Gibraltar's progressive development as a leading international financial centre has owed much to its high regulatory standards, combined with the flexibility of a small jurisdiction and the availability of a quality infrastructure at low cost.
One area that has been slower to develop than the banking and insurance sectors has been funds and their administration. This is perhaps surprising considering the advantages that Gibraltar can offer now and the potential that will undoubtedly arise from its position within the European Union and the passporting opportunities that this will bring.
Gibraltar is determined to see strong development of its funds and third-party administration business, supported by a core of expertise and administrative capability, and capacity that is already established.
Fund promoters can consider Gibraltar as a location for the establishment of funds and/or for fund administration, whether the funds are located in Gibraltar or another jurisdiction.
Fund Regulation and Supervision in Gibraltar
A wide range of funds can be established in Gibraltar, under flexible legislation and a Financial Services Ordinance (FSO) for the control of investment business. The FSO includes a basic statutory framework for the regulation of all types of collective investments.
The Gibraltar Financial Services Commission maintains a robust but flexible regulatory hand over the affairs of collective investment schemes. The Commission has no objection to the actual fund administration being conducted elsewhere as long as the fund has sufficient management presence in Gibraltar to allow for effective supervision. Similarly, funds established in other locations can be administered in Gibraltar.
The fiscal advantages of operating a collective investment scheme from Gibraltar relate to both the fund vehicle and the fund manager. Funds comprised solely of non-resident shareholders or unitholders are exempt from tax in Gibraltar. The fund vehicle may be organised as a 'tax-exempt company', which pays a flat annual fee of ?225.
Furthermore, funds are not required to withhold tax from any distribution of income or capital gains made to their shareholders, nor from accumulation of income undistributed at the end of the year.
No capital acquisition tax is chargeable to persons who receive shares in a specific undertaking by way of gift or inheritance, and no VAT is applicable to the managers of collective investment undertakings.
Fund managers may incorporate in Gibraltar as 'qualifying companies' at a very low rate of tax.
The tax concessions for both exempt and qualifying companies are guaranteed for 25 years.
Types of Funds and their Structure
It is up to each fund promoter to choose the type of fund vehicle most suitable for its intended objectives. This may range from unit trust or open-ended investment company (including an umbrella structure, if required) to closed-ended investment company.
Opportunities exist for retail schemes and more specialised niche funds, created for specific needs and purposes identified by promoters. Such niche funds may include family funds, private investor schemes, portfolio funds for high net worth individuals and those with specialised investment objectives and methods that benefit from a collective structure.
For smaller funds, operators may wish to take advantage of a fund umbrella already structured to be able to offer sub-funds to individual operators and promoters at lower cost than establishing a separate fund structure.