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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 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 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, , a -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 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 , Financial Services and deposited here”. income in the coming months”. Minister, noted in his Budget review: “We Ray Spencer

6 Gibraltar International www.gibraltarinternational.com

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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           Education

schools with 80,000 students on specialist English courses – “it’s an enormous market New university aiming to be out there and Malta seems to do it particularly well; we think that Gibraltar can self-funding in two years also do it.” A Hong Kong provider of educational A long-held ambition to establish a university undergraduate, postgraduate and courses in tours to Europe combining learning of will be realised in late September when Gibraltar law and Gibraltar tax. In addition, English with a cultural awareness programme Gibraltar gains its first higher education facility there is an Institute of Professional has already shown interest in putting together Development providing short courses and a programme with Gibraltar, Licudi revealed. to serve business needs and it becomes an professional qualification courses. “What really has spurred us on is that economic driver for the entire community He expected there would be “many every time we have met with an institution – hundreds of students in the first year, includ - whether in Malta, Singapore, Hong £10m government grant to get ing evening classes for qualifications such as Kong, Seychelles – everybody has been so Gibraltar University (UniGib) off the accounting technician, legal executive and encouraging, so willing to work with us”, he A ground is “another area which we short [part time] courses for industry in the continued. aspire to setting the standard as to what can be evening, because this is something we are Licudi emphasised: “The university done by a small jurisdiction such as ours”, doing in conjunction with local business”. itself will be not-for-profit; in other words it Education Minister, , told The £10m grant covers “all capital costs may make profit, but all the money that Gibraltar International . up front, and all costs of staff and for [£2m it makes will be invested in higher education. “Undoubtedly, the University will annual] running costs for two years”, Licudi It is not a profit-making organ of government; enhance Gibraltar’s reputation in the interna- explained, meaning UniGib should aim to be it’s independent.” tional community”, he said, explaining: “A self-funding after September 2017. university enhances the city; we are already A full-time degree course in 2015/16 £15m overseas grants clearly on the map from a financial services costs £7750, for example (14% below that Gibraltar already provides annual grants of and an on-line gaming point of view – we can generally in the UK). UniGib funding will £5-6,000 for sixth form students who have do things very, very well in Gibraltar.” need to come from tuition fees and any been resident for five years regardless of sponsorship opportunities it will be able to nationality to attend universities, mostly in the attract. UK. Last summer 260 (91%) of school Some UK universities have been leavers shared nearly £15m in grants to cover accused of being ‘commercial enterprises’, university tuition fees, accommodation in but Licudi is adamant: “The university will be halls or private accommodation, air travel and independent, but I expect that the senior books. management will not be derailed in their In 2011/12 the scholarship budget was objectives by industry dictating what should only £5.3m, reflecting rising student numbers be done.” and a jump in English university fees. However, at the same time UniGib had Those opportunities remain even though to be “very conscious of what the needs of similar degree courses may be available industry are in Gibraltar, so it can train locally, but “there have been circumstances people”, he declared. where, after A levels, some students have New student Business and social science faculties and “We have had conversations with some decided not to go on to higher education: accommodation a research facility are housed in 4,000m2 of [business] areas and we think sponsorship having the opportunity to do a degree locally ready for the converted school buildings and new structures opportunities will be possible; it is something would give them that choice of carrying on – 2016 intake being completed at , the southern Gibraltar is well known for,” Licudi observed. or returning – in higher education”, Licudi tip of The Rock, to help “make Gibraltar a “It is possible at the outset, but the senior reasoned. major centre for academic and scientific management team will look at this from day He thought there may be some graduates research”. At the outset up to ten one – funding is important.” working in Gibraltar who would take the research positions concerned with culture, From September next year, the opportunity of applying for grants to continue environment and heritage are being offered. government believes the Language Centre with their education locally, possibly on a But from late 2016, UniGib could also that UniGib is pioneering – with overseas part-time basis – maybe to obtain a graduate prompt formation of a new industry – its students in new accommodation to be diploma - in various areas, or even to gain planned Language Centre primarily focusing built on-campus – “could be a big money another degree or professional qualification. on English as a professional language tailored generator, but more than that it is something Students already have the choice of to specific industries, as well as simply a that could be extremely important for the joining 3-year nursing degree courses in the foreign language, has attracted interest from community as a whole”. UK or locally where some 14 people several private sector language laboratory Ministerial visits to various countries annually prefer to remain on The Rock and providers. have provided valuable insights as well as study at Gibraltar Health Authority’s School Licudi felt there probably would be 100 establishing potential reciprocal university of Health Studies in conjunction with the to 150 mostly local students at the outset in arrangements. Malta has some 40 language Continued page 24

10 Gibraltar International www.gibraltarinternational.com

Insurance The changing face of insurance in Gibraltar uncertainty as to whether a judge needing to The insurance industry in Gibraltar has grown approve a transfer to Gibraltar would believe rapidly in recent years and is now entering its that such a move is legal. period of maturing adolescence, where it starts to Following several years of industry and discover some of the more difficult aspects of life Gibraltar Government pressure on the UK Treasury an announcement was made in July as well as attractive opportunities that exist out 2014 to the effect that Gibraltar now had the there. Steve Quinn , Chief Executive Officer, Quest ability to accept such transfers. However, as Insurance Management (Gibraltar) Limited, reports no Parliamentary Order has been tabled in the UK a test case before the courts needs to Solvency II Rated Entities be heard, and it is anticipated that this will This is the long heralded project to Some insurers are exploring Rating Agency occur soon. If this is approved by the Courts harmonise solvency requirements, corporate accreditation, an area that is largely new in the opportunity for Gibraltar in the run-off or governance, and reporting for insurance Gibraltar. Larger multinational companies discontinued business arena is an exciting companies across the European Union (EU). are well served by being rated by the likes of one. Full implementation will be mandatory AM Best, Standard and Poors, etc. This has There are many portfolios of insurance with effect from 1st January 2016 not been a particular constraint for much of owned by larger companies, where new onwards (subject to limited transitional the Gibraltar market, but some liability business has not been accepted for some arrangements). insurers would certainly benefit from a time, but where the incumbent owner would For some time now the Financial strong security rating. consider disposing of the asset. Gibraltar Services Commission (FSC) has gradually would be the obvious choice if this issue is been guiding insurers to raise their capital Local Operations resolved. bases to meet the expectations of SII and has There may be implications on the local Gibraltar has already tested the set 200% of the Required Minimum Margin insurance managers as well. They have mechanics of the run-off sector by accepting (RMM) as the benchmark that they would undoubtedly been crucial in growing the business from the Republic of Ireland where, wish to see insurers meeting. business locally and will continue to play an along with all other EU countries, perversely New and existing insurers should important role in the future. However, the there are no similar issues. expect to see solvency requirements of 200% level of technical expertise required by the to perhaps 300% of the current RMM. Or insurance managers is developing. An insur - ILS stated in a different way insurers’ solvency ance management outfit should contain Gibraltar has stated its case to become the requirements will be between 40% and 50% expertise in all requirements of SII and be European domicile of choice for ILS of standalone (i.e. without proportional able to assist clients in producing governance business. This strategy has been supported reinsurance support) Gross Written documentation and robust capital models. by completion of the first ILS transaction in Premium. This has become a core function of the April. The belief is that the framework exists insurance manager alongside other for a sound business proposition that could Implications of SII traditional areas of accounting, compliance gain traction in this growing sector. It is quite probable that there will be fewer and company secretarial matters, being but larger companies. There is an appetite intelligently informed about the client’s So to the Future currently from large private equity houses to sector of operation and the investment Gibraltar is clearly maturing. The key now is acquire in particular motor insurance markets to maximise returns in a prudent to be aware of those areas that require further companies, with a belief that better times manner. polish to ensure the jurisdiction can deliver may be ahead as rates improve from the rock in a manner that produces an image that is as bottom levels of the last two years. Part VII Transfers and Run-Off stunning as the on a clear The shareholders of some Gibraltar Opportunities day. insurers are considering whether now is a A Part VII Transfer is so called as it refers to www.quest.gi good time to exit the market rather than that section of the Financial Services and potentially invest further funds to meet the Markets Act 2000. It is effectively the move - evolving solvency demands. The golden era ment of an insurance portfolio from the UK of the owner managed Gibraltar insurer may either to another home in the UK or to an well gradually draw to a close unless alternative EU member state. The legislation shareholders are able and prepared to raise in the UK regrettably did not name Gibraltar additional funds. as an EEA state and so there has been

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peers, appeals (when applicable) are to UK Privy Council (which is the same as the AIFMD – Two years on Cayman Islands and other UK dependent territories) and its currency is GBP Sterling; Adrian Hogg is a director of Grant Thornton (Gibraltar). which is of particular importance in the He is a former GFIA chairman, a member of the FSC’s current environment of Euro uncertainty. Using Gibraltar to establish an EU Funds Panel and a specialist in investment business with marketing passport can be done in two ways over 15 years experience involving various investment (1) build or (2) buy. The build option is for business structures in Gibraltar and the Caribbean. managers (non-EU or otherwise) to set-up their operations (or part thereof) in Gibraltar, s regular readers of the financial the EU via simple notification to its home seek appropriate licensing and undertake press will be aware, the Alternative member state (i.e. Gibraltar) that it wishes to their activities from Gibraltar. This can be A Investment Fund Managers undertake marketing activities in a named EU via a fully self-sufficient investment manage - Directive (AIFMD) has been a hot topic in jurisdiction. ment company or via one supported by its the investment business sector for some time NPPRs is an agreement of private non-EU counterpart (with certain functions and brand AIFMD is becoming well known placement between member states. NPPRs being delegated to the non-EU counterpart

throughout the world. allow managers to market within the EU on a subject to certain conditions). AIFMD was introduced with a number member state-by-member state basis for The buy option is for the non-EU of transitional markers. The Directive those not marketing via the EU passport. manager to engage an EU (Gibraltar)

came into law on 22 July 2013; the first Marketing via the NPPR route is fine for manager and then to market in the EU with transitional period, that required funds non-EU managers so long as they do not wish the marketing passport via delegation from managed and/or marketed in the EU to be to market in several EU member states as the said EU (Gibraltar) manager. The EU compliant with the Directive, ended on 22 NPPR filings are required in each member ‘ manager in this instance acts as the AIFM July 2014; and 22 July 2015 sees the end of state where marketing activity is to be and is permitted to delegate certain functions the second transitional period when, subject undertaken. This becomes very expensive as to the non-EU manager so long as by doing so the EU manager does not become a letter The extension to non-EU managers will be subject to a number of box (i.e. a manger without substance). This rules which may deter all but the most determined managers from can be a good solution for non-EU managers and is often an entry level into EU licensable seeking the EU marketing passport activity that leads to the build option. Both the build and buy options are to the recommendations of the European appropriate advice is needed in all member compliant, effective and cost efficient and by ‘ Securities and Markets Authority (ESMA) states in which the manager wishes to market, doing so the non-EU manager can market and approval by the European Commission, because, despite the harmonisation of the throughout the EU via the marketing the EU marketing passport will be extended rules in respect of the conduct and activities passport. to third country managers (non-EU of managers as per the Directive, NPPR Under AIFMD non-EU managers that managers). marketing rules are not harmonised through - market in the EU have a choice to make. out the EU. They can market via the extension of the EU NPPRs This leaves non-EU managers with a marketing passport to non-EU managers that The extension to non-EU managers will be difficult choice. Market with their existing is expected to be granted by the European subject to a number of rules which may deter structure via an EU marketing passport Commission at the end of the second AIFMD all but the most determined managers from (which will contain “subject to” provisions) transitional period (i.e. on or around 22 July seeking the EU marketing passport. The or via the respective NPPRs of the member 2015), or via the NPPRs, or via an EU other way for a non-EU manager to market states in which they wish to market (on a manager with an EU marketing passport (i.e. in the EU is via the respective national member state-by-member state basis). using a Gibraltar manager under the build or private placement regimes (NPPRs). buy option). Passporting is a mechanism which EU marketing passport There is always a cost of compliance. allows firms to provide services throughout There is, however, an alternative. Marketing The question should not be, “how much does the EU from one member state without the can be undertaken throughout EU via an EU it cost to comply”, but, “what is the cost of need for authorisation across the EU. marketing passport operated by an EU non-compliance”. My preference, if I was a Passporting is used in banking, investment manager and Gibraltar can help in respect of non-EU manager, would be to market via a and insurance services, a good example of such. Gibraltar is a tax neutral, common law Gibraltar based EU manager via the build or which is a Gibraltar insurance company finance centre that bases its rule of law on buy option, both are compliant, effective and selling (via its passport) insurance products in the UK. It has UK trained professionals, no cost efficient. the UK. The AIFMD EU marketing passport statutory borrowing or investment restric - www.grantthornton.gi operates under the same principals whereby a tions on its fund products, competitive cost - manager licensed in one EU member state ing and is the quickest time to market to the (i.e. Gibraltar) is able to market throughout EU. Also, as a distinct advantage over its EU

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there had been disappointing and the old- established Husa Hoteles, a family-run Sunborn looks to Spanish group, withdrew from a deal to manage the floating hotel, because – in part - it felt too many other good land-based hotels float and relocate were opening locally at the time. He had to find an alternative location- fast. After 15 months bedding down Gibraltar’s first 5-star hotel, the Niemi has only ever worked in the publicity-shy owners of the Sunborn super yacht seem confident that the multi-faceted family conglomerate that in six concept is sufficiently viable to warrant significant expansion countries has €500m assets, including 5 land- based hotels, restaurants, catering and – investment in the order of €750m - and a potential Market float, exhibition centres, health spas, healthcare Ray Spencer discovers. hospitals, timeshare apartments, senior citizens homes and a private non-profit foundation focused on elderly living.

Hong Kong influence In Hong Kong, local property consultant Jason Cruz persuaded Niemi to scope Gibraltar’s potential as a base for the new 142 metre long, seven storey super yacht hotel, rather than chose the Asian port. [Cruz has since become the Gibraltar government full-time Hong Kong representative.] “I already knew Gibraltar well having frequently visited the Costa del Sol over the last 25 years staying at our family’s holiday home in Estepona,” Niemi revealed, “so I flew over to consider the prospect in detail and tied up the government arrangement.” At €125m, it is Sunborn Group’s largest single investment. Now I have two hen the Finnish-owned vessel the banks that we were working with were not Peka Niemi and his wife founded the government’s sailed into Ocean Village in late able to transfer their funding to Gibraltar; Sunborn business in 1972 initially with behind me: 2013 there was local controversy there were either jurisdiction issues, or development of the Naantali Spa & Hotel Hans Niemi, W Sunborn over what amounted to a surprise £30m prohibitions of some kind – maybe the fact near Turku in Finland, which became so executive government loan on undisclosed terms that Gibraltar was a market that they did not successful, then running at 95% occupancy, director through the previously unknown Credit understand. If it had been Helsinki or that it ran out of building space. “We could Finance Company, itself financed by the Barcelona they would look at the market and really use extra capacity in the hotel, but with State-owned Gibraltar Savings Bank (GSB). say ‘OK, I understand’- but Gibraltar, no!” nowhere to expand, we came up with the The loan was needed as part of a wider The loan [an investment at, what the yacht hotel concept, something that at the financing arrangement to develop the government called, ‘a good market rate’] “has time was quite innovative,” Niemi junior purpose-built 189-bedroom luxury floating always been on a temporary basis”. Niemi observes. hotel, and to cover initial opening and explains: “This is a development loan. Once His father reportedly said ‘we know how operating costs, explains Sunborn executive the hotel has been up and running with a to build ships and how to run hotels, why not director Hans Niemi, the younger of two sons couple of years’ track record, we have other put them together’; but Niemi laughingly now running the 45 year old, family owned sources to refinance.” suggests it was more like – ‘how to build on Sunborn Group. Having studied at University to your neighbour’s land and not pay for it’. “In every jurisdiction you need a become a banker interested in derivatives Whatever the truth, the fact remains that the financial arrangement in that locale, whether trading, the 37 year old insists: “The deal to Naantali grew to over 420 rooms, the yacht it’s London, Barcelona or Finland”, Niemi come to Gibraltar just would not have been hotel annex adding 138 of them. says, “and the problem at the time was with possible; we had only a very small Since High School, Niemi had been the known planned departure of Barclays window of opportunity available to us having attracted to his future wife, Päivi, whose Bank, there were only a few lending entities decided whilst the ship was being built in family then owned Finland’s largest turnkey in Gibraltar”. The only way of having the Malaysia that we would not after all take it to contractor in the shipbuilding industry. Sunborn Hotel in Gibraltar “was to get some Barcelona, the original destination.” Sunborn has had its own shipyard operation sort of a bridge loan for the company to come The Catalan city provided a 25 year since 2008 and run by elder brother Jari, who in”, he emphasises. licence from 2008 for Sunborn to be based at now lives in Kuala Lumpur. “We rent space Niemi presses home the point: “A lot of its new Port Forum development, but progress Continued page 18

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Continued from page 16 in the Royal Victoria Dock - with proximity to investment in Sunborn by Paf, a Finish not- Canary Wharf, London ExCel conference & for-profit company with exclusive gambling from an existing yard and use existing exhibition centre, and the O² Arena. That rights on Aland Island, where it generates suppliers and networks: rather than waste a lot London ship was moved from the group’s funds for local humanitarian and social of resources in building or buying a shipyard, Naantali spa hotel and given a near €50m causes. Already “it is a significant part of our or renting one permanently, we go wherever refit, and is the group’s second in the capital - business in Gibraltar” and Niemi quips: “Now in the world there is capacity, wherever we get the original was sold after a decade to Nigeria I have two governments behind me – the best deals”. for around £30m in 2008. Gibraltar and Aland!” Sunborn developed a ‘Virtual Shipyard’ Today’s Sunborn London with 80% He picks partners able to share in system designing ships, with various occupancy already, aims to achieve 85% Sunborn’s aspiration: when settling on other companies participating worldwide – “it within the year. “However, of all the hotels in jurisdictions he already has a willing casino really has become like a cloud - so that, for the east London area, Sunborn has the highest operator, and La Sala, a company that “has a example, the steel can be assembled in one average day rate,” Niemi says. London is in big expansion plan, including wanting to do place, fitting out in another location, and so line for one of the new vessels and the an IPO in London”. on; it’s non-geographically-specific”, Niemi existing London ship would then go to Sunborn Group turnover this year “of enthuses. “It is a global business, we can another destination. around €150m is again growing quite rapidly” build ships anywhere in the world: with our Recirculating existing vessels to other after a period of consolidation, and is last ship [Sunborn Gibraltar], the work was ‘home’ ports such as Gibraltar is a key part of refocusing on the objective of gaining a done in six countries.” the Sunborn strategy. Venice, Istanbul and London Stock Market listing in 2020 for the Abu Dhabi are amongst the earliest other super yacht strand of this private family Six ships by 2020 locations being considered, with Barcelona business – assuming sufficient investment The significance of this detail soon becomes subsequently. partners are found to finance the expansion to clear: Sunborn has four more ships in the at least six ships. planning stage, with an implied cost of some Simply moving ports “What this super yacht hotel product enables Relocating to The Rock us to do is to change [the local offering] over An early move has been to broaden the time”, Niemi declares, adding: “If in ten Sunborn board with people who can add years’ time the market diminishes, we need a experience, contacts “and most of all finer, luxury version of my hotel, or only a enthusiasm and passion for our business; it’s 4-star product, we can change it. not just a matter of money - money is “We cannot predict what is going to everywhere”, says Niemi who, despite his happen ten or 16 years’ away, and if the youthful appearance and laid back approach, market is still there – it may have got bigger is responsible for just about everything in the or smaller - we are happy to stay in a location, Group, other than shipyards. but maybe with a different vessel; the lifespan And then comes the denouement. With of these ships is more than enough, maybe an increasingly large part of Sunborn Group 100 years. In any business, the market will activity now outside Finland, Niemi is “very certainly change over that time.” seriously considering relocating our whole Gibraltar’s ship, after a slow start this holding company structure to Gibraltar, year, currently is achieving 70% occupancy because of the tax benefits, and looking at and will probably end 2015 at 65% overall. Gibraltar as our doorstep into the rest of Sunborn is “very happy” for the year 2 Europe and the Middle East. It is much operation. “I am not expecting it to be higher simpler than doing it from Finland.” than that, because Gibraltar has its own Sunborn says it’s important to open up A night club €500m “to be completed in 36 months and seasonality very different from the rest of the the London and Gibraltar flagship operations and casino give then there’s another two or three destinations Costa del Sol. We struggle with the lack of – “because they are the showcases, the big added 5 star [for ships] in mind thereafter”, Niemi business clientele in summer and have to revenue generating pieces of business”. appeal confesses. Commercial negotiations are due work much harder than in the business Niemi claims there are several potential to be complete by end-2015, with months”, Niemi notes. Gibraltar in Sunborn. “It is more a shipbuilding starting within three months Most clients for the hotel are from case of coming up with a suitable vehicle for thereafter. outside of Gibraltar, but a lot of the events – these people to invest and that is one of the Part of the investment logic is to achieve banquets and food and beverage business – reasons why we are talking to the local funds, synergy, scale and saving on design costs by are Rock based customers. A tie up with companies, banks, lenders and so forth; we building four ships in a short period of time, Marbella’s La Sala Group from June to run are trying to create a structure in Gibraltar for having the existing ships as prototypes with around 5% of the yacht’s public space as an the future growth of this company.” proven new technology. entertainment and separate restaurant venture And Niemi observes wryly: “Gibraltar The new yachts will complement is attracting “a different, younger fun group” is one of those locations that draws in Sunborn Gibraltar and the 4-star Sunborn of local people and from over the border. entrepreneurs; sometimes you need not look London, that also opened in March last year, Meanwhile the new 24 x 7 Casino is an further than your front door”.

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www.sapphire.gi +350 200 47 200 - [email protected] Suite 3.0.3 Eurotowers, PO Box 797, Gibraltar Overseas mission Gibraltar as the Gateway to Europe for Singapore and Hong Kong By Joey Garcia , a Financial Services Partner at ISOLAS The Gibraltar proposition lies in being able to and Chairman of the Gibraltar Funds & Investments offer European access, in the same way as a solution from London, Luxembourg, Association (GFIA) Frankfurt or Paris, and this is a strong strong Gibraltar delegation and the importance of the jurisdiction-to message in Hong Kong and Singapore where returned from a short but -jurisdiction interpretation and guidance on historical use of the British Virgin Islands and A intense mission to both what might constitute direct or indirect Cayman structure may start to change as the Singapore and Hong Kong in July. marketing in each. It is certainly the case of weight of compliance and transparency The exercise was one of profiling most practitioners that if managers based increases. Gibraltar financial services generally, but then outside of the EU are not prepared to comply The Gibraltar (GSX), also dealing with the specifics of the with the obligations of AIFMD, they are listing proposition was also placed before the European regulatory framework which may better advised to avoid Europe altogether than audience gathered at both events with the core affect both Singapore and Hong Kong based to rely on the no-mans land of reverse message being one of a Gibraltar listing’s investment managers, and the options and solicitation. visibility, and the global drive to disclosure solutions available to them through Gibraltar. and transparency. As well as dealing with the At a series of very well attended EU market through Gibraltar Listing process, GSX generated real interest Gibraltar Government hosted technical After dealing with what would not work as a on their proposed securitization offering sessions, the panel, who were made up of strategy for a manager based in Asia, we were planned for later this year. Here, the proposed Gibraltar Funds and Investments Association also then able to deal with strategies that creation of exchange traded instruments (GFIA) representatives, as well as the would actually allow access to the EU market, (ETI’s) would allow the securitization of Financial Services Commission, set the scene through Gibraltar. alternative investments into ETI’s, which are by setting out a series of very interesting EU In a pure AIFMD compliant context, a completely free of issuer credit risk and linked statistics. The first speaker Adrian Hogg big focus of the first presentation was to directly to and backed by the underlying asset. highlighted that although the population of highlight what I describe as the ‘build’ or The ETI is intended to combine the the EU represents only 7% of the global ‘buy’ options for managers. The build option advantage of a fund (the collateral from population, it still represents 23.8% of global being that of a standalone establishment of a assets) within the flexibility in the design of a wealth. To put these statistics in perspective, it Gibraltar based AIFM, and the buy option certificate (a derivative security issued by a was also highlighted that China represents being that of using a platform, or management bank). The ETI is a straight pass through 19% of the global population but only 12.2% company solution which would take the instrument that delivers direct (delta one) of Global wealth. appointment as the manager’s appointed performance of the underlying asset (in this In addition to the above, it was also AIFM, but delegate the portfolio management case a fund). The critical point is that ETI’s highlighted that the EU base in Hong function (potentially along with other although linked to the underlying perform - Kong hedge funds account for approximately non-core functions) back to Singapore or ance of the fund, are not collective investment 18% of Assets Under Management (AUM), Hong Kong respectively. Under both build or schemes. The ETI’s issued on a stock and 21% of Singapore AUM. In short, the buy options, the ability exists for Asia based exchange can then be purchased by suitable message from the Gibraltar delegation was managers to maintain their licensed and investors through their broker relationship. that the EU is a relevant market, and access to operating presence within their home They are not Alternative Investment Funds Europe a relevant matter to consider moving countries, and have the Gibraltar AIFM under AIFMD, but they are UCITS eligible forward. delegate the core portfolio management assets and issued with an approved prospectus In my own part of the opening service to them there, thereby obtaining the (and as such, suitable for presentation, I highlighted that the European footprint. In this context, the within the EU). Given that an ETI has no within Europe today is that the only way to requirement for the delegation being on an restriction on asset class, and that non-EU distribute your fund are either through objective basis, and the avoidance of any of funds can also be securitized for listing on an national private placement regimes, or the letter box provisions of AIFM were also EU exchange, there was a great deal of through the pass-porting option granted by the discussed. interest in this offering which GSX continues Alternative Investment Fund Managers When we consider that it is envisaged to develop with a group of experienced parties Directive (AIFMD). In previous trips to Asia that national private placement regimes are operating in this space. we have often heard managers speaking about scheduled to come to an end in 2018, and that www.gibraltarlawyers.com reliance on the concept of ‘reverse reverse solicitation is not a marketing strategy, solicitation’ as a marketing strategy. The we do envisage growth in the AIFM platform dangers of relying on this nebulous concept as space and we are starting to see this growth a ‘strategy’ were highlighted in some depth, across various fund jurisdictions in the EU, with the underlying principle being that it following very much the existing UCITS would not be possible to ‘solicit a solicitation’ platform models that have existed historically.

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FOR MORE INFORMATIONINFORMANFORMAATIONTION ANAND ENROLMENTENROLMENT CONTCONTACT:TAACT: ¥ (0044) 07769289607  [email protected] www.sovereigncoonsulnsulting.co.uk Aviation More UK air services being targeted – but Europe remains elusive

Two new air services to Gibraltar since Yet still more flights are being sought to problem of being virtually unable to do busi - spring promise to boost passenger help boost visitor numbers – and raise income ness here in a single day trip. Extending the arrivals, but hopes of establishing a to offset terminal running costs. Three years timings of flights, rather than necessarily in planning, the terminal was to provide direct expanding the number of routes, is more direct connection with a European access and joint use by Spain, but by the time important for many UK business people.” financial hub airport remain a distant it opened in 2012 political relationships had BA with its London Heathrow service is prospect - and EU plans may bring deteriorated under a changed right-wing the lone UK airline offering business class fresh headaches Spanish government. seats: at one time it flew morning and In the same period, construction costs evening; now twice daily services are only at hen easyJet launched in Spring jumped from an originally estimated £24m to weekends - both in the afternoon. Efforts to three times a week services from reach £84m, funded by Gibraltar government encourage BA to extend its Gibraltar service WBristol to The Rock it opened up as a capital project! are hampered by “slot constraints that exist at potential for tourist and business visitors who The near-20,000m2 terminal is over [Heathrow] airport”, GTB said. previously had to trek to any of three London five times larger than the twice-extended Some 23% of people fly to Gibraltar on airports, “or perhaps they never considered 56 year old one it replaced – and operates business, the others for leisure (35%) and Gibraltar as a convenient destination”, significantly below its 1m passenger capacity, visiting friends and relatives (42%). However, Gibraltar Chamber of Commerce noted. it being able to handle six flight movements around 60% are ‘in transit’ to Spain. Royal Air Maroc at Easter launched its an hour! twice-weekly flights from The Rock to This summer there are 37 weekly Passenger tax to rise departures to 7 destina - Total aviation income for the government was w O r

C tions – all but one in the £3.4m. Airport passenger departure tax in d N

a UK - but in 2012, there 2014/15 produced £1.35m, compared with

N O

T were 36 weekly flights. £1.5m a year earlier, but it is expected to rise f u

H Since 2008 there has to £1.7m in 2015/16. Landing charges pro - been a succession of duced £450,000 in the last financial year, 7% new service introduc - down on 2013/14, but for the current year, the tions and withdrawals government has budgeted £475,000m reflect - through lack of demand, ing the impact of new airline services. including Iberia to The income figure is boosted also by Madrid, Andalus Lineas fees and rental of 13 retail outlets at the airport Aereas to Madrid and – three others currently are unoccupied – and Barcelona and BMI which last year added a rather disappointing baby to East Midlands. £1.6m, including 5% commission received on The Chamber of sales, compared with close on £2m in Gibraltar Tangier - one of the shortest intercontinental Commerce 2014 report notes: “The 2013/14; the forecast £2.1m for this year International flights in the world - and onwards to Marrakech flight [in summer] clearly did not makes up ground. Airport is actually , re-establishing a link from more have the right credentials, be it pricing or tim - Overall costs of running the terminal RAF Gibraltar than a decade ago and creating business ing and ability for the operator to sustain a were £3.2m, including £2.8m payment to the potential at both ends. period long enough to develop its franchise. British Ministry of Defence (MoD), which is The new year-round routes are in We hope the [new] Tangier route has more responsible for everything other than the addition to those already operated to the UK success.” terminal, including air traffic control, the from Gibraltar by British Airways, Heathrow, Defence Fire Service and repairs and easyJet, Gatwick and Birmingham, and More regional connections maintenance of ‘RAF Gibraltar’ as the airport Monarch, Manchester and Luton; in total easyJet anticipated adding 39,000 seats in the is officially known. there are 37 weekly departures to seven desti - first year from southwest England - its third On the surface therefore, the govern - nations, with Sunday the busiest day having Rock route. GTB said: “In terms of scope for ment made an operating profit of around nine departures. growth out of the UK, potential exists for £200,000 in 2014/15, but for the coming year, Together, the new routes are expected to additional regional connections, such as to it is expected to improve significantly to help boost passenger numbers using the Scotland.” £880,000, around 7% more. airport terminal, that tightly abuts the Spanish Yet Peter Montegriffo, a partner at the But this result excludes the cost of border, to reach 445,000 this year, some 7.5% law firm, Hassans, observed: “There is no servicing capital for the £84m construction, a more than in 2014, according to Gibraltar doubt that the new terminal is a far cry from figure the government has not disclosed, Tourist Board (GTB). the old one, but I constantly hear repeated the (despite numerous requests over months from

22 Gibraltar International www.gibraltarinternational.com Aviation

Gibraltar International for the information). Gibraltar air terminal. shows origin/destination demand from cities As Dr Joseph Garcia, deputy Chief “Today there are no military aircraft such as Frankfurt to Gibraltar, for example, Minister and minister with responsibility for permanently based there, however RAF only show annual demand of hundreds of aviation, remarked when referring to service Gibraltar remains at extremely high readiness passengers a year. agreements: “A part of the costs of running to support UK military operations and visiting “Airlines therefore consider that there is the airport are commercially sensitive.” military aircraft [150 last year].” The airfield not sufficient demand to justify a direct The financial arrangements take on is licensed and regulated by the Military service,” given that “airline economics and particular significance because the EU, as part Aviation Authority. profitability would be non-existent”, it said. of liberalisation measures, aims to ensure In addition, Malaga’s extensive route within a decade that airports are not Euro hub demand low network and frequency, especially to financial subsidised by government. It is a develop - Another EU strategy ‘Europe 2020’ notes, hubs and main cities such as Frankfurt, ment Gibraltar “must get right”, Chief “certain regions are hampered by poor Geneva, Zurich, Brussels, Paris, Madrid, Minister Fabian Picardo told Gibraltar accessibility from the rest of the EU.” Barcelona etc., as well as the overlapping International in 2013. Successive governments have sought a catchment areas of both airports, “makes the Observers consider the fact that the European hub airport connection to boost pas - task that much harder to encourage airlines to terminal is owned and has been run by the senger numbers, (and for Gibraltar’s financial start new services from Gibraltar to MoD since the runway was first opened in services and gaming sectors, to support the destinations that are already on offer from 1939, presents a mitigating circumstance that claim to be a key entry point into Europe for nearby”. could see the Rock excluded from the new investors). Jerez airport – about the same distance proposed EU measure. But a suspicion of Montegriffo maintained: “With Malaga north from Gibraltar as Malaga - has reduced initial landing charges to encourage airport again expanding its flights, one would expanded over 20 years as an international new flights, may fall foul of EU policy. have thought that greater Gibraltar connection tourist destination and is considerably larger The MoD confirmed: “RAF Gibraltar would be achievable; there would appear than Gibraltar - 758,000 mostly charter flight is frequently referred to as Gibraltar to be demand [for the funds sector] to passengers in 2014, from 19 locations with International Airport due to the number of Switzerland, for example.” eight being in Germany, two in the UK and civilian aircraft [1,845 landings in 2014] Yet, the government is less optimistic. one each from Luxembourg and Belgium. which operate from the Government of GTB pointed out: “ Data from IATA, which Ray Spencer

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www.gibraltarinternational.com Gibraltar International 23 Education

Continued from page 10 Europe and North Africa. ambitious, but not over ambitious’ at the Kingston University and St George’s Dr Darren Fa, formerly Gibraltar beginning. Clearly we don’t want to expect a University of London. Museum’s Director of Education, is a scientist token university, we want to establish a full UniGib will have positive knock-on and teacher who worked exclusively on university, but…. these things take many, effects for the whole community, Licudi proposals for the model, the courses and many years to consolidate, to develop, to believed. “This is not an isolated, stand-alone how UniGib could be achieved, and is now build up”. institution. There will be benefits, whether its UniGib’s Director of Academic Programmes Jose Julio (JJ) Pisharello, managing students coming in and spending and Research. partner of EY Gibraltar, part of the global money in the economy – the specialist tax assurance and advisory firm, is students for a Language Centre – Staying at the top chairman of UniGib’s Board of Governors. or students coming with their Gibraltar provides world-class services in a Peter Montegriffo, also on the gover - family for graduation, that clearly number of business areas, “but there is a lot of nance Board, told Gibraltar International : “I generate business.” competition out there and it is important that hope the new higher education establishment UniGib’s Vice-Chancellor is Gibraltar professionals stay at the top of their will tackle the serious and difficult issues sur - 47 years old Professor Daniella game, in terms of the services that are rounding its development with both realism Tilbury, who previously was a provided; the university will play a role in and honesty – I am expecting to see solid, but senior manager at the University that”, Licudi said. nonetheless prudent, progress.” Constant industry of Gloucestershire, one of seven such estab - “There will be constant interaction with Other new universities could expect a interaction: lishments she has been associated with in the industry on professional courses to meet longer –more generous - lead-in time, as was Gilbert Licudi, UK, Hong Kong, Australia, Canada, South Gibraltar’s needs; for example, there will be the case with the Seychelles, for example, Education Minister Africa and Spain. specific and high quality training for the which took several years to come about, A well-regarded senior academic with hospitality industry”, the Minister declared. Montegriffo said, adding: “Whilst university over 25 years experience in higher education, When Prof Tilbury was appointed in managers will be seeking external funding she advised the government on the university March, she felt “confident that we can build opportunities, “I hope they don’t fall into the project, having similarly assessed strategic academic and research excellence over a short trap of becoming a commodity, as has been higher education initiatives for government period”, but Minister Licudi later noted: “The the case with some Caribbean institutions”. agencies in Australia, New Zealand, China, one thing everyone has emphasised is ‘be Ray Spencer

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24 Gibraltar International www.gibraltarinternational.com Development Land reclamation project fills State coffers

fter years remaining dormant, a near business of billionaire Simon Reuben and when complete in 2021, “Blue Water will 700,000 m2 plot of reclaimed land on Multiplex Construction, Australia’s largest provide employment for up to 1,000 people A Gibraltar’s east side has a new, building company and a major UK developer. and 4,500 – 5,000 people will be living there”. £1.1bn low-energy development plan over But with no progress, the government in 2013 During the late June Budget 5-6 years that requires a total of nearly £87m regained control by paying £28m for the land: presentation, Picardo noted: “The private to be paid to the government upfront by the Camoren project was chosen in June “as sector is starting to work on developments that September. the most mature” from a short list of 17 were previously not taking off”, and he Detailed planning for 450 up-market bidders. pointed to the Gibraltar World Trade Centre apartments, a 70-berth superyacht marina, a Leslie Allen-Vercoe, Cameron Holdings where foundations for the £85m venture are 5-star hotel, 1,147 government co-ownership chairman, said: “This is a landmark finished. Two new apartment blocks at homes, and a new promenade with retail, development for Gibraltar and we are entirely adjacent Ocean Village were “likely to office and leisure spaces, is to be submitted confident in the economy, which is showing start construction in the next 12 to 24 later this year with infrastructure work starting strong growth. Camoren principals together months”. soon after, according to developer Cameron, a have many decades of expertise in Midtown, a £120m residential, office year-old Gibraltar registered company. developments.” and car parking development over three years, Chief Minister Fabian Picardo, There were a number of funding options, is also underway, but the nearby £50m 4-star described the ‘Blue Water’ project as he said, including a large Irish development hotel and Victory Place office project is not Gibraltar’s “largest ever inward investment”. company, an international bank involved with expected to get under way for 12 to 24 He expected it to be “a major driver a Allen-Vercoe Caribbean project and, in months, the Chief Minister indicated. of economic growth”, attracting “many respect of affordable housing, local and UK Developers are also talking to international High Net Worth Individuals”. banks. Government about a Coaling Island land A 30% smaller reclamation site was to Over 900 people will be employed reclamation project, “which will also provide have been developed there in 2006 under a during construction, and Michael Crisell, a huge boost to GDP” with an expected £35m lease by Aldersgate Investments, the Camoren managing director, expects that payment of a large upfront premium.

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www.gibraltarinternational.com Gibraltar International 25

Business Gibraltar: Where innovation begins

By: Eran Shay , Managing Director, Benefit Business bureaucratic hurdles for companies to get Solutions Ltd.- a Business Accelerator, assisting approvals, licenses or certification than in bigger countries. In countries such as the UK, innovative companies in their setup and technology Germany or France, in order to get to the testing in Gibraltar. national level, a company may first need to pass the municipal and then the or start-ups and established financial and human resources which impedes regional/country level, making it a longer and companies alike, technology on their ability to test trial their technology in often more costly process. Ftesting and other pilot the large countries thereby creating a barrier British standards and EU studies is an important milestone prior to mass to entry; for example, testing a certain mobile membership: being a British Overseas marketing. Companies who wish to enter the application in the UK may require the Territory, and a member of the EU (since European markets often want to test their resources to simultaneously support millions 1973, through the UK), Gibraltar adheres to technologies in an EU compliant environment of concurrent users, while doing the same in high standards of service, and complies with under European standards and regulation. Gibraltar with its 30,000 inhabitants, would all applicable EU Directives, which facilitates Gibraltar has some unique features which be much less demanding. marketing to the rest of Europe. In particular, have made it the ideal testing ground for new Lower bureaucracy: due to its small FinTech companies enjoy the benefit of technologies: size, Gibraltar has fewer bureaucratic layers becoming regulated in Gibraltar and then Economies of Small Scale: Gibraltar is than most other countries, making access to “passporting” their license to the rest of the a small contained economy (measuring 7sq key decision makers, both in Government and EU. kilometres), making it easier to administer in industry much simpler and quicker. Low profile: Gibraltar is often not under and run pilot testing schemes and be in close Although Gibraltar companies are strictly the radar of the world media which means that geographical proximity to all test sites. regulated by the Financial Services if a company’s test trial fails, probably no one Moreover, most start-ups have limited Commission (FSC) there are much fewer would hear about it outside Gibraltar. In a big

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www.gibraltarinternational.com Gibraltar International 27 Taxation

either an audit or an independent accountants Income Tax (Amendment) Bill 2015 report to be filed with the tax office. The threshold for requiring an audit for branches is By Paul Stych, Senior Associate at PWC (Gibraltar) proposed in the Bill to be £1 million, although this will almost certainly change in light of the fter a couple of years of cases a tidying up exercise. There are some threshold increase announced during the most waiting the Income Tax significant changes and as with all tax recent budget to £1.25 million. A (Amendment) Bill 2015 (the legislation, it is long, and it is complex, but Payments of account Bill) was finally published on 5 March following is a summary, and hopefully, a help - Another administrative change comes in the this year. It has, however, not yet been ful guide to the main and, perhaps most inter - form of the basis on which advance tax enacted as the Chief Minister confirmed esting changes. payments are made. The concept of advanced during his budget speech on 22 June that he Change of statutory filing date for payments on account was introduced by the would be taking the opportunity to also corporate Income Tax purposes Income Tax Act and one that was, at the time, include the amendments from his budget Recognising businesses’ cash flow require - unfamiliar to companies in Gibraltar. address in the Bill before it is finally enacted, ments and providing more time to prepare Although, on the face of it, the introduction of so further amendments are expected. The financial statements, the date to file returns the relevant accounting period may seem original amendments in this Bill span (and pay the tax due!) was extended to nine confusing, it has the benefit of allowing com - a wide range of areas and cover months. This brings every company in panies to consistently determine advanced amongst others, changes in administrative Gibraltar, whether requiring an audit or payments on account taking into account an procedures to changes in transitional rules, a independent accountants report in line with entity’s actual accounting period. Simply put, simplification of the imposing of penalties each other. This change has actually already in many of the cases, payments on account in and, for the first time, a statutory audit been applied administratively by the tax office the current financial year are calculated based requirement for taxable branches. since last year. on a company’s tax liability from two years So, what are the changes? Audit of branches ago. Many in the industry will already be aware of Branches with taxable income in Gibraltar Deductions for construction costs these as some have been accepted practice for will now be subject to the same filing require - The Bill formalises the 2013 budget quite some time. The Bill is therefore, in some ments as companies. They will now require announcement in respect of costs relating to

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28 Gibraltar International www.gibraltarinternational.com Taxation the construction of office accommodation returns from their pension or investment the jurisdiction will benefit from the commencing between 1 July 2013 and 31 portfolio. In 2005, when taxation on invest - additional inward investment and from having March 2015. The available deduction is 30% ment income was abolished for all Gibraltar these entrepreneurs using their business skills of construction costs, in the first year of residents, followed shortly after by the and expertise locally. Perhaps more assessment following completion, with a exemption from taxation of pension income, importantly, from a tax perspective, the further 10% deduction per annum available in the Category 2 status was no longer necessary, income from these activities will be taxed each of the second to eighth years. or relevant for many of these individuals. locally to the extent that the income is accrued The Bill also formalises, in law, the 2014 However, Gibraltar continued to attract a and derived in Gibraltar. budget announcement in respect of the younger Category 2 individual, one who was An additional benefit of this new construction of high value accommodation not relocating to Gibraltar to retire here but “opening of the doors” approach is the whereby property developers are entitled to was alternatively a much more entrepreneurial additional substance that it provides to the similar deductions as to those above. individual with active business interests. The individual’s residency position. Substance is Removal of 10 % compound surcharge Gibraltar Government recognising this trend high on the global tax agenda and the weight Other amendments do away with the in 2008, issued guidance to the industry and therefore benefit of having an individual’s additional 10% surcharge at a rate compound - clarifying what activities Category 2 economic interests physically located in the ed on a daily basis on late payments of tax and individuals could, in principle, carry out jurisdiction gives to their residency position revises the penalties for non-compliance with locally. The guidance was welcomed by the should not be underestimated. Many high net the tax office. industry as it provided a number of clear worth individuals, travel and have business Category 2 rules examples of what a Category 2 individual interests in other jurisdictions therefore The Bill introduces changes to the Category 2 could do. Unfortunately though, there were potentially there is a risk that another country rules. Over the years, much like Gibraltar still restrictions with what could be done may claim that the Category 2 individual is itself, the profile of the Category 2 individual physically from Gibraltar. resident in their country. The more established has changed. When the status was first The Bill now allows Category 2 the individual is in Gibraltar the better their introduced the typical Category 2 individual individuals who have the necessary approval defence against a claim for residency from was a wealthy individual who had chosen from the Finance Centre Director, to carry out another country will be. to relocate to Gibraltar to enjoy the or exercise any trade, business, profession or Mediterranean lifestyle as well as the tax free employment in Gibraltar. The intention is that www.pwc.gi

www.gibraltarinternational.com Gibraltar International 29 BUSINESS ROUND UP

Accountants elect new the excellent working relationship mobile payments with “an easy, Bassadone’s services to president with HM , secure and private way”, according business Desiree McHard, managing partner the Financial Services Commission to the Bank. The Queen’s 2015 Birthday of BDO, has been elected President and other stakeholders; she looks Honours list in June was headed by of the Gibraltar Society of forward to a busy period of office 65 years old John Bassadone, Accountants (GSA). continuing to advise on and chairman of Gibunco Group, a Desiree, contribute to, multi-faceted company with who has served changes in It is the latest development in interests in fuel bunkering and on the GSA legislation that a series of moves by NatWest to servicing of ships in Gibraltar and executive affect the entire make it easier and more secure for land reclamation projects for committee for business customers to do their banking on housing and offices. six years, community and the move; recent digital innovations His OBE – one of ten awards moved from addressing the include the integration of Touch ID, for Gibraltar residents - was for Chair of the many EU where customers can open the services to business in Gibraltar. Audit Faculty to directives and NatWest mobile iOS application for Gibunco, was started in 1965 as an President, and international smartphones, just using a underwater engineering and ship takes over the standards that fingerprint, and to get cash from a repair company, but expanded into position from Colin Vaughan who impact upon the finance industry hole-in-the-wall ATM without a the territory’s largest oil bunkering had presided since 2013. locally. bank card. operation in the Port, and through Accepting the chain of office Apple Pay uses near-field subsidiary Penninsular Petroleum, at their Annual General Meeting in Bank paying with Apples communication (NFC) chips has been involved similarly at four June. Mrs. McHard thanked Mr. NatWest customers in Gibraltar, as embedded in the iPhone 6, iPhone 6 other ports, and in worldwide oil Vaughan and the outgoing well as in Jersey, Guernsey and Isle Plus and Apple Watch to pay for and lubricant trading. For over 20 executive committee for their work of Man are amongst the first to goods and services by holding the years it has also had a joint and accomplishments. Desiree have access to the much-heralded device near a card reader, much as arrangement with Spanish oil stated that she intended to build on Apple Pay facility, transforming with a contactless debit card. producer, Cepsa.



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30 Gibraltar International www.gibraltarinternational.com Contacts

Professional Bodies based in Gibraltar Gibraltar Association of Pension Fund Administrators (GAPFA) Gibraltar Federation of Small Businesses Ltd (GFSB) Jane Caulfield, Chair, Tel: + (350) 200 45877 Gemma Vasquez, Chair, Tel: + (350) 200 47722 Email: [email protected] Email: [email protected] Association of Trust & Company Managers (ATCOM) Gibraltar Funds & Investments Association (GFIA) Marc X. Ellul, Chairman, Tel: + (350) 200 70921 Joey Garcia, Chairman, Tel: + (350) 200 64740 Email: [email protected] Email: [email protected] Bar Council Gibraltar Insurance Association (GIA) Keith Azopardi, Chairman, Tel: + (350) 200 79423 Chris Johnson, Chairman, Tel: + (350) 58452000 Email: [email protected] Email: [email protected] Gibraltar Association of Compliance Officers (GACO) Gibraltar Insurance Institute (GII) Carlos M. Martins, Chairman, Tel: + (350) 2000 2022 Lorraine Moberley, President, Tel: + 350 57150000 Email: [email protected] Email: [email protected] Gibraltar Bankers Association (GBA) Gibraltar Society of Accountants (GSA) Kevin Hook, President, Tel: + (350) 2000 4000 Desiree McHard, President, Tel: + 350 200 47300 Email: [email protected] Email: [email protected] Gibraltar Betting & Gaming Association (GBGA) Society of Trust & Estate Practitioners (STEP) Peter Howitt, Chief Executive, Tel: + (350) 200 68450 , Chairman, Tel: + (350) 2000 1892 Email: [email protected] Email: [email protected] Gibraltar Chamber of Commerce (GCC) Gibraltar HR Forum Christian Hernandez, President, Tel: + (350) 200 78376 Ruth Halsall, Chair, Tel: + (350) 200 43865 Email: [email protected] Email: [email protected] Gibraltar Finance Centre Council (GFCC) Gibraltar Electronic Money Association (GEMA) Stephen J. Reyes, Chairman, Tel: + (350) 200 41200 Dani Spier, Chairman, Tel: + (350) 200 79645 Email: [email protected] Email: [email protected]

www.gibraltarinternational.com Gibraltar International 31 SOCIETE GENERALE PRIVATE BANKING HAMBROS

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