Gibraltar is a modern, vibrant low tax jurisdiction, located in Europe and is part of the European Union (except for Customs and Excise and VAT purposes). It offers an economy which is growing from strength to strength despite the economic climate and is a first class international finance centre white listed by the OECD, which offers a wide range of financial services.
Despite the already high standard of financial services which Gibraltar boasts, however, it is dedicated to improving and developing by updating its existing legislation and introducing new legislation in line with market needs and EU Law.
The Companies Act currently in force is almost entirely based on the Companies Act 1929 of England and Wales. Although changes to this Act have been introduced over the years, the Government of Gibraltar has recognised that a revised version of the Act is necessary. In January 2012 the initial stages of drafting commenced, and currently the Act is being circulated for consultation purposes. It is intended that the revised Companies Act shall be considered in Parliament in July with the hope that it may be in force by the end of 2013.
The new Companies Act is a modernised version of the existing legislation. It has been drafted in order to be more in line with the Companies Act 2006 of England and Wales but will also incorporate new legislation and preserve existing provisions which are unique to Gibraltar.
The Insolvency Act was passed by the Gibraltar Parliament on 8 September 2011. This Act has not yet come into operation, as it is intended that it will come into force in conjunction with the revised Companies Act.
There is little doubt that the Act reflects a change of attitude in Gibraltar towards insolvency procedures. The Act makes directors directly responsible (and even liable) for some of the consequences of decisions taken by the directors of a company. It aims to improve the plight of creditors in insolvency scenarios by handing over control of insolvent companies to individuals appointed by the creditors in defined circumstances. The Act also brings in novel procedures which attempt to save companies (which are either insolvent, or likely to become insolvent) as going concerns.
Limited Liability Partnership Act
The Limited Liability Partnership Act (the LLP Act) is also due to come into operation once the Companies Act is enacted.
The LLP Act will offer a new business format to businesses in Gibraltar. A limited liability partnership (LLP) is a hybrid between a partnership and a limited company. It offers a combination of the flexibility of a partnership and protection from liability of a company and is likely to be favoured by firms who currently operate as a general partnership.
Directive on Alternative Investment Fund Managers
The Alternative Investment Fund Managers Directive (AIFM) is a piece of EU legislation which seeks to regularise forms of investment management such as hedge funds and private equity. Managers of hedge funds and private equity providers will be regulated by a common body. It is envisaged that this will help the growth of the investment market, and introduce new competition in a non-discriminatory way.
The AIFM Directive should be transposed into national legislation by the 22 July 2013.
Tax Information Exchange Agreements
Tax Information Exchange Agreements (TIEAs) were created by a working group of the Organisation for Economic Cooperation and Development (OECD) in order to promote the international co-operation of the exchange of information in respect of tax matters.
In 2009 Gibraltar commenced the process of entering into TIEAs with several jurisdictions. Gibraltar’s main objective of entering into the TIEAs was to achieve the ‘white list’ status on the OECD list. A jurisdiction must enter into 12 TIEAs in order to be placed on the ‘white list’. As Gibraltar was concerned about the quality of the agreements made rather than just the quantity, the Government ensured that agreements were put in place with jurisdictions which would utilise the powers created under the agreement.
Gibraltar obtained a ‘white list’ status in 2009 after signing 12 agreements. Since then Gibraltar has continued to enter into further TIEAs and has now signed a total of 26 agreements and is open to negotiate TIEAs with any other jurisdictions that are interested.
Income Tax Act 2010
The Income Tax Act was enacted in 2010 and came into effect on 1 January 2011. The purpose of the Act was to give effect to new arrangements which are compliant with EU competition law and the OECD code of conduct.
One of the most drastic changes brought into force by the Act was the move away from the two-tier company tax system where companies owned by and trading with non-residents paid no tax on profits, and companies owned by and trading with residents paid tax on profits. The Act now ensures that all companies, whether controlled by Gibraltar residents or otherwise, are taxed at a rate of 10 per cent on their profits or gains provided they are accrued in or derived from Gibraltar. It is useful to note that for the purposes of the Act, a company is considered resident in Gibraltar if the management and control of its business is carried out in Gibraltar.
Transposition of all European Union Directives
It was announced on the 4 March 2013 that Gibraltar was up to date with the transposition of all relevant EU directives. The Government has indicated that they wish to continue with transposition of all new directives in a timely manner as this is vital in order to maintain a strong reputation for the implementation of EU law.
The adoption of the Income Tax Act 2010 and the signing of the TIEAs have assisted Gibraltar in becoming a well-respected finance centre. The Companies Act, Insolvency Act and Limited Liability Partnership Act will improve the quality of the diverse financial services which Gibraltar already offers and the timely transposition of EU directives ensures that the services and products offered are of the highest standard required of an EU state. This, together with the economic stability it offers, makes Gibraltar an attractive and efficient finance centre strong enough to rival any other.
Richard Buttigieg, Partner and Danielle Villa, Associate, Corporate and Commercial Department, Hassans, Gibraltar