July-August 2011

ASSOCIATION COLUMN: Solid as a rock

Aaron-PayasGibraltar, as part of the European Union, has seen its reputation grow exponentially as its stable government and political status continues to support its reputation as a robust European finance centre.


Gibraltar’s funds industry has made it a priority to implement directive 2009/65/EC on the co-ordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (Ucits). There is a
feeling within the industry that Ucits will only become more popular given the increasing demand from investors for regulated fund products, as they seek more investor protection and transparency to avoid becoming victims of future fund blow ups.

The country’s regulator, the Financial Services Commission (FSC), has also indicated its willingness to support the expansion in this area; this is expected to translate into greater access to the regulator and a quicker approval process. The FSC is based on the model of the UK’s FSA.

A Gibraltar Ucits management company will be subject to the low corporation tax rate of 10%, however, any income which is accrued and derived outside Gibraltar will not be taxable in the jurisdiction.

There is also no VAT or capital gains tax in Gibraltar. The FSC, is also reputed for its high level of regulatory oversight and for its co-operation with the funds industry.

Gibraltar has signed 18 Organisation for Economic Co-operation and Development-compliant Tax Information Exchange Agreements moving into the organisation’s White List of countries. This in turn attracts service providers of high repute and has been accompanied by an influx of fund managers re-domiciling to Gibraltar, with its Mediterranean environment.

Gibraltar provides special tax regimes for high net worth individuals and for executives seeking to relocate. The effect has been that fund managers are not only domiciling their management companies in Gibraltar, but are themselves becoming tax residents.

A Gibraltar Ucits fund will not pay any tax in the country. Gibraltar entities are only taxed on any income accrued or derived in Gibraltar.

Gibraltar also boasts the presence of prestige accountancy firms such as Deloitte, KPMG, PricewaterhouseCoopers as well as custodian banks Société Générale, Lombard Odier and Credit Suisse. These firms are also supported by a wide range of privately-owned banks, fund administrators and accountancy and/or audit firms.

Licences
The country’s funds industry kick-started with the introduction of the Experienced Investor Fund (EIF) in 2004, which is a flexible fund vehicle that can be set up quickly. Gibraltar also allows for the incorporation of Protected Cell Companies (PCC). A PCC allows for different cells or sub-funds to be created within one entity but provides for the assets and liabilities of each cell to be statutorily segregated. Each cell can have different investment objectives and policies and even different fee structures. Ucits funds can be established as PCCs.

Unlike the Channel Islands and the Caribbean, Gibraltar is part of the EU. This allows Gibraltar-licensed Ucits funds and Ucits Management Companies to passport their licenses throughout the EU. In addition, as a small jurisdiction, the government and the FSC are flexible and responsive to the needs of the funds industry.

Gibraltar is not an island and is very accessible given the proximity of three international airports and the vast selection of flight destinations, especially from Malaga.

Aaron Payas is a member of Gibraltar Funds and Investments Association

©2011 funds europe