling (GBP), and that they should simply be referred to as a guide for the costs associated with this service.

A formal Pro-Forma Invoice for our services will only be presented upon full compliance with our due diligence procedures and completion of our Questionnaire and Instructions Form.

Start-Up Services

Provision of a Gibraltar "Tailor-Made" Company £350.00
Nominee Shareholders Agreement £50.00
Opening Of A Bank Account £250.00

Total Start-Up Costs £650.00

Annual Services

Annual Domiciliation Fee £300.00
Including Services As: Registered Office, Company Secretary, All Other Statutorily Required Services Such As The Filing Of Annual Returns,
Filing Of Corporate Balance Sheets, And The Upkeep Of The Company's Register.

One Nominee Shareholder @ £100 Each £100.00
One Corporate Director @ £300 Each £300.00

Total Annual Costs £700.00

* Please note that the prices listed above only apply in the context of the Form-A-Co (Gibraltar) Ltd. Import/Export Trading Company Package, and should not be quoted outside of this context.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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