Fund Domiciles

Economy

Gibraltar has grown strongly over the decade to 2009. Until last year growth ranged between 8% to 12%. There has been a 45% increase in the job market over the last 10 years. If Gibraltar was a sovereign state it would have the 13th highest GDP in the world. Whilst the credit crunch has affected Gibraltar it is not expected to drive this diversified micro economy into recession.

Gibraltar’s economy is based on tourism, financial services and shipping. Each sector contributes more than 25% to Gibraltar’s GDP. There is no capital gains tax but in a bid to remove Gibraltar’s tax haven image, Peter Caruana, chief minister of Gibraltar, recently announced a corporate tax rate of 10% for both international and domestic companies within Gibraltar. This comes into effect in 2010. The Financial Services Commission (FSC) regulates financial services in Gibraltar.

Gibraltar is a member of the European Union since 1973, but is excluded from the VAT system and the Common Customs Union. It has made big play of its EU membership, implementing a range of directives (MiFID, Basel II, Anti-Money Laundering) at a speed that put larger jurisdictions to shame.

Governmental and political system

Gibraltar was reluctantly ceded to the UK by Spain in the 1713 Treaty of Utrecht.

Gibraltar is a self-governing British Overseas Territory. The United Kingdom maintains responsibility for defence, foreign relations, internal security, and financial stability. The tension between Spain and Gibraltar, which lasted a long time, has largely disappeared. An agreement was reached in 2006 and a new constitution went into effect in Gibraltar in 2007.

Nevertheless relations with its Spanish neighbour tend to dominate politics in Gibraltar. A referendum was held in 2002 proposing sharing sovereignty with Spain. But it was rejected by 99.5% of the population.

Gibraltar has a number of political parties. Gibraltar's political activity takes place in a framework of a parliamentary representative democratic, whereby the Chief Minister is the head of government. The preamble to that Constitution repeated from the 1969 Constitution states that "Her Majesty's Government will never enter into arrangements under which the people of Gibraltar would pass under the sovereignty of another state against their freely and democratically expressed wishes.”

Population (approx)

28,000

Stability and infrastructure

Gibraltar is a stable political and economic jurisdiction. The infrastructure is good but there is the possibility that Gibraltar could run out of space. Office space is at a premium due to a lack of available land.

The Cordoba Agreements of 2006 between Gibraltar, Spain and the UK has greatly increased the physical communications with Spain.

Threats to this domicile

There are no serious threats to this domicile. Gibraltar looks to be in a stronger position than many of the jurisdictions in the fund domiciliation business. If there is a concern it would be that the tax exempt status that companies in Gibraltar have enjoyed comes to an end in 2010. Unfortunately this will occur when the global financial system is likely to still be in difficulty and, as a result, might reduce this jurisdiction’s attractiveness to some in the asset management industry, that are doing all they can at the moment to keep costs down.