In 1942 General Eisenhower, the future US president, needed to choose a secure and strategic centre for planning European operations during the Second World War. He chose Gibraltar. As The Hon. Ken Salazar, former US Secretary of the Interior, discovered while leading the American Chamber of Commerce’s first trade mission to Gibraltar last May, Eisenhower spent two years commanding operations from a bunker deep within the famous Rock. Secretary Salazar noted that, while it is no surprise that Gibraltar is immensely important as a strategic military position, what is less known is its great value as an entry point for the coordination of business and financial operations into the EU and North Africa.
Many Americans might only know of the jurisdiction in the context of the expression “strong as the Rock of Gibraltar” or by reference to the famous Prudential Insurance logo, which adopted the Rock as its company symbol in the late 19th century. Hence, the Americans’ three day visit was filled with lectures and meetings on Gibraltar’s infrastructure, work force, advantageous tax regime, and particularly on Gibraltar’s unique position in the European Union. Some 22 delegates, representing US companies, wanted to understand why Gibraltar has earned its reputation as a gateway into Europe and Africa. So what did they learn, and what opportunities are out there for US-Gibraltar business relations?
They learned Gibraltar is a British Overseas Territory with a mere 6.8 square kilometres and 30,000 residents, conquered by an Anglo-Dutch force in 1704 and ceded to the United Kingdom in perpetuity under the Treaty of Utrecht of 1713. Because of its position at the southern tip of the Iberian Peninsula, it was traditionally an important British military base, as its location gave it the ability to control entry into the Mediterranean through the Straits of Gibraltar.
Despite its size its economy is thriving, as the latest GDP figures show. But what’s in it for American businesses or investors looking to open up shop in Gibraltar? To help answer these questions and increase commercial cooperation, a Gibraltar American Chamber of Commerce (AmCham) was established earlier this year. AmCham Gibraltar was launched in the presence of The Hon. Francisco Sanchez, former US Under Secretary of Commerce for International Trade, and the Chief Minister of Gibraltar, Fabian Picardo. AmCham’s board includes Marielou Guerrero MBE, former President of the World Federation of Small Businesses, Major General Andrew Salmon OBE, CMG Rtd, former commandant of the Royal Marines, and Juan Verde, a Senior Partner of U.S. consultancy firm Mapa Group and US government adviser, along with other notable American and Gibraltarian business leaders.
Here are a few of the key points covered during the AmCham trade mission:
The financial sector is responsible for 15 per cent of total employment in Gibraltar and 20 per cent of the GDP. In 2012, Gibraltar’s insurance industry grew 12.3 per cent with gross written premiums totalling £3.6 billion. Remarkably, over 15 per cent of all auto insurance in the UK is handled by Gibraltar companies. Because of Gibraltar’s position in the EU, it is possible for a bank, insurance company, investment manager, or certain types of funds to offer their services in the entire EU without having to seek further regulatory approval in any other jurisdiction. This is known as the European financial services “passport”.
Gibraltar has a tax efficient environment for companies and individuals: a 10 per cent corporation tax rate is only applied to income which is accrued and derived in Gibraltar. Gibraltar’s position in the European Union gives the opportunity for companies that wish to expand their European activities to do so in a fiscally advantageous manner. Although part of the EU, Gibraltar has not become part of the EU Customs Union, and therefore has the advantage of freedom from VAT. In addition, there is no capital gains tax, wealth tax, gift tax or inheritance tax. Furthermore, the personal tax regime in Gibraltar is also competitive, with the highest effective rate of tax being 24.75 per cent. As an OECD white list country, we’re fully transparent and compliant with global information exchange requirements.
Investment incentive system
Gibraltar’s government, like any other, is keen to encourage investment, particularly in those areas with potential to generate significant job opportunities for the local workforce. There are several incentive programs, including the European Union Funds, Development Aid and Joint Venture programs.
Gibraltar is currently eligible for support under the European Regional Development Fund (ERDF) for programs that focus primarily on infrastructure projects, and the creation of businesses and sustainable employment. The European Social Fund (ESF) deals with programs to extend employment opportunities and develop a skilled workforce.
Development Aid licences are issued by the government for development that produces a tangible and substantial benefit to the economy. If a licence is granted, a portion of total capital expenditure is available for deduction against taxable profits. A similar arrangement for joint venture companies of which the Gibraltar government is a member may have an amount offset against assessable income.
US ties: past and present
Gibraltar has had a long standing relationship with the US that has been strengthened and deepened over the last couple of years. For instance, there have been US Honorary Consuls in Gibraltar for over a hundred years. The Gibraltarian ports have serviced American ships, both military and civilian, for generations. American businesses have invested in Gibraltar’s ports, telecommunications, infrastructure, energy and waste industries. More recently, American investment funds have considered Gibraltar as a domicile for their European marketing efforts.
Gibraltar’s multicultural and multi-ethnic society has created a population with a strong work ethic. Much like the US, it is a nation of immigrants that values justice, civil liberties and the rule of law, albeit on a nano scale. In both places, the formula has attracted various groups who have integrated and worked well with each other, while being able to retain their individualities. Gibraltarians tend to feel that they are a little bit English and Irish, Spanish and Scottish, Maltese and Moroccan, Indian and Italian. They see eye-to-eye with the business-minded melting pot of America, and it is the hope of AmCham that both peoples will be able to continue to build on each others’ experience and talent.
About the authors: James Lasry is President of AmCham Gibraltar, and is a Gibraltarian-American and a partner at Gibraltar’s largest law firm. Amy Lathrop Visser is Treasurer of AmCham.