GIBRALTAR INTERNATIONAL - Gibraltar Budget 2012
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p10 QROPS p16 Funds Aug/Sept/Oct 2012
GIBRALTAR
INTERNATIONAL
FINANCE l
INVESTMENT l
BUSINESS
Gibraltar
Budget 2012
www.gibraltarinternational.com
S PON SORS
Gibraltar International Magazine is grateful for the support of the finance industry
and allied services (with the encouragement of the Finance Council)
in the form of committed sponsorship.
We would like to thank the following sponsors:
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www.gibraltarinternational.com GIBRALTAR INTERNATIONAL 3
Aug/Sept/Oct 2012 EDITORIAL COM M ENT
Volume 18/ Number 3
Are ‘big ideas’ needed?
Contents F
BUDGET REPORT p6
abian Picardo’s first go at setting out his economic stall
as Gibraltar’s Chief Minister, did not disappoint, but
neither did it excite. The now commonplace warning of
outside financial effects on the jurisdiction’s economy,
particularly from a troubled Euroland, was there in his Budget
Not allowing ‘external forces’ to stifle economic
speech, and he provided pointers that justify caution.
growth Corporation Tax, a main source of revenue, may not hold
up – there are early signs of weakening in this revenue stream
BUDGET p8 - and import tax may not see growth, he reported.
Gibraltar budget 2012 Finance and Gaming Minister, Gilbert Licudi, pointed to
“a serious economic effect” on his e-gaming sector (that
PENSIONS p10 contributes over £45m to the economy), from UK plans for a
‘High moral ground’ sought for Gibraltar consumption tax on bets placed by its residents that will help
QROPS rebirth local firms and harm Gibraltar’s.
Yet Picardo, determined not to be ‘cowed’ by these
BUSINESS p12 external effects, presented a budget “to deliver social justice
Looking to the future: and to improve the quality of life of all our citizens [population
Why creating a business plan is good for business 29,000], whilst making Gibraltar a great place to do business
with the rest of the world”.
eGaming p14 And to that end Picardo’s Socialist Liberal government has
Point of Consumption Tax cut personal taxes, reduced import duties – some eliminated
altogether – on a range of goods, announced greater
FUNDS p16 investment in people and facilities in the health and social
Gibraltar equipped to assist as Swiss fund services, raised Civil Service pay and minimum wages, whilst
improving prompt rates payment discounts and axing planned
laws are tightened electricity price rises.
Despite a perhaps predictable total disagreement between
GAMING p26
government and opposition over the level and calculation of
More companies moving in despite UK the jurisdiction’s gross and net debt levels and interpretation of
gaming tax plan revenue surplus, there’s no denying Gibraltar’s economy seems
on a sounder footing than almost all other EU countries.
BUSINESS ROUND UP p28 It would be churlish not to recognise that this basis for
going forward was achieved under the previous government’s
BUDGET EXTRA p30 16-year tenure, even if some things might have been done
DTAs among moves to attract business differently, (examples being, building of the over-sized and
costly new airport terminal and the not building of a vital
power station to replace three clapped out ones now).
GIBRALTAR INTERNATIONAL MAGAZINE Peter Caruana, now Opposition Leader, claims to have
Published by Gibraltar No part of this publication may be created an environment to deliver “unprecedented prosperity,
International Publications Ltd. reproduced without the written stability and progress” for Gibraltar.
G7 Cornwall's Centre permission of the publishers. It is this inheritance that enables the present government
PMB 104 The publishers have tried to to move forward and achieve its target 10.5 per cent average
PO Box 561 ensure that all information is
accurate, but emphasise that they
year-on-year growth in Gross Domestic Product (GDP) until
Gibraltar
cannot accept responsibility for 2015. The question is how.
any errors or omissions. The After eight months in office, a youthful Fabian Picardo
Editorial enquiries publishers accept no responsibility has given retailers some encouragement to stimulate trade –
editor@gibraltarinternational.com for statements made by cutting import tax on a range of items that will appeal to cross-
contributors or for any claim
made in an advertisement. border tourists and residents – and business generally.
Advertising enquiries But so far, there is no sign of the ‘big ideas’ that may be
sales@gibraltarinternational.com © 2012 Gibraltar International necessary to propel the economy forward. BRIC countries –
Publications Ltd. Brazil, Russia, India and China – have been singled out as
Design
bilgoker@gmail.com offering good potential for Gibraltar’s finance centre. More
on-line gaming companies – though only few because of tough
UK Agent: regulatory and reputational requirements –are being attracted
Tel: + 44 (0)1993 703560 and they do generate good revenue for Gibraltar.
Specialist areas such as the funds sector, private client
business, overseas pensions and insurance all have new
opportunities from recent and proposed law changes.
Only time will tell whether all this is enough. But there is
no doubting the enthusiasm with which this new government
is facing up to the task.
Ray Spencer
4 GIBRALTAR INTERNATIONAL www.gibraltarinternational.com
B U DG ET REPORT
Not allowing ‘external forces’ being passed on to customers
and not pocketed by retailers”.
But the duty on cigarettes
to stifle economic growth in Gibraltar – one of the low-
est-priced tobacco locations in
Gibraltar’s government is “on track” to deliver its predicted growth of Europe - rises by 10p a packet,
50 per cent in the economy in the next four years, “despite the a move Picardo recognises as
continuing European and economic recession” “sensitive, but it is the right
thing to do in support of our
The territory’s nominal Gross “when Sterling rises against a Minimum wages rise 5.5 agenda to stop smoking in
Domestic Product (GDP) weaker Euro our exposure to per cent (to account for infla- enclosed public places”!
was forecast to have reached exchange rate variances tion since last changed 18 However, computer soft-
£1.14bn by end March 2012, a becomes marked”, Picardo months ago) to £5.70 ph, pen- ware now has no import duty
rise of 8.3 per cent in a year for said. sioners’ earned income “to promote Gibraltar as a
which the Socialist Liberal What might be good news becomes tax exempt (as are place to do high tech business”,
Government of Fabian Picardo for cross frontier workers Gibraltar pensions already), nor is there duty on equipment
had responsibility for just four exchanging Sterling wages to electricity and water charges for production of sound or
months since winning office. Euros, was not so good for are held, and a large proportion video recordings in the music,
Once the effect of inflation retailers when goods rose in of workers effectively will have television or cinema industry as
has been stripped out, the cost for Euro purchasers, he lower income tax. a means of promoting “the use
economy’s increase to £949m, pointed out. of Gibraltar as a jurisdiction
amounts to 5.1 per cent for But Gibraltar should not Import duty cuts for the creation and ownership
Real GDP – the measure used be “cowed” and apart from There were cuts also in import of intellectual property”.
by most European govern- reducing both national gross duty “to stimulate the retail And duty on imported
ments, and much more than for and net debt, he and his minis- sector” and “make Gibraltar a yachts, pleasure craft and other
other territories. ters announced a series of more attractive destination for sea going vessels has been
However, like his predeces- measures to assist the economy shopping” both for tourists and removed for vessels over 18m
sor, Chief Minister Picardo and improve the population’s locals, rather than use on-line length and halved to 6 per cent
warned in his Budget speech financial position. retailers, Picardo declared. for smaller ones in moves
in July of external effects for Civil servants get a 2.7 per Portable computers, TVs, designed “to stimulate the use
which Gibraltar was not cent pay rise this year and the Hi-fi equipment, DVDs and of Gibraltar by superyachts”.
insulated. promise of a slightly larger one CDs have no duty (down from To encourage “responsible
“A collapse of the Euro, or in 2013/14. “As the engine for between 6 and 12 per cent pre- business who pay on time”, the
even the departure from the growth for Gibraltar and facili- viously), while the duty was discount for early payment of
Euro of one or more countries tators of the private sector, the halved for mobile ‘phones, per- rates by offices, workshops,
would have seismic effects well public sector needs to be ade- fumes and make-up, clothing, construction and manufactur-
beyond any one country or the quately resourced and systems footwear, watches and jewellery. ing industries is being doubled
eurozone”, he noted. of work in the public sector And he warned the gov- to 10 per cent, those for
need to be brought up-to-date ernment will “be keeping a bars and restaurants raised fur-
Not immune for the benefit of everyone in close eye on how prices are ther to 40 per cent until
Sterling was not immune to the our community”, the Chief affected by these decreases to autumn next year, and there is
problems affecting the Euro: Minister asserted. monitor whether reductions are a 50 per cent rates cut for the
first year trading of start-up
businesses.
New power station within four years
A decision on what could be the largest single the right combination of security of supply,
Bigger budget
capital expenditure item in Gibraltar’s history – reduction of polluting emissions, noise surplus
a new power supply to replace three aged, nuisance and technological future proofing.” An originally estimated budget
polluting and increasingly unreliable power A decision, that might involve waste surplus for 2011/12 of £21m is
stations – is close, but the government will not management and renewable energy solutions,
be rushed. is expected shortly and once taken the now expected to be £58m
Frequent power cuts in recent times are government “will move very fast and we are greater at £79m, but depart-
seen as potentially damaging to business, aiming for implementation within this term of mental expenditure, public
particularly the Finance Centre and e-gaming office”.
community, which relies on round-the-clock Pressure from environmental action groups debt charges and the cost
availability of service. for a speedy result was understandable; “but of government pensions also
New Chief Minister Fabian Picardo saw a we must make the right decision, not the rose, which together reduce
£350m oil-fired power station planned by the fastest decision”, Picardo asserted.
previous administration as too costly and not The Government’s choice of energy the anticipated net surplus to
right for the jurisdiction. sources would reflect its commitment to £31m, Picardo reported.
In his state-of-the-nation Budget address, ensure Gibraltar’s carbon and noise pollution
he emphasised: “We are taking steps to ensure emissions are minimized.
Continued on page 18
6 GIBRALTAR INTERNATIONAL www.gibraltarinternational.com
B U DG ET
Gibraltar budget 2012
Social insurance
Despite the current worldwide There was no change to social insurance
economic problems and the fact that contributions; these remain capped at a
this is the first budget for the new maximum of £3,023 for employers’ and
employees’ contributions in total.
Government, there were relatively few
significant changes announced in the Import duties
budget. Neil Rumford, Director, Head of Reductions were made to import duties as
follows:
Tax, Baker Tilly (Gibraltar) Ltd, reports
Portable computers, software From 6%
and memory cards to 0%
Corporate tax Allowance Based System Perfumes, beauty products,
watches, clothing and footwear
From 6%
to 3%
As expected, there was no change to corpo- The “reduced rate” which applies to the
TV’s, hi-fi and other electrical From 6%
ration tax. The standard rate remains at first £4,000 of income, has been lowered audio or visual equipment to 0%
10%, and there were no measures to from 17% to 15%. The “low income Jewellery and mobile phones From
12% to 6%
change the way in which the tax is applied. earners’ allowance” of £8,000 has been
DVD’s and CD’s From
There are a number of changes initiated by increased to £9,000. To smooth the tax 12% to 0%
the previous government which were not impact of moving from income of £9,000
mentioned in the budget speech, although (nil tax payable) to income of between Import duty on cigarettes was
we understand these are still in the pipeline. £9,000 and £19,500, tapering relief has increased by approximately 10p per
These include widening the definition of been introduced. It is not yet clear how packet.
which travelling and entertaining expenses this differs from the additional allowances
are deductible and updating legislation on that already applied to persons with earned Rates
the allocation of expenses between taxable income of less than £19,500. More discounts were announced for the
and non-taxable income. The following changes were also made: early payment of rates for business – gener-
The Chief Minister commented that l Mortgage interest relief increased to ally from 5% to 10%, a first-year 50%
revenue from corporate tax had increased cover interest on capital of up to £350,000 discount for new start-ups, and increased
significantly, but sounded a note of caution, (previously £300,000) on loans for residen- discounts for bars, restaurants and casinos
saying that this needs to be monitored very tial property occupied by the taxpayer; in connection with their co-operation in the
closely. Given the change from the old to l Medical insurance – increased from smoking ban in such establishments.
the new system of tax collection, with an £1,120 to £1,500 on eligible premiums;
element of catching up in terms of l Nursery school allowance – increased Income, expenditure
payments, this seems sensible. from £1,023 to £2,000; and public debt
l Income from approved occupational The budget surplus for 2011/12 was
Personal tax pension schemes are now exempt (previ- reported as being £31m (it would have
The two alternative systems of personal tax ously these were zero-rated, so the pension been higher were adjustments in respect of
remain, with the system that benefits the income increased the tax rate applied to previous years excluded).
taxpayer being applied. other income); Gross Public Debt is forecast to fall
l The cap on contributions to approved from £518m to £450m by 31 March 2013,
Gross Income Based System personal pension schemes and retirement representing a fall from 46% to 40% as a
Little change was made here; only the annuity contracts has been removed, percentage of estimated GDP for 2011/12.
introduction of allowances for mortgage although the maximum tax relief on such Estimated Net Public Debt was not
interest of up to £1,000, and of allowances contributions remains at the previous level; disclosed in the budget speech; this is signif-
of up to £5,000 for certain expenditure on l A significant increase in tax relief for icantly less than gross debt, due to deposits
the frontage of buildings. Under this disabled individuals. in the Gibraltar Savings Bank (which are
system no taxpayer pays an effective (i.e. As most taxpayers use the Gross included in gross debt) being backed by
overall) rate of tax of more than 25%. Income, and not the Allowance Based bank deposits made by Government.
Effective tax payable can be shown by way system, the above changes are of limited The fact that so few fundamental
of example: overall impact. changes were made by the new
Government hopefully indicates that the
Total taxable income £ Effective tax rate %
Individuals enjoying special concessions new tax system applying in 2011 onwards
17,000 12%
Concessions available for qualifying High will prove to be viable for government
40,000 20%
Net Worth Individuals (Category 2 finances and continue to attract business to
From 105,000 to 500,000 25%
status) and High Executives Possessing Gibraltar.
1,000,000 19%
Specialist Skills (HEPPS) remain www.bakertillygibraltar.gi
Income above £1m is taxed at 5%. unchanged.
8 GIBRALTAR INTERNATIONAL www.gibraltarinternational.com
PEN S ION S
‘High moral ground’ sought
for Gibraltar QROPS rebirth
personal pensions with assets of £500,000+ But as Gibraltar International was
by Ray Spencer were attractive business prospects for going to press and Gibraltar moved to build
Gibraltar’s fund administrators, a diminu- a reputable base for QROPS, Guernsey
S
ome Gibraltar trust fund administra- tion of equity values worldwide meant revealed its latest plan to re-open for
tors are linking with counterparties in the average of transfer values now QROPS business by introducing a reported
other jurisdictions – particularly was £180,000, according to the latest 20 per cent tax on distributions to gain
Guernsey – as a fast track means to independent research. HMRC acceptance.
gain “potentially huge” new business for the “To cope with the sub-£200,000 Knight assured his seminar audience:
finance centre through attracting expatriate market, cost effective solutions are needed “There will be no pension-busting, no non-
pensions to The Rock. and other, more established jurisdictions compliant investments permitted as has
And in a bid to take “the high moral such as Guernsey, (where 300+ pension occurred in some other jurisdictions with
ground”, an Approved Code of Practice for schemes were delisted in March from QROPS.”
adoption in late summer is being developed HMRC’s ‘approved’ list), have contacts and None of the 10 existing Gibraltar
in conjunction with Gibraltar’s Pensions processing abilities already in place”, Knight QROPS were delisted by HMRC, but the
Regulator who will draw in part on the best said. new Tax Act is retrospective to mid-2006 so
of what is being operated elsewhere, as well That could provide Gibraltar’s new- any distributions made must pay the tax.
as industry suggestions. found QROPS position - where distribu- Transfers out of pensions schemes can only
be made to jurisdictions applying rules at
least as strong as those now applying in
Photo’s by Jim Watt
Gibraltar.
Financial Services Minister Gilbert
Licudi, opening the seminar, said it did not
take long from December for the new
Government “to be persuaded that it was
the right thing for Gibraltar.
Gilbert Licudi Marcus Killick Steven Knight “It [the legislation enabling QROPS]
clearly made sense for the professionals and
For the past three years, the sector tions limited to those over 55 years old, are for Gibraltar generally – for the expansion
voluntarily halted acceptance of new taxed at 2.5 per cent when at least 70 per of the industry and creation of jobs, and for
pensions when the UK Inland Revenue cent of the fund remains for future pension the revenue that will result from tax on
queried, amongst other things, Gibraltar’s provision - with new and wider opportuni- distributions.”
application of Zero Rate tax. ties through working with others, rather
The moves follow recent amendments than being in competition. International interest
to the Gibraltar Tax Act that members of As an example, his Castle Trust Group Licudi emphasised that it was important to
the Gibraltar Association of Pensions Fund has established working relationships with learn from what other jurisdictions had
Administrators (GAPFA) believe will at last two Guernsey-based QROPS providers with done – from Guernsey for example. “We
make it possible to again attract transfers of a “fully compliant QROPS solution on a are certainly excited about the prospects and
Qualifying Recognised Overseas Pensions high volume and economic margin the business this signifies and expansion of
Schemes (QROPS) from the UK. platform; that means Gibraltar assumes the the Finance Centre. We know we are in
ultimate compliance responsibility, while good hands, with the expertise and profes-
Working partnerships Guernsey provides the established back sionalism within Gibraltar, and we also
In what is described as a ‘win-win’ situation, office and administration skills and know there is a lot of international interest”,
companies operating Gibraltar’s “fully procedures. he declared.
compliant” business model can develop new “Both jurisdictions gain income and But on whether Gibraltar’s law changes
working partnerships in jurisdictions where profitable on-going business”, Knight would now satisfy HMRC, Licudi told
pension schemes have been removed declared, “but Gibraltar providers retain Gibraltar International: “There have been
from the UK Inland Revenue’s (HMRC) ultimate responsibility to ensure compliance discussions. We are very confident we have
‘recognised’ list. with HMRC rules and practice.” the right things in place, but it is up to the
That was the view of Steven Knight, This approach is to cope with an industry to get approval for each of the
GAPFA chairman, at an industry seminar expected dramatic rise in applications to schemes.”
“QROPS – care, compliance and certainty” transfer overseas pensions to the territory GAPFA secretary Chris White, Partner
attended by more than 80 professionals in and is in addition to resources existing and Tax specialist at law-firm Hassans, was
late June. locally and being further developed by
He argued that while large imported individual trust companies. Continued on page 20
10 GIBRALTAR INTERNATIONAL www.gibraltarinternational.com
B U S I N ES S
Looking to the future:
Why creating a business plan
is good for business
motivates you, so consider how you
By Paul Wharton, Head of Intermediaries would answer these questions:
and Corporates, Barclays (Gibraltar) l Why do you want to go into business?
l What do you want to achieve?
W
riting a business plan is your plan match l Will the business supplement your
one of the most important those in your income or replace it?
tasks you will undertake financial forecast, if
when starting a business. they don’t, the plan Describing your business
It’s a dynamic document used to set could lose credibility. When it comes to describing a business, I
targets and collate ideas, and can be The following headings will help find it useful to do a SWOT analysis
used to ensure they are realistic and structure your business plan: whereby you consider the Strengths,
workable. A good business plan will Weaknesses, Opportunities and Threats to
not only help promote the business, it Table of contents your business. Doing this will deepen your
will also act as a tool to attract A table of contents lists the main areas of business understanding and highlight areas
funding. Creating a business plan can the business plan along with page which need addressing. Next, do a PEST
sometimes be perceived as a difficult numbers. Clarity is vital; a logical, well- analysis, looking at the Political,
task, but using a checklist to ensure all structured document is more likely to Economic, Social and Technological
required information is included can inspire confidence in potential investors. aspects of the business. This will help you
mean the process is a relatively consider the bigger picture and generate
straightforward one. Executive summary new ideas.
The Executive Summary is a brief
Approaching the task overview of the plan and should be no Gibraltar
Firstly, get your ideas down on paper. more than two pages. Being the first If you are considering starting a business
Remember to be realistic, concise and section the investor will read, it must be in Gibraltar, it is good to know that the
clear. You will refer to your plan later on engaging and well written. jurisdiction offers the following:
to monitor progress. When reading this section, investors l Well regulated with a stable and
Do your research. For example, who will want to know the answers to the political economic environment which
is your target audience and what will they following questions: benefits from EU membership and access
think of your product? Do you have a l What gives your product the edge over to the EU financial services market. It
name for your business? Remember, the the competition? also has a stable currency with low levels
name you choose should reflect the image l What experience do you and/or your of corporation tax and minimal
you want to project, as well as being colleagues have in the area you want to restrictions in the movement of capital or
memorable and original. work in which will make the venture repatriation of dividends which benefits
If you hire employees, even part-time, successful? from no VAT or capital gains tax.
it’s vital to familiarise yourself with l Is your business idea viable and will it l An established finance centre boasting
employment law and understand how to be profitable? some of Europe’s best professionals in the
build a motivated and efficient workforce. l How will investors get their money areas of legal, accountancy, banking and
The purpose of a business plan is to back or get a good return when you sell insurance with a first class
outline the objective of the business, so the business or buy their shares? communications system and an
include the following: What the business You should indicate the amount of international airport.
will do, the products or services it will money you and your business partners Gibraltar offers all of the above and
provide, your target audience, financial will be investing, the amount of additional much more, making it an exciting
targets and any potential threats to the finance required and why. If you can talk prospect for potential business owners.
business. about how the investment will benefit the Remember, the first step on the road
It’s important that your business plan business, so much the better. to success for any business is a good
stands out from the crowd, especially if business plan. I wish you all the best in
you’re hoping to use it to generate the Aims and objectives your business endeavours.
support of an investor or lender; it should Consider what investors will want to Paul Wharton is writing in his own capacity
be easy to read, concise, honest and know about you and your business when and none of the above is intended to express
realistic. It’s vital to ensure there are no you meet, and prepare accordingly. the views or opinions of Barclays Bank PLC.
contradictions. So make sure the figures in Essentially, they’ll want to know what www.barclays.com/wealth
12 GIBRALTAR INTERNATIONAL www.gibraltarinternational.com
eGaming
Point of Consumption Tax
Following the recent publication of should they even be willing to offer their
services in future.
KPMG’s Gibraltar eGaming Summit Unburdened by the traditional
Report, Archie Watt, eGaming constraints of industry, the modern
business model for eGaming firms is one
Specialist at KPMG, looks at a key of dispersion to places where potential
topic highlighted at the Summit: the assets reside. Contrary to the benefits
UK Government’s new Point of suggested above the UK’s arguably
protectionist principles could serve to
Consumption Tax policy and its encourage further fragmentation of the
effects on the sector. industry and its supporting elements to
jurisdictions further outside of the UK.
H
M Treasury and HM Revenue provide the facilities through which a UK This could result in the re-emergence of
and Customs’ industry customer may place a bet. Broadband unregulated, or worse, black markets
consultation window suppliers for example, or those companies chasing the price gap created by the
concerning the UK associated with data protection, storage or proposed tax and levy charges. These
Government’s recently announced Point transferral, could be construed as operators may have no intention of
of Consumption Tax on the online facilitating the provision of online - yet to entering into a system in which taxation
gaming industry closed on 28th June. A what extent are they implicated from a and regulatory adherence is a concern,
summary of responses is due to be issued, legislative standpoint? And to what extent, ultimately with negative consequences for
after which draft legislation will be as is envisaged, are they responsible as players – which is surely not what the UK
prepared before being exposed to third party suppliers for the conduct of Government wants.
technical consultation prior to the policy operators who refuse to pay tax? More
being implemented on 1st December, importantly, how might this affect the Rapid fallout
2014. future interactions of these companies with The potential for rapid fallout even prior
At our April eGaming Summit, Maria the eGaming industry and how might this, to implementation is, therefore, great and
Brennan, Branch Head of Gambling Taxes in turn, affect European domestic although these potential ramifications will,
at HM Treasury, explained that the economies? of course, be subject to in-depth
reasons for the UK’s proposed regime were consultation; I would suggest that pre-
threefold - to promote fairness and a level Mobile gaming emptive measures are taken in order to
playing field between UK and overseas Another concern surrounds the topic of guard against or at least soften the impact
operators in terms of duty liability, to both identifying which customers reside of those taken by these industries. Whilst it
improve the competitiveness of the UK tax within the UK and non-residents gambling is true that the proposed measures will
system, and to ensure that remote within UK territory who are still subject to impact with disproportionate severity upon
gambling makes a fair contribution to taxation. At the Summit, Andy Grimsley smaller jurisdictions, like Gibraltar, many
public finances. It is fair to say that it has of HMRC explained that the UK of which have largely been responsible for
been met with significant concern from Government envisages that operators will the squeezing out of such negative
regulatory authorities, governmental be given the responsibility of identifying practices as unregulated online gambling,
bodies, operators and satellite industries where in the world their customers wager the imperative to assess the likely impact
alike as to its repercussions. It is on these and explained that it would be for them to of the proposed regime spans beyond
issues that are likely to impact upon the decide how this might best be achieved. single jurisdictions to a pan-European and
operations of the wider eGaming sector – However, with the rapid growth of mobile increasingly trans-global level. At KPMG,
not just the operators themselves - that I gaming, this represents an increasingly we are committed to helping those likely
would like to focus. difficult and very costly undertaking. Over to be affected by these changes, cut
the past year, the number of bets made through the complexity of this increasingly
Critical partners over mobile has more than doubled to 44 important debate, and are happy to
One of the most pressing concerns raised million, whilst £1billion was wagered over support the Gibraltar Government in their
was the importance of establishing the the course of Euro 2012 alone. One efforts to remove the misconceptions held
extent to which critical partners of the method would be to determine where in by the UK Government in this area and
eGaming industry would be subject to the world the money was coming from but help design a taxation regime that is felt to
taxation under the new regime. eGaming this would implicate companies such as be fair by all parties concerned.
supply often involves a number of critical Barclaycard which facilitate transactions
partners – software providers and affiliates including payment of winnings. Again, the To find out more or to view the KPMG
– though associated with the provision of extent to which these acquirers would be Gibraltar eGaming Summit Report
gambling, may not necessarily directly liable to taxation will need to be assessed, please visit www.kpmg.com/gi
14 GIBRALTAR INTERNATIONAL www.gibraltarinternational.com
FU N DS
Gibraltar equipped to assist as
Swiss fund laws are tightened
Peter Young bring the Swiss fund management arena in
line with new international regulatory
& Anthony Jimenez standards. At the forefront of changes to
report on behalf of the global regulation of fund management is
the introduction the Alternative
Gibraltar Funds and Investment Managers Directive (AIFMD)
Investment Association in Europe. AIFMD, which came into force
(GFIA) on 21st July 2011 and is due to be
implemented by EU member states by July
G
ibraltar’s business ties with 2013, provides that managers of
Switzerland were celebrated alternative investment funds (AIFs) will be
last year when the Gibraltar subject to mandatory regulation, subject
Finance Centre invited guests to certain exceptions (such as those
to join members of Gibraltar’s relating to the value of assets under
commercial and finance community at management). After September 2015
special “Gibraltar Day” conferences in under AIFMD, the management of AIFs
Zurich and Geneva. The guest speaker may only be delegated to alternative
at both events was the then Chief investment fund managers (AIFMs)
Minister of Gibraltar, the Hon. Peter domiciled in third-party countries, such as
Caruana QC, who, during his speeches, Switzerland, if these AIFMs are subject to
emphasised the benefits and solutions regulation equivalent to that under
that Gibraltar can offer Swiss AIFMD. The regulatory authority of the
businesses. One Gibraltar industry place between July 2011 and October third-party country responsible for the
which has seen substantial utilisation 2011 and is currently with the Swiss AIFM must also cooperate with the
by the Swiss in recent years is Parliament for review. Implementation is regulatory authority monitoring the AIF.
Gibraltar’s booming funds sector; planned for early 2013. Under the current provisions of the CISA,
Gibraltar’s emergence as a funds Swiss fund managers would most likely
domicile jurisdiction began in 2005 Regulation in Switzerland not meet these requirements. If the law in
when it unveiled its Experienced Switzerland, under its CISA, currently Switzerland is not amended, Swiss fund
Investor Fund (EIF) product. The EIF operates a “light touch” regulatory system managers may not be able to manage
has since proved a popular vehicle for Swiss managers managing non-Swiss certain collective investment schemes
amongst Swiss managers for its domiciled funds. Only managers of Swiss domiciled in Europe.
robustness and flexibility. This year, collective investment schemes are currently
Gibraltar’s EIF regime was updated to subject to mandatory regulation by the Proposed Changes under
allow for foreign administration in Swiss Financial Market Supervisory D-CISA
certain circumstances and expansion of Authority (FINMA). However, Swiss The D-CISA proposes that all Swiss fund
the definition of “experienced managers of foreign collective investment managers, regardless of the domicile of the
investors” to include investors who schemes may, under certain conditions, funds they manage, be subject to licencing
invest a minimum of EUR 50,000 submit to voluntary supervision by self- and regulation by FINMA. The D-CISA
provided they are professionally regulatory organizations (SRO) which are did not initially offer any opt-out or
advised. in turn subject to regulation by FINMA. exclusion provisions for smaller managers,
In February 2012, members of the The main role of a SRO is to draft even though AIFMD allows exemptions
Gibraltar Funds and Investments regulations governing the obligations for fund managers managing less than
Association (GFIA) attended the Fonds under the Swiss anti-money laundering act EUR 500m (for closed ended funds with
2012 exhibition at Kongresshaus, Zurich and to ensure that institutions registered no leverage) or EUR 100m (for open
for the second year in succession. The with them comply with these obligations. ended funds or those which use leverage).
main topic amongst attendees was the However, changes in how fund However, due to some resistance on this
Swiss response to international pressure to managers are regulated globally are point by the Swiss fund industry, the D-
amend its Collective Investment Schemes causing Switzerland to restructure its CISA was amended to allow for
Act (CISA) in light of the evolving global current regime and embrace new rules exemptions in certain circumstances,
legislative framework governing funds and with regards the management, safekeeping amongst them a partial exemption of
fund management. The consultation and distribution of collective investment smaller fund managers (the definition of
period for the draft CISA (D-CISA) took schemes. The aim of the D-CISA is to Continued on page 24
16 GIBRALTAR INTERNATIONAL www.gibraltarinternational.com
B U DG ET REPORT
Continued from page 6
The extra income in part is New airport terminal’s spiraling costs
the result of the “unprecedent- Full operation of Gibraltar’s flagship airport government has negotiated down interim one-
ed level of Government’s own terminal is imminent, the cost having spiraled year Service Level Agreements with five entities
capital expenditure, some of to around €84m, compared with an originally that will cost Gibraltar more than £1m a year.
estimated £24m. The completed building has Other contracts still needed to be agreed,
which ends up back in been in government hands for three months. and staffing costs added; however, when asked
Government’s own pocket by After several earlier expected launch dates by Gibraltar International, no comparative figure
way of PAYE, Income Tax and it now seems probable that from August both was available for the cost of operating the old
outgoing and in-bound flights will use the terminal.
Import Duties”. building that abuts the border with Spain and Building snagging and integration of IT
Company Tax, following dwarfs the old terminal nearby. systems in the new terminal was in progress,
introduction of a reduced flat In early July, Dr Joseph Garcia, the including the check-in system, which was
jurisdiction’s deputy Chief Minister, told expected to be complete by mid-July when staff
rate 10 per cent Corporation Parliament that “it was a serious error of training was taking place, Garcia said in his
Tax, accounted for “a further judgement [by the previous administration] to Budget speech.
large increase” in revenue. operate two terminals at the same time”, which Visiting holidaymakers and business people
added logistical problems and caused even have been bemused by the experience of
However, he cautioned: greater costs. landing in the new building and departing via
“This increased revenue stream Since taking the terminal over, the new the small old one.
will need to be monitored
closely … to see if the level of
such revenue during this first tion of Zero Rate Tax – and Picardo suggested. As the Chief Minister
year of the change is indeed some companies overstating In the current full year of declared: “We could be less
sustainable going forward”. income. office, the government plans “a prudent and we could take
Import duties in 2010/11 significant increase in spend- recurrent [government-owned]
Business tax falling were higher than expected and ing” on public services, where company losses off the balance
Already this year’s business tax as a result “very little growth there is a clear need for further sheet and provide for a higher
is anticipated to be down has been built into these figures resources. However, a £17m surplus by borrowing more -
because of previous one-off as it may not be possible to surplus is still anticipated for but we will not do that. We will
payments arising from the see even a repeat of those the current year – but almost not fall into that trap!”
change in tax systems – aboli- numbers, let alone growth”, half that of 2011/12. More budget news, p 30
18 GIBRALTAR INTERNATIONAL www.gibraltarinternational.comPEN S ION S
Continued from page 10 and a disputes procedure. Through supervision of Trustees,
said to have “established a good rapport The Code, a blueprint to be reviewed Killick will see if providers are following the
with HMRC”, but he warned delegates that annually and updated to ensure on-going GAPFA Code, “because if we have any
Gibraltar providers should “not stray out of acceptance by HMRC, will provide [people with] QROPS here, those individu-
the agreed boundaries”. “unparalleled best practice for QROPS to als have the same right of protection as
UK pension schemes, have the greatest the highest standards of any jurisdiction”, anyone else who has their savings, deposit
investment flexibility, and represent a key he said. A second version will be complete or [insurance] policy in Gibraltar”, he
target market, along with Ireland and by end-August. noted.
possibly also Luxembourg, according to Knight insisted: “Although this might His remarks nevertheless, left some
Nigel Sloam, who runs his own firm of seem like a “belt ‘n’ braces” arrangement, it multi-jurisdictional providers uncertain on
Actuaries & Consultants with offices in the does give greater certainty for clients and whether appropriate regulation and the
UK and Monaco. their independent financial advisors.” industry Code were coming too late.
Regulator Marcus Killick, who is chief
Investment penalties executive of the Financial Services Business race risk
Fund administrators must ensure individu- Commission (FSC), admitted: “Pensions Karen Griffin, a director and compliance
als do not receive personal loans from their supervision is not currently the officer at Gibraltar trust and company
personal pension pot, he pointed out, nor Commission’s strongest area”; however, administrator ECS International, explained
purchase residential or tangible ‘moveable’ “we are building up an understanding and her concern was that in the race for new
property such as works of art, classic cars, expertise”. The FSC was now a Member of QROPS, there is a risk that non-compliant
fine wine etc., because those would attract the International Association of Pension business may be taken on unwittingly.
up to 70 per cent tax penalties for being Supervisors, giving standing and access to Pentech’s Peter Davis, who provides
‘unauthorised’ investments. Buying gold, wider experience. pensions technical and actuarial support for
however, was OK! And he later emphasised to Gibraltar the Sovereign Group worldwide from bases
As Knight earlier assured, investment International: “We have only one chance to in the Isle of Man and Guernsey, concurred,
criteria is being incorporated into the second get this right. Gibraltar has adopted a virtu- suggesting “there is little relevant UK
draft Code of Practice, including guidelines ous approach, by working with HMRC, pensions experience in Gibraltar and, as a
on aspects such as full up-front disclosure of unlike the experience in some other result, some complex schemes with inherent
all costs and fees, penalty free transfers out jurisdictions.” Continued on page 22
20 GIBRALTAR INTERNATIONAL www.gibraltarinternational.comPEN S ION S
Continued from page 20 can only outsource some of this responsibil- connected with creating local employment
and secure guarantees may be transferred ity elsewhere for a maximum of 12 in Malta, but he remained uneasy that
inadvertently in the early stages.” months.” Firms would be closely reviewed Gibraltar might not gain the same standing
He told Gibraltar International: “As an to ensure that the sole responsibility and unless it also had a similar resident
example, the Malta Pensions Regulator has activity was in Malta where responsibility approach to control and operation of the
warned that in reviewing their licenses for for the QROPS was based. full process, which the FSC says it is
this type of business local administrators Davis admitted the ruling might also be exploring.
– on our streets.”
Gibraltar tax card is a winner It was important to ensure that the
On tax considerations alone, when benefits might benefit UK citizens. pensions product and service is fiscally
are being drawn, Gibraltar is likely to Sloam said: “We will not recommend compliant. “This is not the time to get this
be more favourable for residents of Gibraltar as being best in all cases - but sort of issue wrong. This is big money for
Switzerland, Monaco, Dubai, Cayman equally Malta and The Isle of Man - or government”, Killick observed.
Islands and Israel, when compared with Guernsey if it re-enters the QROPS arena - However, tax advantage is not the only
main rival territory, Malta. would not be the most appropriate for all consideration when choosing a home for
According to independent UK and situations.” QROPS.
Monaco actuary Nigel Sloam, if there were Gibraltar Pensions Regulator, Marcus “Changing lifestyle, partial retirement
no double taxation treaties (DTA’s), Malta Killick warned: “The issue of tax is popu- and enhanced longevity dictate new pat-
would deduct tax at source of up to 35 per lar. The focus on tax loss – moving from terns of income needs in later life,” Sloam
cent, clearly less favourable than Gibraltar’s tax evasion to aggressive tax avoidance – is pointed out. “The territory chosen for
2.5 per cent tax rate. And Guernsey is now clearly in the hair sights of the UK and QROPS provision will need to accommo-
thinking of a flat 20 per cent taxation. other European governments. date pension drawings selected to meet
“In this respect, The Isle of Man's and “These people know – or think – they these needs - and also the desire to leave
Guernsey's likely offerings will be taxed at can get the money by clawing it back from unutilised pension resources to selected
lower rates to Malta - but higher than in jurisdictions such as ours through certain beneficiaries. I believe that Gibraltar will
Gibraltar”, he told Gibraltar International. types of avoidance practices. These guys have a ‘best of breed’ offering in this
However, Gibraltar has no DTAs that would like to see blood on the streets regard,” he added.
22 GIBRALTAR INTERNATIONAL www.gibraltarinternational.comFU N DS
Continued from page 16 Instruments Directive (MiFID) or will be exemption rules in AIFMD should allow
which is drawn from AIFMD) of collective imposed under AIFMD. However, a them to manage European funds (whether
investment schemes at the discretion of the MiFID license (or its mutually exclusive as the AIFM or otherwise) provided the
Federal Council. cousin, an AIFM license) will be funds they manage have less than EUR
passportable (on a regulator-to-regulator 100M (or EUR 500M, as the case may be)
Other changes under notification basis) across EU member under management. In the two largest
the D-CISA states unlike the Swiss equivalent. A alternative funds jurisdictions,
Amongst other matters, the D-CISA also Gibraltar licensee will automatically be Luxembourg and Ireland, even prior to
introduces new requirements relating to able to provide cross border services to the implementation of AIFMD, investment
safekeeping for Swiss custodian banks and AIFs (if an AIFM) or as currently under managers based outside those countries
also relating to the distribution of funds MiFID, by the simple checking of a box. are coming under increasing scrutiny by
within or from Switzerland. It is There are a number of services providers the Luxembourg and Irish regulators
understood that all distributors of funds in already in Gibraltar, who are accustomed where it is proposed they manage the
Switzerland will need to be authorised, to providing both the technical services Luxembourg or Irish EIF equivalent. The
which includes distributors of funds to and personnel in Gibraltar for Swiss based Gibraltar EIF regime simply requires the
“qualified investors”. managers to establish a MiFID licensed investment manager to be licensed in the
manager in Gibraltar. Gibraltar is place where it is based. In addition, at
How can Gibraltar help? particularly attractive because of the very present there is no requirement to have a
For financial services purposes, Gibraltar low Gibraltar corporate tax rate (10% of Gibraltar custodian bank, whereas the
is fully within the European Union. We accounting profit, subject to all the usual Luxembourg and Irish equivalents require
envisage two ways in which Gibraltar can deductions) for business that are a local custodian. We anticipate that these
assist Swiss fund managers: physically based in Gibraltar. rules are unlikely to be altered in Gibraltar
Firstly, larger Swiss fund managers, Secondly, Gibraltar will be interesting by the introduction of AIFMD, where the
who will have to comply with the D-CISA to Swiss fund managers with assets under EIF or its manager are not required to
and be regulated by FINMA, will have management at the smaller end of the comply with AIFMD, because the value of
significant regulatory constraints at least scale, that are exempt from the new assets under management are low enough
equivalent to those which are currently licencing rules under D-CISA but who also to fall within the exemption.
imposed by Markets in Financial cannot comply with AIFMD. The www.gfia.gi
24 GIBRALTAR INTERNATIONAL www.gibraltarinternational.comeGaming eGaming
precisely the opposite effect by driving those Companies based in Malta, Isle of breaking into the presently closed US tries must provide open cross-border access
More companies moving in customers to unlicenced and unregulated Man, Alderney and Gibraltar account for market. to their gaming markets.
operators based in less reputable jurisdic- almost all remote gaming business in the William Hill bought three firms offer- “If blatant infringements persist, I will
despite UK gaming tax plan tions who will have no intention of paying UK, with The Rock accounting for some 60 ing sports betting on mobile devices in June not hesitate to propose to my colleagues that
the proposed UK consumption tax”. per cent. However, those four jurisdictions after gaining a Nevada Gaming Commission the appropriate proceedings be taken”,
Gibraltar’s gaming community is gambling on being able to A Gibraltar gaming sector insider told have only 6 per cent of existing UK licence, as a hoped-for prelude to an online Barnier told the EU parliament in July and
change the UK government’s mind over plans to impose a 15 Gibraltar International: “Most of the sup- e-gaming licences. gaming licence. he said on-going cases and complaints are to
per cent remote gaming consumption tax that would raise pliers to the gaming industry are UK or asso- The UK market is important, but it be contacted by the Commission and
£240m for the Treasury in 2015, the first full year of operation, ciated UK firms, and it becomes totally unvi- could become much less so as other territo- Branching out in US reminded of the applicable rules.
able and preposterous to impose this [tax] in ries open up. Some of Gibraltar’s 23 Minister Licudi, attending an international There’s broad industry agreement in
writes Ray Spencer. terms of an EU single market. The UK has licenced gaming operators gain almost all of gaming conference in San Francisco and favour of introducing EU-wide legislation to
A
n industry fighting fund has been tax will operate. the strongest interest in remote gambling their business from the UK, while others meetings in Nevada, in May, confirmed govern on-line gambling to protect con-
established and top Legal Counsel Clive Hawkswood, chief executive of with so many associated businesses involved have wider interests across Europe (where “there are a number of Gibraltar operators sumers and tackle fraud and money launder-
retained to consider the value of the Remote Gambling Association, feels the with it, yet its actions seem to want to close gross gaming yield is estimated at €11bn) interested in branching out by seeking a ing issues, but the European Gaming and
seeking a Judicial Review if UK will be “hard to turn around”. From it down.” and elsewhere. licence”. Betting Association points to a growing
the tax is introduced, but speaking to UK officials and politicians, he Gibraltar-based bwinParty, the world’s Two of four new Gibraltar e-gaming financial burden, saying: “In France it costs
Gibraltar’s Minister responsible for told me “they also do not accept that Bizarre twist largest on-line gaming company, and the licences being processed are believed to be a firm €8.7m to receive a licence. We can't
Gambling, Gilbert Licudi, is hopeful that a Gibraltar, as opposed to the companies In a bizarre twist, UK citizens betting with a 888 on-line gaming company, along with Nevada-based entities, underlining an duplicate this 27 times.”
political solution can be found to what he based there, will suffer materially”, because UK licenced operator would pay the tax, but William Hill, Britain’s biggest bookmaker “unprecedented interest” in establishing l Gibraltar Gaming Commission (GGC)
describes as “an entirely misconceived to get a licence no company needs to be in anyone from Africa, Australia, or China, for with a significant Gibraltar stake, were operations on The Rock. Two Las Vegas requests to discuss and establish with the
scheme”. the UK. “This reflects a worryingly simplis- example, is exempt. among 59 operators to be granted Spanish gaming equipment-testing houses are also UK “arrangements for the practical report-
He maintains that “this is a political tic view of the situation and is one that Contrary to UK Treasury assertions, no licences in June after agreeing to pay €70m said to be interested in Gibraltar. ing and examination of any suspicious bets
proposal and politicians…are not unknown Gibraltar needs to address at governmental other European country is operating a place in self-assessed back taxes at the rate of 25 In the meantime the sector calls for connected with the Olympic Games have
to change their minds”. Licudi has plans for level”, Hawkswood pointed out. of consumption tax. But like other EU percent of gross gaming revenue. “fair and transparent licensing conditions not beensuccessful. But GGC says it still will
political lobbying in the UK to begin in Minister Licudi is firm that “a UK States, the UK wants to raise tax from Bwin previously secured 4 per cent of for EU operators,” led by Europe’s internal evaluate and pass on to the UK as necessary
autumn when the results are expected of a licensing and regulatory regime that is said the growing remote e-gaming sector by its revenue in Spain and plans to broaden market services commissioner Michel any suspicious betting offers to Gibraltar
Treasury consultation process into how the to be protecting UK customers, may have tightening regulation through licences. further its income base, with expectations of Barnier, to warn in July that member coun- operators.You can also read
