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Bank On The Rock

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Monkeys… that’s the usual thing that springs to mind when you mention The Rock of Gibraltar to most people in the UK… and the amusing antics of the 300 Macques are certainly a tourist attraction, but the Macques are not what brings business to Gibraltar – it’s the 10% Corporation tax rate introduced in January 2011 for companies that have a physical presence here.

There are a number of jurisdictions in Europe that have the 10% rate, but none that also have the added advantage of not being in the VAT zone. This has encouraged many companies to re-locate their service type businesses to Gibraltar – add a dash of sunshine, a dip in the Mediterranean Sea and Gibraltar is hard to beat. Couple that with a highly educated, multinational staff base attracted here initially by the explosion of international gaming companies, and Gibraltar ticks all the boxes.

Many software development companies, web design and maintenance operations, marketing specialists, logistic planners and online marketers take advantage of the low corporation tax. Gaming, gambling, Insurance and financial companies have also relocated to Gibraltar over the last few years – all require licencing by the Financial Services Commission, but the climate is encouraging for experienced and professional management teams.

The increase in companies setting up in Gibraltar has also had a knock on effect on the local economy, boosting the property market for both commercial and residential property, and finding a sensibly priced office or apartment can be a challenge, but weigh that against the low tax and no vat regime and Gibraltar continues to thrive.

Many high net worth individuals (HNWIs) have also been attracted to take residency in Gibraltar due to the enticing CAT2 resident option. HNWIs who can demonstrate a wealth, including property, in excess of two million pounds can apply for the CAT 2 residency status. Qualifying includes the purchase or rental of approved property in Gibraltar, a personal reference from a bank, accountant or lawyer, along with a few standard documents and once approved, CAT2’s can cap their personal income tax to as little as £30,000 per annum. With property still booming many HNWIs have taken the decision to buy rather than rent, and luxury property developments have sprung up all over the rock.

Another residency option is the High Executive Possessing Specialist Skills (HEPPS) – if approved a HEPPS professional only pays personal income tax on his first £120,000 per annum, which equates to approximately £32,000 per year. Like the CAT2, a HEPPS has to buy or rent approved value property in Gibraltar. But the largest number of companies incorporated in Gibraltar every year are still the non-operating, not physically present companies – still referred to locally as “non-resident” companies. These companies pay no corporation tax in Gibraltar as they do not derive or accrue their income here, neither do they normally need to charge VAT on their invoices, although that may depend on where they do operate from, but this option is still a very popular choice for many tax planners, where they usually incorporate a holding element.

It has to be said that as an experienced corporate service provider, licenced in Gibraltar, one aspect of operating in Gibraltar that has grown more and more difficult over the years has been the change in attitudes of the banks here. Many of the main high street banks have closed their doors to commercial business and have turned their attentions to investment banking only, leaving a massive detrimental hole in the framework of Gibraltar – however in April 2015 the new Gibraltar International Bank opened its doors for business. Owned by the Government of Gibraltar, and opened with the intention of filling that hole, offering local people and businesses an opportunity to bank commercially again. As a corporate service provider looking to assist business people, we are hopeful that the GIBank will allow more clients to be able to “Bank on Gibraltar” for a variety of reasons.


Gibraltar High Net Worth Individuals Residency Changes…

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Only two things in life are certain, death and taxes…How often have we heard this saying before? Well in Gibraltar since 1992 the High Net Worth (“Category 2”) Individual has not had to worry about taxes. For over 20 years individuals have been relocating to Gibraltar to enjoy the Mediterranean climate, cuisine and way of life.

The Category 2 rules allow individuals who meet certain criteria (including the purchase or rental of a suitable property and a minimum net worth of £2 million) to cap the tax on their worldwide income at an amount of less than £30,000 per annum.

One of the common and more restrictive features of the Rules to date has been that Gibraltar employment and trade has been specifically discouraged. Whilst the Finance Centre Director is able to waive this restriction where he feels that doing so would be of benefit to the economic development of Gibraltar, this has been, and remains, very much the exception.

Over the years, much like Gibraltar itself, the profile of the Category 2 individual has changed. When it was first introduced the typical Category 2 individual was a wealthy individual who had chosen to relocate to Gibraltar to enjoy the Mediterranean lifestyle as well as the tax free returns from their pension or investment portfolio. When in 2005 taxation on investment income was abolished for all Gibraltar residents followed shortly after by the exemption from taxation of pension income, the Category 2 status was no longer necessary for many of these individuals.

However, Gibraltar continued to attract a younger Category 2 individual, one who was not relocating to Gibraltar to retire here but was alternatively a much more entrepreneurial individual with active business interests. The Gibraltar Government recognising this trend issued guidance to the industry clarifying what activities Category 2 individuals could in principle carry out locally. The guidance was welcomed by the industry as it provided a number of clear examples of what a category 2 individual could do. Unfortunately though there were still restrictions with what could be done physically from Gibraltar.

In the autumn of last year the Gibraltar Government created a working group of industry professionals to review the Category 2 status and advise on how this product could be expanded and improved. The group is engaging with professionals experienced internationally in this area (including current Category 2 individuals) and is considering all aspects of the status from its process and application through to its functionality and practical application.
The recommendations, some of which have already been published in the Income Tax Amendment Bill 2015, will allow Category 2 individuals who have the necessary approval from the Finance Centre Director, to carry out or exercise any trade, business, profession or employment in Gibraltar. The intention is that the jurisdiction will benefit from the additional inward investment and from having these entrepreneurs using their business skills and expertise locally. The income from such activities will be taxed locally to the extent that the income is accrued and derived in Gibraltar. The challenge for the working group continues to be achieving the right balance in terms of the effective tax rate that these individuals should be subject to, in order for Gibraltar to retain its attractiveness as a low taxed jurisdiction.

An additional benefit of this new “opening of the doors” approach is the additional substance that it provides to the individual’s residency position. Substance is high on the global tax agenda and the weight that having an individual’s economic interests physically located in the jurisdiction gives to their residency position should not be underestimated. Many high net worth individuals, travel and have business interests in other jurisdictions therefore potentially there is a risk that another country may claim that the Category 2 individual is resident in their country. The more established the individual is in Gibraltar the better their defence against a claim for residency from another country will be.

Individuals affected by the change may be able to structure or plan their affairs to minimise the tax impact from the change. With its low corporate tax rate of 10% and its system of no taxation on capital gains, no wealth tax and no inheritance tax Gibraltar really is starting to feel like paradise in the sun.

So, only one thing in life is certain…….


The Isle of Man as a Wealth Management Centre

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Peel Castle

Many readers may be familiar with the Isle of Man as a centre for motor-racing i.e. the famous ‘TT’ races or Manx Kippers! You may even be familiar with its Loaghtan sheep or award winning cheeses but how many of you will realise that the Isle of Man is one of the top 5 centres for space commerce or that it has a thriving eCommerce and eGaming industry or recognise it as a top centre for Wealth Management?

Well, it is pleasing to be able to say that, while the Island was relatively late into the financial services boom of the middle and late 20th Century – seeing the benefits of such only shortly before the creation of the digital world that we now know, it’s relatively recent development has had a significant advantage: the Island did not base its growth on an ‘old world’ economic model but took some inspired decisions early on in the age of the digital evolution or, for many of us, a digital ‘revolution’ i.e. the 1990s and 2000s, that have provided a sound, leading-edge platform for much commercial opportunity and wealth creation & management.

The Isle of Man has benefited by virtue of needing to differentiate itself from the other financial centres that grew up in the 1960s, 70s and 80s. As a UK Crown Dependency, located just off the North West coast of England, it has benefitted from the physical location as the closest Crown Dependency to the City of London and the UK finance sector and has been a conduit of much business to the United Kingdom, from listings on the Stock Exchange, to investment related undertakings such as collective investments or property purchases and commercial undertakings. However, merely replicating what the other finance centres did was not likely to provide long term growth opportunities on a sustainable basis and that was certainly evidenced when we saw the fallout from the recent Great Recession. By identifying some (niche) areas where we could punch above our weight, the Island has enabled real value-added economic development and opportunities for entrepreneurs and professional support services alike.

With a physical location in the centre of the British Isles, occupying an area of c500 square kilometres with a population of only 85,000, the Island is well positioned to provide a secure and accessible location from where we can act as a conduit for investment and business into and within the United Kingdom and the European Union, and, for international trade between Asia and North America. Being part of the ‘Common Purse’ arrangement with the UK enables VAT registration for single point of entry to the EU as a whole. Having significant Ship and Aircraft registers, Space/Satellite licensing ability, and, having an extraordinarily large-capacity and robust digital infrastructure with multiple access points allows the Island to offer the latest IT ‘platform’ to commercial operators, including the eGaming sector.

office site

Alongside the ‘digital’ platform i.e. IT and logistics stands the intellectual property opportunities that we can offer clients. Whether UK entrepreneurs wishing to engage in international commerce, international businesses wishing to trade within the European Union, wealthy individuals and families wishing to ensure a lasting wealth legacy (whether for their families or through charitable foundations etc.), the Isle of Man has a wealth of experienced professionals who can advise upon and structure their clients financial and business requirements, from the simplest to the most complex needs. The professional services sector has been dealing with wealthy individuals, families and corporate businesses for decades and the Island’s links with The City of London has ensured that our connections, knowledge and experience spans all areas of wealth creation and retention, whether physical property, in terms of homes, yachts, aeroplanes, intellectual property, in terms of copyright ownership etc, or the areas of family trusts, foundations and other structuring needs or (possibly) more mundane matters such as pensions and financial planning.

The Island has had to be nimble in its approach and has benefitted from a government that has been both proactive and supportive of business and wealth creation, whilst ensuring best practice in terms of adoption and adherence to international legal and taxation standards and professional expectations.

Our door is open to all-comers, large and small, mainstream and niche. We merely seek to offer professional solutions and adopt best practice in fulfilling our clients’ worthy and legitimate needs.

Whatever your financial or business interests and requirements, do take a little time to enquire how we may be able to assist you in your endeavours and see what we may be able to achieve together.

Wilton Wealth Management is an independent team of highly skilled financial advisers. Our fee based planners are experienced in all aspects of advanced wealth management, analysing complex situations and implementing solutions globally. They manage the financial affairs of a range of clients from professionals to individuals with significant family wealth.

The team will work with you to understand your lifestyle, goals, timeframes and financial requirements. Only then will they put a strategy in place to help you to achieve your overall objectives.

We work hard to create long-term relationships. Our ethos is to provide a service that is transparent and focused on tangible outcomes. We will meet you on a regular basis to track your progress and review your planning. If your goals change, as they often do, we will work with you to ensure the strategy changes as well.



Malta Launches a New Investment Fund Structure – the Notified AIF

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The Malta Financial Services Authority (MFSA) has recently announced the launch of a new framework applicable for notification of Alternative Investment Funds, the Notified AIFs, which will be promoted to qualifying or professional investors.

The AIFs falling within the scope of the notification process shall be managed by a full-scope AIFM. The Notified AIF is not authorised or in any way approved by the MFSA. In addition, Notified AIFs will not be subject to ongoing supervision. The MFSA shall make available and maintain updated on its website a List of Notified AIFs in good standing. The MFSA is separately assessing the licensing process for funds, particularly the Professional Investor Funds, currently licensed under Maltese law.

The Notified AIF can be established as any structure allowed under Maltese law and the AIFM will assume full responsibility for the Notified AIF and for the fulfilment of the obligations of the Notified AIF. EU/EEA AIFMs may submit a notification to the MFSA for an AIF to be included on the List of Notified AIFs. Third country AIFMs will be able to submit a request for notification of an AIF once the country where these have been established has been granted passporting rights pursuant to the AIFMD.

The process of notification of AIFs will be available to Collective Investment Schemes which are not already in possession of a licence issued by the MFSA in terms of the Investment Services Act. The MFSA will be publishing a list of documents required, together with a proforma prospectus template, to be submitted as part of the notification process of the AIF. Within 10 business days from the date of filing of a complete notification pack, the MFSA will proceed to include the AIF in the List of Notified AIFs.

The MFSA expects to start receiving requests for inclusion in the List of Notified AIFs from around the middle of the second quarter of 2016.

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