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For centuries Gibraltar has been at the crossroads of International trading, majestically dominating the entrance to the Mediterranean. Gibraltar has been a British dependent territory since 1704 and has therefore been a member of the European Union since 1973 when Britain joined. Gibraltar has, however, managed to obtain certain derogations from European Law, in particular Gibraltar does not apply Value Added Tax or the Common Customs Tariff.

Today, Gibraltar is still considered an important centre for international business, although the advantages now arise from the fiscal opportunities available rather than physical location.

Gibraltar does not apply any Capital Gains Tax, Sales Tax, or Estate Duty. The main taxes applied in Gibraltar are Income/Corporation Tax and Withholding Tax. However, opportunities exist for non-resident non-Gibraltarian individuals and entities to either be tax exempt or substantially reduce their exposure to these taxes.

Tax Breaks for Companies
There are four types of corporate structures available in Gibraltar; a company limited by shares, a company limited by guarantee having a share capital, a company limited by guarantee without a share capital and an unlimited company. Only companies having a share capital can apply to be registered as an exempt or qualifying company.

Tax Exempt Companies
Subject to certain conditions (the main one being that no resident of Gibraltar or Gibraltarian has a beneficial interest in the shares) a company incorporated in Gibraltar or a registered branch of an overseas company may apply for a Tax Exemption Certificate. Possession of such certificate will, in return for the payment of a fixed annual tax (between ?200 and ?300), exempt the company or branch from further taxation (includes corporation tax and withholding tax) in Gibraltar. A Tax Exemption Certificate is issued for a period of 25 years.

Exempt companies are used by individuals for many purposes, but the most common uses are the following:

- Property holding
The individual's asset then becomes the shares in the company situated in Gibraltar and not the property situated in another country. The sale of the shares or transfer of the shares on death (both effectively transferring title in the property) does not give rise to a taxable event in Gibraltar since Gibraltar has no capital gains tax and no Estate Duty. The ownership of the property in the country the property is situated is still the same company, and therefore normally no taxable event occurs here either.

- Investment and asset holding
Exempt companies in Gibraltar are not subject to either capital gains or income tax. Investment holding companies can therefore accumulate income and capital gains without any erosion due to taxation.

- International trading
Exempt companies may be used to carry out international trading between third parties in different countries. The trading is carried out by the exempt company in Gibraltar and profits earned by the company will not be subject to any taxation in Gibraltar.