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Gibraltar continues to grow as a European hub for global e-commerce and finance

Sponsored post: Gibraltar is an exciting British and European success story that shines out in an otherwise gloomy time of political and economic crisis. Peter Howitt.

This year Gibraltar celebrates its 40th year within the European Union. As a European law firm based in Gibraltar we also wish to celebrate Gibraltar’s success and share some key information about doing business.

Gibraltar is a European Jurisdiction of Choice

Gibraltar is fast becoming the jurisdiction of choice for many e-commerce, financial services businesses and investment fund managers that wish to be established within Europe.

Over the last 20 years Gibraltar has seen tremendous advances in development of the economy and the high quality of the regulatory environment here.

The figures speak for themselves…

 

A Few Surprising Statistics

  • Despite the global downturn, Gibraltar has continued to grow and diversify its economy. Gibraltar's GDP is estimated to have grown by 35% over the last five years and it is ranked in the top 20 in GDP growth globally.

 

  • Gibraltar has one of the lowest public debt to GDP ratio’s in Europe and the world, a crucial measure of the fiscal health of a jurisdiction that is relevant for investors in these uncertain political and economic times.

 

  • Gibraltar has been part of the European Union for over 40 years (since 1973) and has implemented all applicable Directives.

 

  • Gibraltar licensed operators currently supply more than 50% of the UK online gambling market.It is the world’s leading online jurisdiction with over 15 years of experience and home to regulated FTSE and NASDAQ listed companies in the sector.

 

  • The e-commerce industry also includes a growing e-money and payments sector and Gibraltar is now one of the leading EU jurisdictions for electronic payment companies.

 

  • Gibraltar insurers have a greater share of the UK motor insurance market than Lloyds of London.

 

  • Gibraltar has only recently started to focus on the collective investment scheme sector (CIS) and yet already it is one the four main EU jurisdictions of choice and has over 200 funds. The introduction of the Alternative Investment Fund Manager Directive allows Gibraltar fund managers to passport across Europe.

 

  • Gibraltar’s laws are approved for EU law tax and tax transparency purposes. It has also entered into nearly 30 bilateral Tax Exchange Information Agreements. It is expected to enter into bilateral arrangements with the USA with respect to FATCA and with the UK for Son of FATCA.

 

UK Overseas Territory within the European Union

As a UK Overseas territory within the European Union, multinational businesses can establish themselves in Gibraltar and use it to provide cross-border services throughout Europe, including the ability to rely on the EU financial services  ‘passporting’ regime. The UK relationship provides comfort that Gibraltar will remain politically stable whatever the weather.

 

English Law & Practice

A major commercial attraction is the practicality and certainty that flow from an English common law and equity legal system.

 

Diverse & Vibrant Community

Despite a small population of only 30,000 people Gibraltar has a vibrant community that is surprisingly diverse and cosmopolitan for its size – Gibraltar has experienced cross-border experts from around Europe and the world living and working here. The quality of the community and the experience of the people here is the major part of Gibraltar’s success story.

 

Competitive Tax environment

In addition, Gibraltar has favourable tax systems including competitive corporate tax rates, an attractive structure for cross-border dividend distributions and no capital gains tax or value added tax (VAT).

 

Gibraltar is a great place to locate your European business and investments Gibraltar continues to be a great place to live in and invest in. Please get in touch if you would like to know more: info@ramparts.eu or +350 200 68450.

 

Ramparts Profile

Ramparts is a European law firm based in Gibraltar. We specialise in the e-commerce, technology and financial services sectors and transaction management with expertise in cross-border law issues. Our clients include individual entrepreneurs and early stage innovation companies to publicly listed multi-nationals.

Ramparts:  no assumptions, just solutions.*

 

*We are delighted to announce that in January 2014, we will be joined by a new senior solutions manager, William Rawley (previously Head of Execution and Syndication of the EMEA Corporate Solutions team at Citigroup Global Markets in London). William will be heading up our new Corporate & Finance team.

Peter Howitt is an e-commerce and financial services specialist lawyer and is currently acting as the CEO of the Gibraltar Betting & Gaming Association (www.gbga.gi) and Secretary of Gibraltar E-money Association (www.gema.gi).

Photo: Getty
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Gibraltar - impact of Brexit

Last week our editor took a general overview of some of the scenarios for Gibraltar if Britain were to leave the Euro. This week, as the atmosphere in the British Conservative Party becomes ever more toxic, Michael Castiel, partner at Hassans lawyers on the Rock, goes into more detail (this piece written before the Iain Duncan Smith resignation and subsequent arguments happened).

However unlikely it may prove, the prospect of Britain's withdrawal from the EU sends shivers through Gibraltar's financial services, gaming and tourism industries, which are at the core of Gibraltar’s economy. For, if Britain leaves the EU, Gibraltar goes too, and, should Brexit occur, it is Gibraltar’s relationship with the UK that as in the past, largely will shape Gibraltar's future.

Gibraltar joined the European Union in 1973 as part of the UK. While rights to freedom of services across borders of EU member states apply between Gibraltar and the rest of the EU, because Gibraltar is not a separate member state (and is in fact part of the UK Member State) those rights do not apply between Gibraltar and the UK. Instead a bilateral agreement, formalised almost two decades ago, gives Gibraltar's financial service companies the equivalent EU passporting rights into the UK. Accordingly and pursuant to such agreement, where EU rights in banking, insurance and other financial services are concerned, the UK treats Gibraltar as if it is a separate member state.

This reliance on the special relationship with the UK is recognised by both the Government and the Opposition in Gibraltar, and when the territory (which in this instance as part of the UK electorate) goes to the polls on 23 June, the vote to remain in the EU is likely to be overwhelming. This may have symbolic significance but realistically seems unlikely to influence the outcome. In actual terms, although some non-EU jurisdictions use Gibraltar and its EU passporting rights as a stepping stone into Europe, almost 80% of Gibraltar’s business dealings are with the UK.

But whether or not Britain maintains the 'special relationship' with Gibraltar, if Brexit becomes a reality, other factors will come into play, with the ever-present Spanish Government’s historic sovereignty claim over Gibraltar topping the list.

Recently Spain's caretaker Foreign Minister Jose Maria Margallo went on record that if the UK voted to leave the EU he would immediately 'raise with the UK the question of Gibraltar.' If this was to come about it could take one or more of several different forms, ranging from a complete closure of the border between Spain and Gibraltar, demanding that Gibraltar passport-holders obtain costly visas to visit or transit Spain, imposing more stringent border controls, or a frontier toll on motorists driving into or out of Gibraltar. The latter idea was in fact floated by the Spanish Government three years ago, but dropped when the EU Commission indicated that any such toll would contravene EU law.

Here, again, imponderables come into play, for much will depend on which political parties will form the next Spanish government. A Spanish government headed by the right wing PP party is likely to take a less accommodating attitude towards Gibraltar (the Foreign Minister having recently indicated that in case of Brexit the Spanish Government may opportunistically push once again for a joint sovereignty deal with the UK over Gibraltar) whereas a left of centre coalition will likely adopt a more pragmatic and cooperative relationship with Gibraltar in the event of EU exit.

The most significant changes to Gibraltar's post-Brexit operation as an international finance centre are likely to be in the sphere of tax, and while Gibraltar has always met its obligations in relation to the relevant EU rules and Directives, it has also been slightly uncomfortable with aspects of the EU's moves towards harmonisation of corporate taxes across member states.

Although it was formed as a free market alliance, since its inception fiscal matters have been at the root of the EU, but Gibraltar's 'special relationship' with Britain has allowed considerable latitude in relation to what taxes it imposes or those it doesn't. However, as is the case with other member states, Gibraltar has increasingly found in recent years its fiscal sovereignty eroded and its latitude on tax matters severely curtailed.

As in Britain, Gibraltar has benefitted from several EU Directives introduced to harmonise and support the freedom of establishment, particularly the Parent-Subsidiary Directive which prohibits withholding taxes on cross-border intra-group interest dividend and royalty payments made within the EU.

As a stepping stone for foreign direct investment, should Brexit come about EU subsidiaries could no longer rely on these Directives to allow tax-free dividend or interest payments to their holding companies based in Gibraltar. In the case of the UK, bilateral double tax treaties will no doubt mitigate the impact of the non-application of any tax related Directives. Gibraltar, however, is not currently a party to any bilateral double tax treaties. Accordingly, Gibraltar would either have to seek from the UK the extension of all or some of the UK’s bilateral tax treaties to Gibraltar (subject of course to the agreement by the relevant counterparties) or it would need to negotiate its own network of bilateral double tax treaties with a whole series of EU and non EU Member States. To say the least, neither of these options would be straightforward to implement at short notice and would need the wholehearted support of the British Government

Whilst Gibraltar’s economy is likely to be adversely affected should Brexit occur, there may be some potential benefits. An EU exit would result in fewer regulations and possibly may provide Gibraltar with greater exposure to emerging economies.

From a tax perspective, an EU exit would probably enable Gibraltar to introduce tax rules and incentives that are contrary to EU tax laws and would provide the Gibraltar Government more freedom to adopt competitive tax regimes that may be considered contrary to EU state aid rules. How possible or effective any such strategy would be is doubtful given the OECD driven anti-tax avoidance climate affecting all reputable jurisdictions whether within or outside the EU.

In this as well as other possible change much will hinge on any post-Brexit relationship with the UK - an issue which the Gibraltar Government addressed recently in a paper sent to Westminster's Foreign Affairs Committee. It stressed not only that 'EU membership has been an important factor in the development of Gibraltar’s economy' but also the importance of 'clarity as to the rights the British Government will protect and defend for Gibraltar in the context of its own negotiations.' 

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