2014 IFC Review - Gibraltar extract

Within the European Union Single Market

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www.ifcreview.com/Gibraltar

By Darren Anton, Senior Tax Manager,KPMG Advisory Limited, Gibraltar

Gibraltar: The Perfectly Placed EU IFC

GIbraltar offers an alternatIve to the usual IFC candidates with an

international, mainstream fi nance centre that is located next to Africa but is part of the European Union. It also boasts other attractions such as its strong regulatory regime, low taxes, business infrastructure and Mediterranean climate.

Gibraltar is a part of the EU as an Overseas Territory for whose external relations a Member State is responsible, in this case the UK. Th erefore, Gibraltar companies are able to “passport” their services throughout the EU. However, Gibraltar is not part of the EU VAT or Customs Union and so there is no VAT in Gibraltar. Gibraltar has signed up to both UK and US FATCA, the multi-lateral convention with the G5 on exchange of information, and numerous Tax Information Exchange Agreements, and is on the OECD whitelist for internationally agreed tax standards.

Company Tax Rate: 10%From 1 January 2011, in Gibraltar the majority of companies pay tax at a rate

of only 10 per cent on their taxable income, except, according to the legislation, for certain companies such as “utility” companies that are taxed at the rate of 20 per cent.

Th e territorial basis of taxation operates in Gibraltar so companies are only taxed on income that “accrues in or derives from” Gibraltar. When considering if income is “accrued in or derived from” Gibraltar reference is made to the location of the activities which generate the income, although for companies that are licensed and regulated in Gibraltar, the activities giving rise to the profi ts are deemed to be undertaken in Gibraltar. Th is extends to branches and permanent establishments of entities, which are licensed in another jurisdiction but enjoy ‘passporting’ rights into Gibraltar and which would otherwise be required to be licensed and regulated in Gibraltar. However, a branch or permanent establishment of a Gibraltar company undertaking activities outside of Gibraltar would not be subject to tax in Gibraltar.

Companies are not subject to

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tax on certain investment profits, including dividends and capital gains, and there is no withholding tax on dividends, royalties, and generally, interest payments made by a Gibraltar company.

Individuals benefit from low taxes generally and special tax regimes for certain categories of persons.

Companies Act The Gibraltar Companies Act 1930 sets out the requirements for the incorporation, registering, constitution, operations and the winding up of corporate bodies registered in Gibraltar. Subsidiary legislation such as the Gibraltar Companies (Accounts) Act and the Companies (Consolidated Accounts) Act cover the accounting and filing requirements of Gibraltar companies and groups. The legislation is based on the UK Companies Act 1929 with subsequent amendments to reflect all relevant EU Directives.

A Gibraltar company can usually be incorporated within two to three days. However, same day incorporation can be effected.

A Gibraltar company is required to maintain a registered office in Gibraltar, where the statutory records must be kept. In the case of a private company, a sole director is permitted. A public company, on the other hand, must have at least two directors.

In December 2013, the Government issued a Command Paper on a draft bill to revise, reform and consolidate relevant legislation on companies into a new Companies Act. It is expected that the new Companies Act 2014 will be enacted during the first half of 2014.

Re-DomiciliationA company domiciled in another jurisdiction is permitted by the Gibraltar Companies (Re-domiciliation) Regulations 1996 to re-domicile to Gibraltar provided it is permitted to do so by its constituting documents and by the applicable laws in the jurisdiction of incorporation.

The Fund IndustryIn August 2005, the Experienced Investor Fund (EIF) legislation was introduced, which allows certain funds to be set up in a matter of days. Since then, Gibraltar has provided the perfect environment for the industry due to ease of entry, good regulation, low taxes

and access to the European Union.The EIF, as the name suggests, is

aimed at experienced investors or high net-worth individuals. These funds have the advantage of protective regulation, speed of establishment and competitive set-up and running costs. There are certain criteria for investing in an EIF: the investor must have in excess of €1 million in net assets, or be a professional/experienced investor, or be investing in excess of €100,000 into the fund.

Another advantage of using Gibraltar in setting up a fund structure is the ability to use a Protected Cell Company (PCC). A PCC is a company, which allows the segregation of assets and liabilities between different cells, so that in the case of a fund each cell can serve as a sub-fund. Sub-funds can then be used by separate investors or by one investor wishing to promote several investment strategies. The segregation of assets means that if one cell incurs liabilities such that the obligations cannot be met, the creditors of that cell cannot satisfy their debt from the assets of another cell.

The use of a PCC must be approved by the Financial Services Commission prior to the fund being launched.

Directive on Alternative Investment Fund ManagersAs noted above, the funds sector is one of the key strengths of Gibraltar’s financial services industry and, as such, activity in respect of the EU’s Alternative Investment Fund Managers Directive is being closely monitored and responded to by Gibraltar’s Financial Services Commission.

Compliance with the Directive requires affected fund managers to apply for authorisation in order to manage alternative investment funds and with compliance will come the ability to passport management and marketing services for these funds into the EU. The FSC has issued the Financial Services (Alternative Investment Fund Managers) Regulations 2013, which came into force on 22 July 2013.

“Gibraltar has signed an Inter-Governmental Agreement with the UK which will enable information to be exchanged with HMRC by financial institutions in Gibraltar.”

These Regulations set out the scope of the Directive and also detail the authorisation process as well as what will be required from an operational perspective. The FSC’s website has a range of papers to assist licence holders in understanding the requirements, thereby ensuring that the Gibraltar funds sector continues to be able to respond proactively and positively to regulatory developments.

FATCA & Exchange of Information Gibraltar, like many other jurisdictions around the world, has had to take action to enable its financial institutions to address the requirements of the US’ Foreign Account Tax Compliance Act (FATCA). Whilst FATCA has its genesis in the exchange of information on US citizens, Gibraltar, as an Overseas Territory of the UK, also has to comply with what is known as UK FATCA ie, the exchange of information requirements introduced by the UK’s HMRC in respect of UK residents.

UK FATCA applies to all of the UK’s Crown Dependencies and Overseas Territories. Gibraltar has signed an Inter-Governmental Agreement with the UK which will enable information to be exchanged with HMRC by financial institutions in Gibraltar. The signing of a similar agreement with the US is still pending. The implementation of both agreements will be subject to local regulation and the industry bodies are working closely with the Gibraltar Finance Centre to ensure that there is a cohesive approach to the requirements, particularly for those financial institutions which may have a multi-jurisdictional footprint.

Conclusion The Gibraltar Government has taken steps to position Gibraltar’s finance centre in the mainstream EU financial services market but with a favourable tax system. Taking into account all of the above, Gibraltar makes for a highly attractive location for both individuals and businesses.


GENERAL OVERVIEWLocation Peninsula at southern tip of Spain, Self Governing British Overseas Territory, part of

European Union .Time Zone GMT +1.Population 29,000.

Capital Gibraltar.Airport(s) Gibraltar. Malaga and Jerez both within 1.5 hours.Language Business Language –English. Social language English or Spanish.Currency Pound Sterling; local notes also in issue. Euros widely accepted.

Political system Parliamentary democracy.International dialling code +350.

Legal system Common Law based on English law with local variations. Centre’s expertise Internet gaming centre, trusts, insurance, captives, protected cell companies, funds,

wealth management, yacht and vessel registration, Radio licensing, Fiduciary Services (Trust and Company Management).

TAXPersonal income tax All individual taxpayers will pay an effective rate of less than 25%. Marginal tax rates

then start to decrease when income exceeds £105,000 per annum, with any annual income over £1m being charged at 5%. There are beneficial regimes also available for High Net Worth Individuals and High Executives possessing Specialist Skills.

Corporate income tax 10% - but only where income is accrued in or derived from GibraltarExchange restrictions None.

Tax Information exchange agreements For full details, please go to www.ifcreview.com/TIEA.SHARE CAPITAL

Permitted currencies All major currencies.Minimum authorised capital No minimum specified.

Minimum share issue One.

TYPE OF ENTITYShelf companies Available.

Timescale for new entities Approximately 3 days but can be accelerated to 1 day on an urgent basis.Incorporation fees £380 to £635 approximately (by company managers).

Annual fees Basic maintenance cost £445 to £750 approximately - but depends on the need of the client.DIRECTORS

Minimum number Private company –one, Public company- seven.Residency requirements None.

Corporate directors Yes.Meetings/frequency There is no requirement as to frequency of directors meetings.

SHAREHOLDERSDisclosure Yes.

Bearer shares No.Minimum number One.

Public share registry Yes, Companies house.Meetings/frequency There is no requirement as to frequency of members meetings.

ACCOUNTSAnnual return Yes.

Audit requirements Companies are classified as small, medium-sized or large. Documents to be filed at the Companies Registry vary according to their classification;- Large companies — to file full accounts including the balance sheet, profit and loss account, notes, directors’ report and auditors’ report Medium-sized companies — filing as for large companies except that the profit and loss account may be in abridged formatSmall companies — required to file abridged balance sheet only

OTHERRegistered office Required.Domicile issues Re-domiciliation in or out available in appropriate cases.

Company naming restrictions Yes (eg, Royal or Bank).

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Gibraltar - Fact File


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London New York Hong Kong Cayman IslandsBahamas Singapore BVI Geneva Guernsey Jersey...

Where’s your next stop?

www.workinwealth.com

IFC_Work_In_Wealth_Ad_rev.indd 1 26/02/2014 14:36

table 2: top offshore Centres

Jersey 41 657 28 657 ▼13 -

Guernsey 42 656 36 649 ▼ 6 ▲ 7

Cayman Islands 43 655 39 642 ▼ 4 ▲13

British Virgin Islands 44 654 48 626 ▲ 4 ▲28

Isle of Man 51 642 41 638 ▼10 ▲ 4

Gibraltar 53 639 70 572 ▲17 ▲67

Hamilton 56 631 40 641 ▼16 ▼10

Mauritius 63 621 68 581 ▲ 5 ▲40

Bahamas 65 618 67 583 ▲ 2 ▲35

Malta 67 614 53 608 ▼14 ▲ 6

Cyprus 79 541 74 536 ▼ 5 ▲ 5

GFCI 15rank

GFCI 15rating

GFCI 14rank

GFCI 14rating

Change inrank

Change inrating

28 The Global Financial Centres Index 15

Most Offshore centres have seen their ratings improve since GFCI 14 but mosthave experienced a decline in their position relative to other financial centres;several losing more than ten places. Jersey retained its rating from GFCI 14 butwas overtaken by 13 other centres and fell from 28th to 41st place. Itnonetheless retained the top spot in the Offshore group because Guernseyalso lost six places to 42nd while the Cayman Islands lost four places to 43rd.The British Virgin Islands (BVI) entered the Top Five Offshore centres moving upfour places. Mauritius saw a rise of 40 points in the ratings and five places to63rd, and the Bahamas improved by 35 points and two places to 65th.

Offshore Centres

GFCI 11

GFCI 12

GFCI 15

GFCI 14

GFCI 13

GFCI 10

GFCI 9

GFCI 8

GFCI 7

GFCI 6

GFCI 5

GFCI 4

GFCI 3

GFCI 2

GFCI 1

450

500

550

600

650

700

750

Jersey ■Guernsey ■

Cayman Islands ■BVI ■

Isle of Man ■

Chart 27 | Selected Offshore Centres over GFCI Editions

Table 9 | Offshore Centres in GFCI 15

GFCI 15rank

GFCI 15rating

GFCI 14rank

GFCI 14rating

Change inrank

Change inrating

Jersey 41 657 28 657 ▼ 13 –

Guernsey 42 656 36 649 ▼ 6 ▲ 7

Cayman Islands 43 655 39 642 ▼ 4 ▲ 13

British Virgin Islands (BVI) 44 654 48 626 ▲ 4 ▲ 28

Isle of Man 51 642 41 638 ▼ 10 ▲ 4

Gibraltar 53 639 70 572 ▲ 17 ▲ 67

Hamilton 56 631 40 641 ▼ 16 ▼ 10

Mauritius 63 621 68 581 ▲ 5 ▲ 40

Bahamas 65 618 67 583 ▲ 2 ▲ 35

Malta 67 614 53 608 ▼ 14 ▲ 6

Cyprus 79 541 74 536 ▼ 5 ▲ 5

Top Ten. Panama also saw a significant improvement of 39 points and rose four places to 59th.

OffshoreOffshore centres have seen their ratings improve since GFCI 14 but most have experienced a decline in their position relative to other financial centres; several losing more than ten places. Jersey retained its rating from GFCI 14 but was overtaken by 13 other centres and fell from 28th to 41st place. It nonetheless retained the top spot in the Offshore group because Guernsey also lost six places to 42nd while the Cayman Islands lost four places to 43rd.

The British Virgin Islands (BVI) entered the Top Five Offshore centres moving up four places. Mauritius saw a rise of 40 points in the ratings and

five places to 63rd, and the Bahamas improved by 35 points and two places to 65th.

Performance by the other leading three centres – Jersey, Guernsey and the Cayman Islands – converges in GFCI 15.

The global average assessment for Jersey is 676, slightly up from 670 in GFCI 14; its ex-regional assessment is 641, a strong improvement from 618 previously. Other Offshore centres along with Asia/Pacific, the Middle East/Africa region and North America rate Jersey more favourably than the mean.

The global average assessment of Guernsey is 661, two points lower than GFCI 14; its ex-regional average is 617 (up from 599). Europe is the only region that assesses Guernsey less favourably than the mean.

The global average assessment for the Cayman Islands is 643 and its ex-regional assessment is 640, both considerably up from GFCI 14. Assessments from other Offshore respondents and from North America were only slightly better than the overall mean.

The global average assessment of the BVI is 635, the same as in GFCI 14; its ex-regional assessment is 620, significantly better than 587 in GFCI 14. The BVI get higher than mean assessments from four regions but European respondents were much less favourable.

Extracts from The Global Financial Centres Index 15 courtesy of Z/Yen Group

Copyright of Z/Yen Group Limited - © 1994-2014 - The Z/Yen Group of Companies. All rights reserved.

top offshore Centres over GfCI edItIons
