Many offshore jurisdictions allow foreign companies to change their jurisdiction of incorporation. The legislation usually permits the transfer of a company’s ‘seat of incorporation’ into or out of the jurisdiction – a process known as redomiciliation. The alternative to redomiciliation is to liquidate the existing company and transfer the portfolio to an entity incorporated for the purpose in the new jurisdiction.

Redomiciliation to Gibraltar

Gibraltar’s status within the European Union and its offshore capabilities make it an attractive location for companies allowed to redomicile by their country of incorporation.

Gibraltar enacted its own Companies (Redomiciliation) Regulations in March 1996 to improve opportunities for developing international insurance business. The territory’s Financial Services Commission has been approved by the United Kingdom as a ‘competent authority’ for supervising companies licensed to carry on insurance business in Gibraltar and intending to provide insurance services to branches in European Economic Area member states on the European Union passporting principle.

Companies wishing to redomicile to Gibraltar must already be domiciled in a country recognised by Gibraltar for this purpose, including Ireland. The Regulations also allow redomiciliation from within the EEA and British Commonwealth, as well as from most other offshore centres.

Any application to establish a domicile in Gibraltar must be made to the Registrar of Companies in Gibraltar. The application must be accompanied by the company’s resolution to establish domicile in Gibraltar, which must be approved in the manner prescribed by the company’s constitution. The resolution should specify:

All the information and evidence must be in English (or accompanied by a certified translation). A Certificate of Good Standing (or similar) is also required, issued by the competent authority of the country of incorporation of the company.

Where the company carries on a business which the EU requires to be licensed by a competent authority in the jurisdiction of its incorporation, evidence of the consent of that authority to the redomiciliation is also required. The Registrar must also be satisfied that no proceedings for insolvency have been begun against the company in the jurisdiction where it was originally incorporated.

Once the company is redomiciled in Gibraltar, it is deemed to be a body corporate registered and incorporated under the Companies Act 2014 of Gibraltar. The Act recognises the continuity of the company’s legal entity relating to its property, assets, contracts and business which continue to be vested in the company. Similarly, the company continues to be liable for all its debts, liabilities and obligations.

Redomiciliation to other territories

In April 1998, the Organization for Economic Co-operation and Development issued a report on harmful tax competition. Following publication of the report, a Forum on Harmful Tax Practices was established to consider how its recommendations could be implemented. The Forum invited a number of jurisdictions, including some British Overseas Territories, to provide details of their tax regimes. Those 31 tax havens (including Gibraltar) which signed up to the OECD’s standards of transparency and exchange of information were enumerated. (The OECD issued a list of seven unco-operative tax havens in April 2002.)

The G7 trade group has also asked for a similar report on the banking industry and tax incentives. The G7 urged the OECD to pay particular attention to the development of a comprehensive programme to improve the availability of information to tax authorities to curb international tax evasion and avoidance through tax regimes and preferential regimes.

There was also internal pressure on the UK government to tackle what many see as offshore tax loopholes – not least because of the embarrassing disclosure that former paymaster‐general Geoffrey Robinson had a family trust established in Guernsey. In March 1999, the United Kingdom issued a White Paper on the Offshore Industry in the British Dependent Territories (Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Montserrat and Turks & Caicos).

The White Paper stated that there was growing international concern about the economic side‐effects of harmful tax competition between states. It said: “Promoting economic stability and fairness, as well as improving the integrity and security of financial markets, are high priorities. Irrespective of size, all jurisdictions are potential beneficiaries from a healthier world economy. They have a responsibility to ensure that their regulatory regimes are effective, transparent and offer adequate accessibility for the legitimate investigation of criminal activity, including tax fraud and evasion. These initiatives have implications for some Overseas Territories. It is important, therefore, that Overseas Territory governments co‐operate with them.”

In the EU Code of Conduct for business taxation agreed in December 1997, member states committed themselves to re‐examine laws and practices with a view to eliminating existing harmful measures, and not to introduce any new ones. Member states with associated or dependent territories were committed (within the framework of their constitutional arrangements) to ensuring the principles of the Code were adopted in those territories. The EU also considered a draft directive which would require member states to operate a withholding tax on cross‐border income from savings by individuals, or to provide information on savings income to other member states.

In relation to Gibraltar, the White Paper said the territory was required to implement all European Community Directives related to financial regulation. It went on: “Gibraltar has made a commitment not just to implement the necessary measures to the minimum standard required within the European Union (EU), but also to match UK standards of financial regulation. Gibraltar’s standards of financial regulation are assessed formally and rigorously by the UK Government on a regular basis. This should ensure that Gibraltar will match the regulatory requirements set out in this White Paper.”

Double taxation in Ireland

Section 826 of Ireland’s Taxes Consolidation Act 1997 set out the principal reliefs in relation to double taxation.

Section 1 says that, where the government of Ireland declares that arrangements have been made with the government (or head of state) of any territory outside the State in relation to relief from double taxation for income tax, corporation tax (in respect of income and chargeable gains) or any similar taxes, such arrangements shall have the force of law, if expedient. This is subject to s 168 (certain distributions to non‐resident companies), s 833 (the 1949 convention between Ireland and the USA), s 834 (ships documented under US law) and s 835 (orders made prior to 1987 under s 362 of the Income Tax Act 1967).

(Note that there is no conjunction between the taxes specified in s 1; they are merely separated by semi‐colons, but may be regarded as alternatives.)

Schedule 24 applies where tax payable in the foreign territory is allowed as a credit against tax payable in Ireland. Relief may be allowed for periods before the Act was passed on 30 November 1997. The Revenue Commissioners could disclose to any authorised officer of the foreign territory any information which is required to be disclosed under the arrangements.

The Revenue Commissioners could make additional arrangements:

Returns of profits on corporation tax

Section 882 of the 1997 Act (as amended by s 83 of the Finance Act 1999) says that every company which is incorporated in the State (or which begins to carry on a trade, profession or business in the State) must provide the Revenue Commissioners with written details of:

Non‐resident companies incorporated in the State must provide the Revenue Commissioners with written details of:

Where the company is controlled by a company whose principal class of shares is substantially and regularly traded on one or more recognised stock exchanges in a relevant territory, the name of that company and the address of its registered office must be provided in writing. In any other case, the name and address of any individuals who are the ultimate beneficial owners of the company must be given. (“Ultimate beneficial owner” means the person who controls a company or, where that person is a trustee of a settlement, the settlor, anyone who might become a beneficiary under the settlement or the ultimate beneficial owners of any company which benefits from the settlement.)

In the case of non‐resident companies which are not incorporated in the State, but which carry on a business in the State, the Revenue Commissioners must be given details in writing of:

The information must be provided within 30 days of:

(Note that the conjunction and in this section should be or. The current wording of the statute could be taken to mean that companies are only required to provide such information where all three requirements have been fulfilled.)

In the case of a company incorporated on or after 11 February 1999, these rules apply from the day of incorporation. Otherwise they apply from 1 October 1999.

(Section 882 formerly specified that, in the case of a non‐resident company which was incorporated, but not carrying on a business, in the State, the Revenue Commissioners were entitled to know:

Sub‐sections 4 and 5 of s 882 were not carried over by the substituting legislation in the 1999 Finance Act. Sub‐section 4 said that s 882 did not apply where the company had a 90 per cent subsidiary carrying on trade in the State. Sub‐section 5 (a) said that ss 412‐418 of the 1997 Act (dealing with group relief, profits or assets available for distribution, the meaning of “profit distribution” and “notional winding up”, limited rights to profits or assets, diminished shares of profits or assets and beneficial percentages) applied as they would for the purposes of Chapter 5 of Part 12 (group relief) if s 411(1)(c) were deleted (referring to resident companies).

(Section 411(1)(c) was amended by s 78(1)(b)(ii) of the Finance Act 1999, so that it refers to companies which are resident for tax purposes in an EU state, by virtue of the law of that state.) Sub‐section 5(b) said that “control” should be construed in accordance with s 432.

‘Associated company’ and ‘control’

Section 432 of the Taxes Consolidation Act 1997 sets out the meaning of ‘associated company’ and ‘control’.

Sub‐section 1 says that a company shall be treated as another company’s associated company if, at any time within the previous year, one of the two companies has control of the other, or both companies are under the control of the same person(s).

Sub‐section 2 says control means that a person (or persons) exercises, is able to exercise or is entitled to acquire, direct or indirect control over the company’s affairs, in particular if the person has (or is entitled to acquire at any time in the future):

(Note that s 2 of the statute contains incorrect punctuation. The published statute says: “...if such person exercises, or is able to exercise or is entitled to acquire, control, whether direct or indirect, over the company’s affairs...” The comma between the words ‘acquire’ and ‘control’ changes the meaning of the section.)

The rights and powers attributed to a person in sub‐section 2 also include the powers of a nominee, and the powers of any company (or companies) of which the person – or his associate(s) – has control, including nominee powers. The powers attributed to an associated person under s 432(5) are excluded for the purpose of sub‐section 2. The company will be treated as if it is under the control of five or fewer participants, if possible.

Company residence

Company residence is defined by s 82 of the Finance Act 1999, which inserts a new s 23A into the Principal Act. That section applies to ‘relevant companies’ which are companies under the direct or indirect control of anyone who is resident for tax purposes in a relevant country by virtue of that territory’s laws AND are not under the control of anyone who is not so resident. Alternatively, such companies may be related to a company of which the principal class of shares are ‘substantially and regularly’ traded on one or more stock exchange in a relevant territory.

A company is ‘related’ to another if 50 per cent of its share capital is directly or indirectly owned by the other company (or 50 per cent of the share capital of both is owned by a third company). (Note that sections 412‐418 and s 432(2) to s 432(6) of the Principal Act apply to the definition of ‘relevant company’.)

A company incorporated in the State is regarded as resident for tax purposes except where it is a ‘relevant company’ which carries on a trade in the State (or is related to a company carrying on trade in the State). A company which is regarded ‘for the purposes of any arrangements’ as resident in a territory outside the State (and non‐resident in the State), shall be treated as non‐resident for tax purposes. A ‘relevant territory’ is an EU state (or a non‐EU territory with the government of which such arrangements have been made). Section 23A applies from the date of incorporation where a company was incorporated on or after 11 February 1999 (or from 1 October 1999 where the company was incorporated before 11 February 1999).

Note: The Companies (Amendment) (No 2) Act 1999 amended the Companies (Amendment) Act 1999 to prohibit the formation of a company unless it appears to the Registrar of Companies that it would carry on an activity in the State. It also required that at least one of the directors of a company must be resident in the State or that a £20,000 bond (in the days of Irish pounds!) be provided in case of non‐payment of certain taxes or fines. Alternatively, a company could apply for a certificate to indicate that it had a ‘real and continuous’ link with one or more economic activities within the State.

European Union law

Europe’s common company law binds 15 EU states (as the EU was then) and three states of the European Economic Area. Primary law is based on the Treaty of Rome, while secondary law is based on Directives and Regulations. Chapter 2 of the European Community Treaty dealt with the right of establishment within the European Community (now the European Union).

Article 52 provided that “restrictions on the freedom of establishment of nationals of a Member State shall be abolished by progressive stages in the course of the transitional period. Such progressive abolition shall also apply to restrictions on the setting up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State. Freedom of establishment shall include the right to...set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 58, under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter relating to capital”.

(Paragraph 2 of Article 58 says that ‘companies or firms’ means “companies or firms constituted under civil or commercial law, including co‐operative societies, and other legal persons governed by public or private law, save for those which are non‐profit making”.

Article 53 says: “Member States shall not introduce any new restrictions on the right of establishment in their territories of nationals of other Member States, save as otherwise provided in this Treaty.” These provisions are almost identical to the provisions of Article 31 and 34 of the European Economic Area Agreement.

‘Freedom of establishment’ includes the right to set up and manage undertakings in a member state. Establishment may be constituted by taking the steps necessary for the pursuit of a particular activity on a regular basis, such as creating an undertaking in the host member state (Case 182/83 Robert Fearon & Co Ltd v Irish Land Commission [1984] ECR 3677.) Where it appears that such steps are taken for the purpose of carrying out a particular operation, rather than the conduct of activity on a regular basis, it may be inferred that the establishment is of a temporary nature.

Article 58 of the European Community Treaty requires the same rights to be provided for commercial legal persons as for natural persons. A company planning to establish itself in another member state must therefore be granted the same rights as companies domiciled in the state in question.

The EU also signed the OECD’s Third Decision to extend the same rights and obligations to foreign companies as to domestic companies. (The decision concerns the treatment of companies established in an OECD country that are dominated by foreign interests.)

Subject to some limited exceptions (of which the states must formally advise one another), the EU and OECD member states are bound to extend to undertakings which conduct business activities in their territories and which are residents of another member state (or are controlled directly or indirectly from another state) treatment that is not less favourable than that which the state would grant to domestic companies under similar circumstances. (See Opinion 2/92 Competence of the Community or one of its institutions to participate in the Third Revised Decision of the OECD on national treatment of 24 March 1986 by the European Court).

The European Court allows little or no compromise in upholding these rules. See the judgments of:

The Court's interpretation of the Treaty in these cases grants four main freedoms to companies – the right:

The law governing the company’s affairs (the valid law) depends on the establishment of the company’s nationality. Three contradictory criteria exist in EU law for the establishment of that fact:

Germany, for instance, maintains the main seat criterion in relation to its EU partners, but has negotiated and accepted the registered office criterion with the United States. A convention on this issue was prepared and signed in 1968, but was never ratified by all states and is therefore not in force.

The question of whether EU law permits redomiciliation cannot be answered unambiguously. The EEC Treaty’s Article 220 contains a catalogue of possible topics for convention between EU states and mentions the issue of “retention of legal personality in the event of transfer of their seat from one country to another”, but no treaty has yet been signed on this issue.

In the case of The Queen v Treasury and Commissioners of Inland Revenue, ex parte Daily Mail and General Trust, the newspaper wanted to move its central administration from Britain to Holland to avoid Capital Gains Tax on its fixed assets. It was argued that, since a company (unlike a natural person) only existed as a result of the legislation of the state of incorporation, no right could be recognised to move the legal person’s statutory or genuine domicile to another state unless both states’ legislation recognised such a possibility. The Court (rather unhelpfully) pointed to the fact that British law allowed the company to dissolve itself in accordance with British law, pay the tax and then re‐establish in another EU state.

In Metallgesellschaft Ltd & Ors v Commissioner of Inland Revenue & another C‐397/98 & C‐410/98, 12 September 2000, the United Kingdom asked the European Court of Justice (ECJ) whether a difference in tax treatment of certain corporate taxpayers – depending on the place of residence of their parent companies – was justified under the notion of fiscal cohesion, or whether it was contrary to Article 52 of the EC Treaty. The Court held that the tax was contrary to Article 52, and EC law demanded that there should be a remedy, despite the fact that the taxpayers had only been required to pay the same tax earlier, rather than paying more. The taxpayer should be able to recover the lost interest on the tax paid early.

In any case, transfer of domicile to a state which accepts the main seat criterion may cause a number of problems. Since the company was not legally formed under the rules of the main seat state, its incorporation may be deemed to have been void and it may be forced into dissolution. And, since the main seat criterion indirectly requires the company to abandon its original nationality (in order to be governed by the legal rules of the accepting state), this would seem to be inherently discriminatory against the nationality of the legal person, thereby falling foul of Article 58 which gives equal weight to the registered office and to the central administration or place of business.

The European Communities (European Public Limited Liability Company) Regulations 2007 indicates that, in practical terms, any share capital can make a transnational transfer of domicile without liquidation and new formation. A plc can be changed to a public limited company and thereafter changed to an SE (Societas Europa) company.

Professor Erik Werlauff, who teaches business law at Aalborg University in Denmark, takes the view that “once a technical solution becomes available to previously insuperable problems, the Court is ready to reinterpret the Treaty’s right of freedom”. The existence of EU laws for tax‐neutral transnational majority takeovers (Merger Taxation Directive 2009/133/EC) may lead the Court to the view that primary establishment – and hence transnational transfer of the registered office – is an option available to legal personalities.

Where all parts of the company are moved to a different state, dissolution and liquidation taxes may still apply (as natural persons may be taxed in the same way when emigrating), but if parts of the company remain in the home state (for example as a branch office with limited tax liability), no discontinuation tax will be payable, as the situation under tax law will be one of succession.

With respect to the freedom to provide services, Gibraltar is to be treated as a single entity with the United Kingdom, following a 2018 decision by the UK High Court. According to the European Commission, EU treaties apply to Gibraltar (for the time being, by virtue of Article 355(3) of the Treaty on the Functioning of the European Union), but EU customs, VAT and excise rules do not apply.

This (mostly) 1998 article is provided as a general guide to the topic of redomiciliation.
Reliance should, accordingly, not be placed on this information.

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