The conduct of investment services, fund management and administration in Gibraltar is governed by the Financial Services Legislation. Detailed rules and regulations have been issued under several acts to give effect to all EU directives relating to investment services and the regulation of all types of collective investments, including Undertakings for Collective Investment in Transferable Securities (UCITS) which are harmonized investment funds within a European context. Gibraltar transposed the Alternative Investments Fund Managers Directive in July 2013, firmly placing the jurisdiction as an EU domicile of choice for managers and funds in the changing regulatory landscape.
Gibraltar enjoys passporting rights with respect to investment services. This means that providers of investment services may, based on the authorization granted locally by the FSC, operate in other EEA member states. Fiscal advantages for both the fund vehicle and the fund manager contribute to Gibraltar’s attractiveness for operating collective investments. Gibraltar operates a territorial basis of taxation where by income accrued and derived there is subject to tax.
A Gibraltar -based corporate fund manager providing investment services is required to be licensed and regulated in Gibraltar and is subject to 10% tax on its profits (except that the profits of any branch or permanent establishment of the licensee would not be subject to taxin Gibraltar, to the extent that those activities are carried out outside Gibraltar).
Most Gibraltar funds are set up as corporate vehicles and derive their income from capital gains (which are not subject to tax there) or passive investment income, such as bank interest, dividends from listed investments or dividends from other companies, all of which are exempt from tax under the Income Tax Act 2010.
Funds and their administration is a sector of the finance industry that has witnessed steady growth in recent years. Investors in an EIF must have a net worth in excess of €1m or invest a minimum of €100,000 (either in a single fund or across a number of EIFs).
Within 10 days of the establishment of the fund, its administrator must provide the FSC with written notification of the fund’s establishment, a copy of the offering document, an opinion from a Gibraltar lawyer that the fund complies with the EIF regulations and any other document required by the FSC. A pre-approval option is now available whereby a fund may file the above for registration with the regulator at least 10 working days before the establishment of the fund, thereby enabling the fund to be deemed authorised at the time it launches. An EIF must have two Gibraltar ordinarily resident directors who have been pre-approved by the FSC, an administrator and a depository (unless the fund is a closed fund or the regulator exempts the fund from this requirement).
In April 2012, the definition of an EIF investor was widened to include professional clients under the Markets In Financial Instruments Directive and investors who invest a minimum of €50,000 on the advice of a professional adviser. Funds may appoint non-Gibraltar licensed administrators, subject to certain conditions, for instance, that they are established in the EEA or jurisdictions subject to an equivalent legislative and regulatory regime in relation to the administration of funds.
The Gibraltar Stock Exchange was launched on 1 November 2014. Its initial focus will be on the listing of open-ended funds, with plans to extend listing to closed-ended funds and insurance-linked securities in 2015.