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Gibraltar is an attractive and ideal location to set up an EU based investment fund. The new Gibraltar Income Tax Act was launched in 2011 where a 10% corporate tax rate was introduced. However, all income received by a Gibraltar fund which is accrued and derived outside of Gibraltar is not taxable in Gibraltar. There is also no withholding tax for non-Gibraltar residents.
Gibraltar has developed over the years as being a reliable and ideal location for establishing and servicing funds. Gibraltar boasts a highly technical fund jurisdiction with experienced industry professionals, tax advantages, an approachable regulator and a dedicated association (Gibraltar Funds & Investments Association - "GFIA").
Investors looking to set up in Gibraltar can structure a fund in one of the following ways:
This is a collective investment scheme ("CIS") which can be offered privately to any identifiable group. It can accept up to 50 participants (investors). There are no restrictions to the type of investor that can subscribe, as long as they belong to an identifiable group. Typically, the participants tend to be families, groups of employees or groups of individuals or friends wishing to run their investments in a fund structure. Private funds are not regulated or authorised by the FSC. As long as the appointed directors follow the investment objectives as stated in the offering document of the private fund, there are no other statutory investment restrictions. This allows private schemes to be established cost-effectively and quickly. A Private Fund is exempt from any licensing requirements, and must remain private for a year from the date of offer.
The Experienced Investor Fund (“EIF”) regulations have been established to allow experienced or high net worth investors the opportunity to set up funds quickly and with minimum regulatory intervention. Generally, EIFs are formed as a limited company or as a Protected Cell Company ("PCC"). They may be open-ended or close-ended. The benefit of setting up as an EIF is that the fund can be up and running within 14 days of finalising the offering document. It is assumed that EIF directors and investors are experienced, therefore there are no statutory investment restrictions or limitations on borrowing or leverage.
UCITS Funds - Undertakings for the collective investment of transferrable securities (“UCITS”) are a set of EU directives that allow collective investment schemes to operate freely throughout the EU. UCITS funds are regulated by the FSC and have investment restrictions. The funds must comply with the Financial Services (Collective Investment Schemes) Regulations 2006. As Gibraltar is within the EU, locally based UCITS funds may passport their services within the EU on the basis of their UCITS license, provided they are managed by an authorised UCITS manager. UCITS funds are generally for investment by retail investors. UCITS funds are desirable when the primary investment is in "transferable securities" listed on a recognised European Community or other recognised stock exchange. In this case, a fund in Gibraltar can be licensed in compliance with the European directives on Undertakings in Collective Investments in Transferable Securities ("UCITS").
Non-UCITS Retail Funds – These are licensed by the FSC and can be distributed to retail investors. These funds can be structured as:
The use of a Protected Cell Company (“PCC”) allows a fund to separate it’s business into different ‘cells’ through a segregated portfolio. This allows the assets and liabilities of each cell to be separated from the assets and liabilities of other cells and also the main assets of the fund. This allows for various clients to use separate investment strategies.