The continued success of Gibraltar as a location for investing or undertaking business is due largely to the positive approach taken by the Gibraltar government, which seeks to encourage and facilitate business. It has created an environment that affords excellent 'ease of doing business', a favourable tax environment, a common law legal system, competitive operating costs, a productive, flexible and highly trained workforce and a well-developed infrastructure with world-class support services.
A self-governing UK Overseas Territory located at the southern tip of the Iberian Peninsula, Gibraltar controls all its own affairs, taxation and policies, with the exception of defence and foreign relations. Over the past three decades, it has transformed itself into a fully compliant financial services centre, specialising in insurance, shipping, asset management, gaming, distributed ledger technology (DLT) and FinTech.
Whether you represent a company looking for a tax efficient investment location or an international business seeking a strategic UK presence, Gibraltar offers a range of features and benefits for establishing a corporate entity. For anyone looking to set up business in Gibraltar, here are 10 good reasons why Gibraltar could be the ideal location to set up your operations.
- Gibraltar company registration – The
principal business entities are the public and private limited
company, partnership, limited partnership, sole trader, branch and
non-resident company. Gibraltar companies offer swift
incorporation, full UK compatibility and tax benefits. The
Gibraltar Companies Act is based on English legislation and the
Gibraltar Companies Registry is now fully automated.
Sovereign Trust (Gibraltar) Limited has over three decades of experience in the Gibraltar market. We will assist you to select the most effective and efficient legal entity for your business and will then form and register that entity in line with local laws and regulations.
Sovereign has further developed a compelling suite of corporate services to assist the growth and sustainability of businesses in Gibraltar and beyond. We provide the necessary expertise in administering and managing companies, including company secretarial services, company law, board procedures, director responsibilities and shareholder relations, and financial and corporate compliance requirements. This enables business owners to focus on their primary business.
We also provide the administrative support to help businesses to maximise opportunities and achieve long-term sustainability, from full back-office solutions to assistance with tax and regulatory compliance. This includes bookkeeping and accounting, payroll and HR, insurance, banking introductions, pensions, trademark and intellectual property protection, obtaining local licences and permits, executive relocation and specialist tax advice.
- Unfettered access to UK
markets – Gibraltar has always had a 'special
status'. Unlike the UK's other Overseas Territories and
other Dependencies, Gibraltar was part of the European Union until
31 December 2020 and benefitted from direct access to the huge
European Economic Area (EEA) market of more than 500 million
people. After Brexit, the UK and Gibraltar governments have agreed
that Gibraltar-licensed firms can continue to provide their
services into the UK market and set up branches in the UK on the
basis of their Gibraltar registration.
Legislation has been introduced to the UK parliament to establish a new institutional framework – the 'Gibraltar Authorisation Regime' – to provide for mutual market access and aligned standards in financial services between Gibraltar and the UK. For EU entities that have lost their right to 'passport' into the UK, a new Gibraltar subsidiary will therefore be able to continue to access the UK market. For non-EU entities, a new Gibraltar subsidiary will provide access to the UK market but within a more favourable tax environment and with more competitive operating costs.
- Stable relationship with the EU – On 31
December 2020, Spain and the UK reached an agreement in principle
under which Gibraltar would join the EU's Schengen Area, which
allows the free movement of people across 26 European countries (22
members of the EU plus Norway, Switzerland, Iceland and
Liechtenstein). This clears the way for the EU and the UK to start
formal negotiations on the matter.
Elements of the proposed agreement are that the land border between Gibraltar and Spain will go, possibly within six months, with Gibraltar's air and seaport becoming entry points of the Schengen area. This means that people landing on the Rock will be able to move freely across the Schengen Area without going through passport control. Gibraltarians have never previously had this kind of open access to Europe because the UK did not sign the Schengen agreement. It would also mean that it may become possible to fly to the 26 members of Schengen from Gibraltar airport. Previously there were no direct flight links from Gibraltar to the rest of the EU.
- Stable and resilient economy – The
economy of Gibraltar has greatly diversified over the past four
decades as its dependence on British military activity, especially
its naval dockyard, has diminished from over 60% of total economic
activity in 1984 to an estimated 7% today. Gibraltar's modern
economy is now predominantly service-based and dominated by four
main sectors: financial services, online gaming, shipping and
tourism. It is also a popular shopping destination, and all goods
and services are VAT free.
Gibraltar maintains very strong links with the UK and while most of the population is bilingual in English and Spanish, all business is generally conducted in English and the currency is pound sterling.
Although Gibraltar's local labour market shows an extremely low unemployment rate of around 1%, it is highly flexible because almost half of total employment is provided by 'frontier workers' – employees who are normally resident in Spain but are employed in Gibraltar.
Gibraltar is a long-established centre for international banking services. Today Gibraltar-based banks, made up of a combination of large global institutions and specialist private and investment banks, are able to provide a breadth of modern solutions to client needs in all areas of finance.
- Highly favourable tax regime – Gibraltar
is a 'low tax' rather than a 'no tax' jurisdiction.
All companies incorporated in Gibraltar are chargeable on taxable
profits at a rate of 10% – except for utility, energy and
fuel supply companies, for which the applicable rate is 20% –
under the 'accrued and derived' principle. This means that
if the business of the company is outside Gibraltar and it is not
trading with other Gibraltar residents, it will not pay any tax in
Gibraltar but will still be 'subject to tax at 10%'. As
such it will receive a tax reference number that will facilitate
doing business in Europe and worldwide.
Gibraltar does not levy withholding tax on dividends, interest, royalties or technical service fees, nor does it levy a branch remittance tax. There is no capital gains tax in Gibraltar. Trading losses may be carried forward indefinitely, provided there is no change of ownership in the company and no major change in the nature or conduct of trade within a period of three years.
A company is considered to be ordinarily resident in Gibraltar if the management and control of that company take place in Gibraltar, or if the management and control is exercised outside Gibraltar by persons who are ordinarily resident in Gibraltar. A Gibraltar company is required to maintain a minimum presence in its place of incorporation – a registered office and a resident company secretary and/or a resident agent. Sovereign would typically provide these services for all our clients.
Individuals are also taxed on income accrued in or derived from Gibraltar from trade and employment. Interest income, royalty income and income from immovable foreign property are not taxable. Expenses incurred for the production of taxable income may be deducted for tax purposes. Dividends are taxable only if paid from profits taxable in Gibraltar.
Individual that are ordinarily resident in Gibraltar are subject to tax on non-trading worldwide income (except for rental income from foreign immovable property). An individual who is present for at least 183 days in a year or 300 days in any three consecutive years is ordinarily resident.
There is no capital gains tax in Gibraltar and no inheritance/estate tax or wealth/net worth tax.
- Legal system – Gibraltar's legal
system mirrors that of England and Wales. It is a common law
jurisdiction that applies the principles of equity. It is common
for commercial disputes to be settled before the Supreme Court of
Gibraltar, which is equivalent to the High Court in London.
Alternative dispute resolution is often preferred for low-value
Court procedures closely follow those contained in the Civil Procedure Rules that regulate proceedings in England and Wales. With an English legal system and access to special counsel – but with the absence of VAT – Gibraltar is often a preferred location for high-value commercial disputes. The Gibraltar Court of Appeal is the Judicial Committee of the Privy Council in London.
Due to the similarities to English law, practice and procedure whilst maintaining local judicial independence, Gibraltar is seen as an attractive place to do business, which is evidenced by the great number of international companies operating from Gibraltar.
- Generous residency progammes – Gibraltar
operates residency progammes featuring generous tax incentives that
are designed to attract high-net-worth individuals and executives
possessing particular skills. These make Gibraltar a very
attractive base for suitably qualified individuals and their
dependents, or for retirees or entrepreneurs that wish to live in a
tax competitive jurisdiction.
The Qualifying (Category 2) Individuals Rules provide for a well-established regime that limits income tax for high-net-worth individuals wishing to reside in Gibraltar. To apply for a certificate, an individual is required to verify that he or she has a minimum net worth of £2 million and is of good character. A Category 2 certificate holder is taxed in Gibraltar on the basis of the normal rates applicable under the gross income-based system, but only on the first £80,000 of assessable income such that, at current tax rates, the minimum annual tax liability is £22,000 and the maximum annual tax liability is £27,560. Any further income is not subject to income tax in Gibraltar, irrespective of whether it is remitted to Gibraltar.
The High Executive Possessing Specialist Skills (HEPSS) category of tax residency is to encourage the relocation of high earning executives with specialist skills that will promote and sustain economic activity of particular economic value to Gibraltar. Requirements include a basic salary of over £120,000 per year and specialist skills that are not available in Gibraltar. A HEPSS certificate holder is only taxed under the gross income-based system on the first £120,000 of assessable income such that, at current tax rates, the tax payable from qualifying employment income is capped at £29,940.
- International compliance –
Gibraltar's success as a finance centre is underpinned by its
commitment to ensuring highest standards of regulation and it is
fully committed to the international tax transparency agenda.
Gibraltar has in place the legal and regulatory framework to give
effect to its exchange of information mechanisms and a very wide
treaty network covering all relevant partners.
Gibraltar ensures transparency and exchange of information on fiscal matters through three principal legal instruments: Council Directive 2011/16/EU on administrative cooperation in the field of taxation (DAC1); the OECD and Council of Europe Multilateral Convention on Mutual Administrative Assistance in Tax Matters; 27 bilateral Tax Information Exchange Agreements (TIEAs) to OECD standards.
The Gibraltar government was an early adopter of the OECD Common Reporting Standard (CRS). The legislation was enacted on 22 December 2016 and the first exchange was on 30 September 2017. In September 2020, Gibraltar again achieved the second-highest OECD rating of 'largely compliant' in its latest Peer Review of tax information exchange carried out by a team of OECD Global Forum expert assessors. This placed Gibraltar on a par with the USA, Germany, the UK and Spain.
The Country-by-Country Reporting Regime was introduced into Gibraltar in 2017 as part of Article 13 of the OECD BEPS Action Plan. In July 2019, the OECD agreed to Gibraltar becoming a full member of the Inclusive Framework on Base Erosion Profit Shifting (BEPS).
- Pragmatic regulation – Gibraltar
regulation does offer many advantages. The Gibraltar Financial
Services Commission (GFSC), the financial services regulatory body
in Gibraltar, supervises a broad range of firms including:
auditors, banks, company managers, e-money institutions,
professional trustees, payment services providers, funds and fund
service providers, insurance companies, managers and
intermediaries, investment firms, and insolvency
The GFSC is knowledgeable about these markets and is able to deal with enquiries and applications in a very responsive manner. It is generally easier to meetings with them to discuss issues and to keep them fully informed of what is happening in a business. The GFSC also encourages pre-application meetings with applicants, which helps smooth the application process because they understand the business plans and the principals behind the applicants.
The GFSC is working to manage the implications of Brexit for financial services providers and their customers, wherever they are located, and is seeking to build on partnerships both with UK authorities and other regulators, authorities and international standard setting bodies and make meaningful contributions to the work of these bodies. It aims to be recognised as a leading regulator of new innovation by strongly supporting the safe use of financial and regulatory technology.
- World-class communications –
Gibraltar's infrastructure, including communications and IT, is
of renowned high quality and it is highly praised for the
availability of electronic services, their quality of regulation
and resilience. Many big blue-chip companies have taken note and
been drawn to Gibraltar, allowing it to become a global leader in
the virtual gaming market, an industry that continues to prosper in
The effects of the liberalisation of the electronic communications industry, intended to enhance investment and competition, have been felt in recent years as new market entrants have stimulated the industry. The result has been improved quality of services and more attractive prices. Technology businesses based in Gibraltar benefit from an attractive package, including funding schemes and the use of proficient local website designers and administrators who provide a wide range of first-class services.
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.