Gibraltar’s Fund Regime
Gibraltar has strengthened its position as a leading player in the fund industry. A solid infrastructure, robust regulatory regime and favourable tax system has allowed Gibraltar to uniquely position itself as a high-quality, low-cost fund servicing jurisdiction.
It remains, by virtue of its constitutional relationship with the United Kingdom, fully a part of the European Union and therefore complies with all its laws and directives. It enjoys political and economic stability and as a result, prosperity. As a result of its compliance with all EU financial services regulation, Gibraltar has achieved OECD White List status and remains committed to complying with the European standard of regulation.
Taxation of a fund in Gibraltar
Gibraltar offers a corporate tax rate of 10% and all income received by a Gibraltar fund accruing and deriving outside of Gibraltar is not liable to taxation. In addition to this, there is no VAT or capital gains tax and no dividend or withholding tax for non-Gibraltar residents.
Type of funds that can be established
The two main types of fund that are established in Gibraltar are Private Funds (PF) and Experienced Investor Funds (EIF). The introduction of the distributed ledger technology (DLT) legislative framework in January 2018 by the Gibraltar government has led to an increase in demand for setting up “crypto-funds”, which can be structured either as Private Funds or EIFs, although the EIF vehicle is strongly recommended due to the high risk nature of managing crypto assets.
As a collective investment scheme, the Private Fund can be made available privately to an identifiable group of up to 50 participants. The main advantages of a Private Fund in Gibraltar are its speed to market, lower cost, and the need for just a simple registration with the Gibraltar regulator. It is essential, however, for an Offer Document to be drafted by a local legal adviser and the criteria that will enable investors to qualify as “private” would need to be defined.
In relation to crypto funds, the Private Fund is generally only set up for the purpose of one investor, normally where the fund promoter wishes to trade their own digital assets within a formal fund structure.
Experienced Investor Funds (EIFs)
EIFs are authorised and regulated by the Gibraltar Financial Services Commission (GFSC) and are created as collective investment schemes that are solely for experienced investors. They are structured differently to private funds in that they allow for a wider range of investments, from traditional asset classes to alternatives, and there are no diversification requirements. In addition to this, an EIF can be marketed to an unlimited amount of investors as long as they meet the definition of an experienced investor. Due to these characteristics, the EIF is the main type of fund used to support investments in cryptocurrencies, tokenised securities and other digital assets which has been the main driver of growth for Gibraltar’s fund industry.
The main features of an EIF are:
• Regulated investment scheme
• No limit to the number of investors
• Must draw up a Private Placement Memorandum, offer document or prospectus
• Must have policies on how to deal with custody of crypto assets, AML and security risks
• A legal opinion from Gibraltar lawyer is required to confirm compliance with EIF Regulations
• Pre-launch approval mechanism, which means that no regulatory approval is required before the fund can start to raise capital – speed to market
• Can be self-managed
• No investment or borrowing restrictions
• Variety of structures available, such as a Gibraltar limited company or a Protected Cell Company
• The Board of Directors must include 2 Gibraltar resident and authorised EIF Directors, although it is possible to apply to the regulator for a waiver to reduce this to 1 local authorised director, subject to competency requirements. Other directors may be resident elsewhere
• A regulated fund administrator is required
• A company manager and secretary is required
• Must undergo an annual audit by an approved auditor
Gibraltar Funds & Investments Association (GFIA)
GFIA is an association that represents the interests of the funds and investments sector in Gibraltar. It is very active in the development of the Gibraltar funds industry, advises the Government of Gibraltar on fund matters and engages with industry practitioners to provide training and guidance related to funds as well as publishing codes of conduct for Gibraltar Collective Investment Schemes.
Abacus is a member of GFIA and adheres to the high standards of Gibraltar’s sophisticated fund industry. More information on GFIA can be found on their website via the following link: https://gfia.gi/