Gibraltar’s transition to a low tax jurisdiction (corporate tax rate of 10% from 1 January 2011 and which is applicable now for new start ups) coupled with Gibraltar’s robust regulatory environment (Gibraltar is a member of the EU having joined with the United Kingdom and is required to implement all EU Directives) has been attracting interest from investment managers and fund administrators located in other jurisdictions.

Locally based fund administrators have experienced significant growth since the introduction of the Financial Services (Experienced Investor Funds) (‘EIF’) Regulations in 2005. These regulations enable Gibraltar to offer professional investors a very flexible and cost effective fund vehicle domiciled in the European Union.

Under the EIF regulations, a fund may be constituted as a company, trust, partnership or protected company under the Gibraltar Protected Cell Companies Act 2001 and the vehicle is exempted from tax on its investment income on application to the Commissioner of Income Tax. There is no withholding tax on dividends or capital gains taxes suffered by shareholders of the fund.

EIFs have no investment or borrowing restrictions imposed on them and have therefore been used as fund vehicles for alternative investment strategies, including:

• Derivatives trading (futures, forwards, options);
• Real estate; and
• Private Equity and Venture capital.

Regulation and Corporate Governance of funds are addressed through the legislative requirements to have a locally licensed fund administrator, resident pre-approved individuals as part of senior management (two directors in the case of a company and a trustee in the case of the trust), an authorised depository (unless the fund is closed ended, or a hedge fund who has appointed a prime broker with a minimum credit rating of A1/P1), the filing of an annual return and audited financial statements with the Gibraltar Financial Services Commission.

There is no regulatory pre-approval process for EIFs. The fund administrator is required to notify the Gibraltar Financial Services Commission (FSC) within 14 days of the establishment of the fund, provide the FSC with copies of the offer documents and a legal opinion from a local lawyer with five years standing that the fund complies with all the applicable legal requirements.

Gibraltar has in place a well established legal, banking, accounting and audit platform to provide the full range of services required by funds.