0204/2014

Gibraltar as an EU Finance Jurisdiction

 

A brief bullet-point overview of Gibraltar as a competitive European jurisdiction for financial services:

 

Political and economic stability

  • Gibraltar is a peninsula with an area of 2 3⁄4 square miles situated at the southernmost tip of Spain.
  • Gibraltar has been a Crown Colony of the United Kingdom since 1713 when the Territory was ceded to Britain under the terms of the Treaty of Utrecht.
  • Gibraltar is politically and economically stable with full support of British Govt.
  • Gibraltar continues to grow and diversify its economy in financial services (finance, payments, insurance), e-commerce and tourism 
  • GDP is estimated to have grown by approximately 35% over the last five years and is one of the highest per capita in the world
  • One of the lowest public debt to GDP ratio’s in Europe and the world

 

Transport access & time zone 

  • English Language
  • Gibraltar's time zone is Central European Time, and time flight to London takes 2.5hrs
  • Gibraltar International Airport has 4-6 schedules flights to London a day
  • Regular direct flights to Manchester and Birmingham
  • Two international airports (Jerez and Malaga) within 1 ½ hrs. drive ensure comprehensive options
  • Gibraltar is a small place & very easy to do business meetings here
  • Intimacy encourages commerce and a collegiate atmosphere
  • Close community fosters close relationships between Govt, industry and regulatory bodies

 

Rule of law & English legal system

  • Gibraltar is an English common law jurisdiction
  • Numerous older UK statutes are in force in Gibraltar by virtue of the Application of English Law Act 1962
  • Fully autonomous legislature for local matters (only foreign policy and defence remain the responsibility of the UK)
  • Principal legal concepts and legal system (inc. CPR) remain aligned with UK
  • Efficient and professional lawyers and judiciary (many who have trained and worked extensively in the UK)
  • European law fully applicable (exc. VAT) & implemented in a timely manner

 

Part of European Community

  • Gibraltar has been part of the EU since the UK's accession in 1973
  • Gibraltar is specifically confirmed as a Special Member State Territory (Declaration 355(3), TFEU)
  • Gibraltar takes prides in the fact that it is among the first jurisdiction to adopt EU Directives
  • Gibraltar authorised financial institutions can provide services throughout the EU and EEA be by(Passporting)
  • Examples of relevant Directives inc.:
    • Financial Collateral Directive, MiFID, UCITS, AIFMD

 

Reputation and integrity

  • Gibraltar has signed Tax Information Exchange Agreements with 39 countries
  • Currently listed in the OECD “white list”- shares the same status as OECD member states such as the UK, the US, Spain or Germany.
  • Currently in the process of agreeing FATCA with USA & UK
  • Gibraltar’s government markets the territory as an ‘onshore jurisdiction with strong regulation’
  • The Gibraltar Financial Services Commission (FSC) stated aim is to ensure that “regulation is delivered in a way which is conducive to and encourages financial services business in Gibraltar
  • The FSC also consider carefully the extent to which any activity may undermine the reputation of Gibraltar

 

Developed service sector

  • All so called ‘Big 4’ accounting firms have a presence in Gibraltar
  • Legal Profession – biggest professional service sector industry in Gibraltar
  • Corporate services – multiple providers inc. multi-nationals
  • Strong e-commerce sector (>20% of GDP)
  • Growing financial services sector (>20% GDP) - Gibraltar writes more UK motor insurance than Lloyds of London
  • Ambitious international fund administration sector
  • In addition to local domiciled funds there are foreign domiciled funds that are administered by Gibraltar licensed administrators
  • International Corporate Finance & Funds is the new area of growth for Gibraltar

 

A favourable tax system

  • Corporate tax paid at a rate of 10% on any income accrued or derived in Gibraltar
  • Substantial personal income tax benefits including Cat2 wealth status and HEPSS (High Executive Possessing Specialist Skills) for senior staff
  • Corporate tax will not apply to non-Gibraltar sourced income
  • Many Gibraltar companies which do not trade with other Gibraltar resident companies or individuals will be able to operate tax free
  • No capital gains tax, VAT, wealth tax, or inheritance tax/death duties
  • Generous corporate tax allowances for royalty payments
  • No withholdings on dividends as between companies or paid out of Gibraltar
  • No withholdings on interest
  • No capital/stamp duty on the transfer of shares and capital
  • Subject to EU Directives on Royalties & Interest
  • Current tax system as per Income Tax Act 2010 has been reviewed and approved by EU

 

Incorporating a Gibraltar company

  • Comparable incorporation timing and costs to BVI/Cayman etc
  • Minimum of one director and a secretary required
  • Director may be a corporate entity
  • Filing requirement with regard to accounts varies depending on balance sheet value and/ or turnover and /or number of employees
  • For larger companies full audited accounts including the Balance Sheet, Profit and Loss account
  • Larger companies defined as balance sheet greater than £9.6m, and/or net turnover greater than £19.2m and /or more than 250 employees

 

Funds industry

  • Over £2.4 Billion currently under management in Gibraltar
  • Up from £212 Million in 2006 – an 11 fold increase
  • Made up of private unregulated funds and Experienced Investor Funds (EIFs)
  • EIFs are Gibraltar’s flagship funds product
  • EIF regulations were updated in 2012 to allow for Administrators established in the EEA or a jurisdiction that has a equivalent regulatory regime
  • MiFID adopted in 2006
  • UCITS (iv) adopted in 2011
  • AIMF Directive adopted in July 2013

 

Funds – Gibraltar’s competitive advantage

  • European launch-pad
  • AIFs established in Gibraltar who are either large AIFs or who opt in may be marketed throughout the EU under the marketing passport
  • Non-EU-manager as well as an EU-manager with non-EU-AIFs may only market by way of private placement to those EU Member States which permit private placement  -  additional local law conditions will apply.
  • Wide range of excellent fund service providers
  • High regulatory standards
  • Flexibility of a small jurisdiction with a business friendly Govt.
  • Financial services Passporting
  • UCITS funds - The Financial Services (Collective Investment Schemes) Act 2011 allows for UCITS-funds and UCITS management companies to be domiciled and operate in Gibraltar
  • Gibraltar was the first EU jurisdiction to offer protected cell companies (PCC)
  • Gibraltar's Protected Cell Companies Act 2001 enables companies to be incorporated as a PCC or existing companies, if they provide so in their constitutional documents, to convert into a PCC

 

Experienced Investor Funds

  • EIFs are open to investors who are considered to be “experienced”
    • a participant who meets the requirement that is classified as a professional investor according to the Directive 2004/39/EC (MiFID); or
    • a participant who invests a minimum of Euro 50,000 and is advised to do so by a professional adviser;
    • a participant who invests a minimum of Euro 100,000
  • Fast-track procedure that enables funds to be swiftly and easily set up which makes it an excellent vehicle for AIFs
  • EIFs are not subject to any mandatory restrictions on their investment or borrowing powers
  • Directors must follow the investment objectives of the EIF as set out in the offering memorandum
  • Burden of compliance, due diligence and on-going monitoring on the administrator and two directors that are licensed by the FSC
  • Wide pool of authorised directors in Gibraltar that can be appointed to fund boards
  • No legislative requirements for an EIF to appoint a custodian that is licensed locally in Gibraltar (of particular value for fund managers wishing to re-domicile to Gibraltar)
  • Re-domiciliation is possible without major operational changes to the funds business

 

Re-domiciliation

  • Re-domiciliation specifically legislated for in Gibraltar
  • Large number of jurisdictions benefit from easy re-domiciliation (e.g. Hong Kong, Singapore, Panama, BVI, Bermuda, Cayman Islands)
  • Streamlined procedure has been issued by the FSC to re-domicile funds to Gibraltar
  • Gibraltar’s EIF Regulations paved the way for foreign funds to re-domicile to Gibraltar and for Gibraltar funds to use fund administrators based outside Gibraltar
  • Unlike funds domiciled in the Channel Islands and Caribbean jurisdictions (non-EU), Gibraltar based funds may benefit from the AIFMD Passport from July 2013
  • EU Passporting + Ease of Re-domiciliation + Taxes + English law + Financial Stability = obvious choice for bringing offshore funds within Europe

 

 

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