GIBRALTAAug/SeptR /Oct 2015 INTERNATIONAL FINANCE n INVESTMENT n BUSINESS
The changing face of insurance in Gibraltar
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DELOITTE QUEST INSURANCE MANAGEMENT LIMITED Tel: + (350) 200 41200 • [email protected] Tel: + (350) 200 74570 • [email protected] www.deloitte.gi www.quest.gi EUROPA TRUST COMPANY LIMITED ISOLAS / FIDUCIARY GROUP Tel: + (350) 200 79013 • [email protected] Tel: + (350) 2000 1892 • [email protected] www.europa.gi Tel: + (350) 200 76651 • [email protected] www.gibraltarlawyers.com HASSANS www.fiduciarygroup.com Tel: + (350) 200 79000 • [email protected] www.gibraltarlaw.com GIBTELECOM Tel: + (350) 200 52200 • [email protected] GRANT THORNTON www.gibtele.com Tel: + (350) 200 45502 • [email protected] www.grantthornton.gi KPMG Tel: + (350) 200 48600 • [email protected] EY LIMITED www.kpmg.gi Tel: + (350) 200 13200 • [email protected] www.ey.com/gi SAPPHIRE NETWORKS Tel: + (350) 200 47200 • [email protected] PIRANHA DESIGNS www.sapphire.gi Tel: + (350) 200 45599 • [email protected] www.pdg.gi TRIAY & TRIAY / T&T MANAGEMENT CREDIT SUISSE (GIBRALTAR) LIMITED SERVICES LIMITED Tel: + (350) 2000 4000 Tel: + (350) 200 72020 • [email protected] [email protected] Tel: + (350) 200 76108 • [email protected] www.credit-suisse.com/gi www.triay.com • www.ttms.gi BANGOR BUSINESS SCHOOL BDO LIMITED Tel: + (44) 1248 365966 Tel: + (350) 200 47300 • [email protected] www.bdo.gi [email protected] www.charteredbankermba.com SG HAMBROS BANK (GIBRALTAR) LIMITED Tel: + (350) 2000 2000 TURICUM PRIVATE BANK LIMITED [email protected] Tel: + (350) 200 44144 • [email protected] www.privatebanking.societegenerale.com/hambros www.turicum.com
www.gibraltarinternational.com Gibraltar International 3 Aug/Sept/Oct 2015 Volume 21/ Number 3
Contents Overseas mission p20 News p6 Gibraltar as the Gateway to Europe for Singapore Private sector setting the pace for growth and Hong Kong Budget p8 Aviation p22 Budget 2015 – Tax Measures More UK air services being targeted – but Europe remains elusive Education p10 New university aiming to be self-funding in two years Development p25 Land reclamation project fills State coffers Insurance p12 The changing face of insurance in Gibraltar Business p26 Gibraltar: Where innovation begins Funds p14 AIFMD – Two years on Taxation p28 Income Tax (Amendment) Bill 2015 Profile p16 Sunborn looks to float and relocate Business round up p30 Editorial Comment Quick wins to help economy wo new independently run State enterprises, the retail Gibraltar it is not just a case of making money. International Bank (GIB) and Gibraltar University (UniGib), Yet that is just what Gibraltar seems able to do with comparative ease! The have between them £35m of pump priming, but it is a pity not GSLP set out to increase the economy by 50% over four years, but the original Tmore time was given before launch. estimate of £1.64bn Gross Domestic Product (GDP) by December has already GIB opened in May, encountering start-up problems with suppliers for been met, Chief Minister Fabian Picardo revealed in his June Budget. Debit cards and cheque books and three weeks rather than three months to He suggested £1.65bn could well be the final outcome for 2014/15 in which test systems; UniGib, had a similarly short gestation period and opens in case he feels, it is not unreasonable to expect that the current year will produce September without any on-site accommodation, and unable to capitalise for £1.8bn nominal GDP. the coming year on potentially profitable overseas students, and new But as Minister for Employment, Joe Bossano, a long-standing parliamen - full-time degree courses. tary economic guru, noted: “For the future, to manage the same rate of growth But this is an election year and the Gibraltar Socialist Liberal Party would require that our GDP should then go from £1.8bn in 2015/16 to £2.7bn in (GSLP) government clearly felt it necessary to ensure major manifesto 2019/20.” However, ahead of this year’s election, no one is yet making such a commitments are achieved before voting occurs towards end-2015. The prediction. establishment of the bank and university are undoubtedly big achievements. Construction and related income forms a significant part of that growth, for Emphasis now will be on ensuring both institutions deliver quality results, example the near £89m upfront licence fee payment due in September for the whilst not tapping further into State coffers. GIB estimates it will be Blue Water £1.1bn development – Gibraltar’s largest projected inward invest - profitable within three years; UniGib’s government grant covers two years’ ment - and the big rise in associated PAYE income from the 900 people to work setting up and running costs. on realising the project by 2021. Ensuring both enterprises present a good deal, encourage business The worry is that temporary construction projects are fuelling much of the opportunities, and add to Gibraltar’s reputation will be critical. Both growth: ministers this year did not trumpet shares of economy held by financial organisations have a sound and experienced management board to help steer services (previously 20%) and gaming (25%), the feeling being that sectors such development, and UniGib in addition has an enviable Academic Board, with as the port and tourism, are not producing any significant growth rate. 12 education luminaries from across Europe (and Australia), assisting Information based on ageing input-output studies has been extrapolated by vice-chancellor, Prof. Daniella Tilbury. government statisticians. How GIB and UniGib both engage with the community will be key – Ray Spencer
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4 Gibraltar International www.gibraltarinternational.com Within the European Union Single Market News
continue to seek opportunities to add greater diversity to the current insurance sector where Private sector setting the predominant class of business is UK motor insurance.” the pace for growth Earlier, Picardo revealed gaming companies paid £33.4m corporation tax last Unlike developing countries facing a series of economic “tough year (up 19%) and remote gambling duties rose to £14.1m from £11.6m (reversing the challenges” in 2015, Gibraltar’s progress continues apace – a 10% previous years’ fall), largely due to an increase rise in Gross Domestic Product (GDP) last year and only slightly in licences and higher turnover. lower rate expected for 2015 However, “modest reductions” in the total number of gaming staff to 3,423 from hat was the view of Chief Minister That is based on the £83m upfront pre - business mergers and office moves, caused a Fabian Picardo, presenting his fourth mium negotiated by the government for the 1.3% year-on-year fall in PAYE contributions Tannual budget in his current term of long-awaited Eastside development before a to £22.5m. Financial services and gaming office. Early estimates indicate GDP of construction licence is given, plus £4.75m for together account for around 45% of the £1.64bn for the year to end-March, but based “a pile of rubble” on the land that will be used economy. on experience, “it is likely that this figure will to help make a breakwater for a super yacht in any event be revised upwards”. marina in the £1.1bn project (see page 25). It LNG to aid growth Picardo expected to “comfortably is “a huge statement of confidence in our Another anticipated “great driver of exceed” his original election target of £1.65bn economy”, Picardo said. economic growth” - Liquified Natural Gas by end-March next year, maybe reaching That development involves building storage, re-gasification and LNG bunkering, a £1.8bn nominal GDP. 1,700 affordable homes with the government new industry for Gibraltar and necessary if it “Most exciting”, said Picardo, was the being only a purchaser in partnership with the is to remain the largest bunkering port in the fact that now the private sector was the main homebuyer when built. “Indeed, just the Mediterranean “as diesel slowly disappears as driver of GDP growth, including: continued sales of those apartments can provide a the fuel of choice”. The project is “likely to be rising employment – “a record high” full and considerable payment to government from the financed entirely by third parties”, although part time jobs 7% higher at 24,422 in October purchasers,” he declared. the Government anticipates having the option 2014; increases in online gaming and In managing Public Debt, the to invest, Picardo stated. financial services duty and tax contributions; Government has agreed renewal of a £50m Measures to help new business with and “very increased levels of construction” revolving loan facility with the Royal Bank of cash flow, and training costs for all with the private sector taking a greater lead. Scotland for a further 5 years to end-March companies, were announced, while the mini - Income at £559m exceeded government 2020 with interest set at LIBOR plus 0.875%, mum wage from September rises 10p to expenditure last year to provide a budget the low margin being “a reflection of £6.25. No rises were made in electricity and surplus of £51.3m, after contributing £25m the increasing level of confidence by water charges, nor employer social security to unprofitable State-owned companies. international financial institutions in our econ - contributions. With recurrent expenditure conservatively omy and Government”. Recommendations in a review by estimated to be £541m, the expectation is for Having repositioned itself as an open industry leaders of Gibraltar’s “personal tax a recurrent budget surplus of £18m this year. and transparent financial services centre with offering” is being considered; for 2015/16 Government revenue at £571m a competitive rate of tax, “Gibraltar is reaping personal taxes are reduced by varying exceeded the budget by £24m; income tax the rewards of seeing real business done from amounts and the tax free threshold raised to receipts at £144m were up 6% or £8m, and here which accrue and derive their [sic] profit £11,000. No rises were made in electricity corporation tax at £89m by 7.8% or around here and are taxed here… it is one of the and water charges, nor in employer social £9m. Those taxes represented 10.6% of GDP. principal drivers of sustainable economic insurance contributions. In the financial year 2014/15 the growth”, Picardo asserted. FATCA and other international Government invested around £104m on Within financial services, the Chief measures may already be affecting individu - capital projects; this year it will be around Minister singled out the Insurance sector – als’ ability to plan their tax affairs as much as £95m. where there were 3,388 jobs last October - corporations, especially given the moves and its £4.3m contribution to growing PAYE towards more and greater tax transparency, Exceptional income receipts in the year to March, as well as pro - Picardo asserted. Small, as well as large, Even so Public Debt at £448m was lower at ducing £22.6m corporation tax. economies will see information shared. end-March and is likely to end this year at Gibraltar International understands “It’s time to allow people to rationalize £400m. Cash reserves were estimated at there are at least two significant insurance their tax affairs before they are caught out”, he £72.3m and estimated to rise to £85m this companies currently applying for licences to asserted while revealing a 6-month tax year while net public debt is anticipated at operate from The Rock – one is a large UK- amnesty during which time individuals, “will £375m, or 22% of GDP, and destined to based firm relocating services and the other is be able to wipe the slate clean on payment of further fall to £314m by end-March and the a new type of insurer for the territory. 5% of the total amount remitted to Gibraltar expectation is that there will be “exceptional Albert Isola, Financial Services and deposited here”. income in the coming months”. Minister, noted in his Budget review: “We Ray Spencer
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Budget Budget 2015 – Tax Measures By Neil Rumford, Tax Partner, EY Limited ↓ Hearing aids, walking aids, wheelchairs, glasses & frames for prescription spectacles, contact lenses & dentures various 0% ibraltar’s budget measures Allowance based system (ABS) Toys 6% 3% for 2015/16 were announced The tax rates for this system were reduced by ↓ Gon 22nd June. Continuing 1% for each band: ↓ Suitcases 6% 0% the theme set over the last three Taxable income band Rate applied ↓ Marine engines and spares 6% 0% years, there were slight decreases First £4,000 14% (previously 15%) ↓ Hybrid vehicles in tax rates, some increases in £4,001 to £16,000 17% (previously 18%) (with trade licence) 2% 0% allowances and further tweaking of Over £16,000 39% (previously 40%) ↓ Hybrid vehicles (private imports) import duties and excise duties. From 12.5% to 17% 5% Increases in allowances include: ↑ White goods rated B 6% 12% Corporate tax Personal allowance £3,200 (was £3,100) ↑ Two stroke motorcycles 30% 50% Whilst the standard rate of tax remains set at Spouse allowance £3,200 (was £3,100) 10%, some minor changes were announced, ↑ Wines 39p per litre 50p per litre House purchase allowance including the introduction of 100% capital ↑ Beers 32p per litre 35p per litre £12,000 (was £11,500) allowances for new businesses (including ↑ Spirits 80p per litre £1.00 per litre self-employed and partnerships) in their first Nursery school (per child) £5,000 (was £4,000) year of trading. The audit threshold to Parent of disabled person £9,000 (was £6,000) Property-related measures determine whether accounts filed with the Blind person’s allowance £5,000 (was £4,000) For first and second-time buyers, the Income Tax Office are required to be audited Single parent allowance £5,264 (was £4,000) exemption from Stamp Duty has been or not is to be increased from £1m to £1.25m. increased to the first £260,000 (previously Medical insurance – up to £5,000 (was £4,000) £250,000) of the cost of the property. Personal tax A major factor in deciding if the ABS A one-off deduction “with the The alternative systems, the Gross Income applies to a taxpayer is whether they own their percentage to be verified” for individuals, Based System and the more traditional home in Gibraltar. As well as the house companies or businesses was announced for Allowance Based System, remain. purchase allowance above, there is an the investment made in improving the Energy Whichever results in less tax is the system that additional £4,000 purchase allowance (to be Performance Certificate rating of their applies to a taxpayer. spread over four years). Mortgage interest premises. Whether this includes residential Gross Income Based System (GIBS) deductions are given for mortgages of up to property is as yet uncertain. This system, with lower tax rates combined £350,000 (and even higher for pre 1 July 2008 A rates holiday was introduced for with fewer deductions, applies to most loans). purchasers of new “Affordable Homes” – taxpayers. The maximum effective (overall) with no rates in the first year, and a 10% rate never exceeds 25%, and in fact decreases HEPPS & HNWIs increase each year until 100% of the full once taxable income exceeds £500,000. On No specific changes to the special tax status amount is payable. taxable income above £700,000, the rate for High Executives Possessing Specialist A pre-notification procedure was applied is now 5% - previously this rate Skills and High Net Worth Individuals introduced where services such as the applied to income over £1m. Some examples (Category 2) were announced. However, the installation of kitchens, bathrooms and other of the effective tax rate at different income outcome of the review of the Category 2 fitted furniture are provided by suppliers levels are: product announced in last year’s budget is based outside Gibraltar. This will mean Total taxable income Effective tax rate expected to be available soon. imposing a withholding tax to ensure tax is £25,000 17% Social insurance paid by such suppliers. £50,000 22% The total cap of £3,023 per annum for Tax amnesty From £105,000 to £500,000 25% employers’ and employees’ contributions Gibraltar’s first tax amnesty was introduced in £1,000,000 18% (previously 19%) combined remains. Where an employee has respect of funds held abroad on which tax Limited deductions are given under this more than one employment, the requirement should have been paid in Gibraltar. system – some of these were increased for each employer to make contributions has Individuals will be able to “wipe the slate slightly: been removed. clean” by paying 5% of the total amount l Expenditure towards the purchase of a new Import and excise duties remitted to Gibraltar under the amnesty. The home in Gibraltar for first-time buyers – up Some further adjustments to duty were amnesty is to last for six months from 21st to £6,500 (previously £6,000) announced: June 2015. l Mortgage interest payments for main Changes From To Gibraltar residence – deduction of up to ↓ Flooring, carpets, construction £1,500 (previously £1,000) materials (trade imports) 12% 6% l Medical insurance - £3,000 (up from ↓ White goods rated A and above £2,500) (trade imports) 6% 3% www.ey.com/gi
8 Gibraltar International www.gibraltarinternational.com
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