Gibraltar's legal system is based on the common law and statute law of England and therefore embodies the advantages and security of English company and trust law. The Trustee Act of Gibraltar is the main governing Act, which applies the provisions of the Convention on the Law Applicable to Trusts and their recognition, with various additions, such as the establishment of asset protection trusts.
Appointment and Regulation of Trustees
An individual or a trust corporation may be appointed as Trustee. For a local trust corporation to act as a trustee, it must have a licence to operate as a professional trustee granted by the Financial Services Commission pursuant to the Financial Services Act
It is not unusual for an underlying company to be utilised as a vehicle to hold assets of the trust. The company acquires assets such as real estate, marketable securities, a pleasure yacht or other suitable investments and it is the shares in the company that are entirely owned by the Trust.
Why Establish a Trust?
The trust is a highly flexible instrument which can be tailored to meet a Settlor's specific requirements and apart from confidentiality may provide the following advantages:
- Protection and administration of assets for family and future generations.
- No need for probate which simplifies the distribution of assets to family members.
- Minimising income and other taxes payable.
- Avoiding inheritance taxes or estate duties which may otherwise be payable.
- Avoiding forced heirship provisions whereby the Laws of a particular Country determine the inheritance of assets in a manner which may be contrary to the wishes of the Settlor.
- There is no estate duty in Gibraltar.
- No stamp duty is payable on the transfer of assets held by a trust except in the case of immovable property situate in Gibraltar.
- No gift or wealth taxes are payable.
- There are no capital gains taxes in Gibraltar.
Gibraltar's Private Foundations Act came into force on 11 April 2017. A Private Foundation is a structure that arranges the orderly transfer of assets to beneficiaries on the death of the Founder, who will have set out how the assets are administered through the Foundation's regulations. A foundation can be used for the protection of the family property and assets, succession planning, charitable purposes or to safeguard assets such as protection against creditors or liabilities. Unlike a Trust, a Foundation has legal personality and is registered at Companies House in the same way as a corporate entity and must keep up to date with filing responsibilities.
Key to the establishment of a Gibraltar foundation is the founder. The founder of a Gibraltar foundation will be responsible (either directly or through an agent) for endowing the foundation with its initial assets, registering the foundation and determining:
- its purpose;
- its constitution; and
- its initial officers (i.e. who the initial councillors and guardian (if any) are).
Foundation Parties |Council and Councillors
A Gibraltar Foundation is managed by a council ('the Council') which must at all times include a Gibraltar resident body corporate duly licensed by the Gibraltar Financial Services Commission to provide professional trustee services (a Licensed Councillor'). Provided the Council includes a Licensed Councillor, it may also comprise additional individuals or corporates, and shall have no maximum number of councillors.
In respect of the management, administration and investment of the property of the foundation, the Council has all the powers of an absolute beneficial owner. The councillors have a duty to the foundation to act in good faith with a view to the interests and the purposes of the foundation, and must discharge their duties with due care, diligence and skill.
The Register of Foundations
The Act creates the office of the Registrar of Foundations ('the Registrar') as well as a Register of Foundations ('the Register'). The Register will contain a record of all foundations registered and will contain the following details in relation to each foundation, information which shall be available to the public:
- the name and registered number of the foundation;
- the date of registration;
- the name and address of the councillors;
- the name and address of the guardians, if any; and
- the details of the registered office.
The Register will also contain any further documents required to be filed with the Registrar under the Act, which shall not be available to the public.
A foundation resident in Gibraltar is subject to taxation in Gibraltar at a rate of 12.5%.
Financial statements, including a profit and loss account, a balance sheet, and a report made by the councillors, are to be filed annually at Companies House.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.