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The Gibraltar Trust

Gibraltar Trust legislation is generally based on the trust law of England & Wales; thus Gibraltar recognises and gives full effect to the concept of the trust. The Trustee Act of Gibraltar is the main governing Act; it is based on the English Trustee Act 1893, with amendments being made from time to time.

Whilst each jurisdiction's trust law is different we will not expand upon this here except to bring to your attention the following which may be of particular interest to you and your clients:

Forms of Trust

Although life interest trusts and accumulation and maintenance trusts are used in Gibraltar, the most popular form of Gibraltar trust is the discretionary trust. Such a trust can be used effectively to hold assets which are administered and distributed confidentially, maintaining the client's anonymity if so desired.

The Deed may either be in the form of a Settlement, of which both the Trustees and the Settlor are a party and sign the Deed, or as a Declaration of Trust which is executed only by the Trustees.

Key Benefits of a Trust

  • Asset Protection: Secure your assets and control how they are distributed during and after your lifetime
  • Flexibility: Enable flexibility to accommodate for changes in circumstances as they arise
  • To Provide for Succession Planning: Facilitate the transfer of your internationally held interests in an efficient, cost-effective and timely manner to your heirs
  • Confidentiality: Keep your interests private

Beneficiaries' Interests

In the case of discretionary trusts, the interests of the named beneficiaries are contingent. This means that a beneficiary's interest only becomes a real and fixed interest when the trustees, in their discretion, confer a benefit upon the beneficiary. During the lifetime of the Gibraltar Trust beneficiaries may be added or removed. There is no requirement under a Discretionary Trust for any named beneficiary to receive a benefit.Memorandum of Wishes

In order to maintain maximum flexibility the Discretionary Trust Deed is normally drafted with wide ranging powers. To provide more specific guidance to the Trustees the settlor normally provides the trustees with a memorandum of his wishes in which he sets out how he would like his trustees to deal with the assets of the Gibraltar trust during his lifetime and, in particular, on his death. The trustees can have regard to the wishes of the settlor at any time, and any matters set out in the memorandum of wishes can be amended from time to time during his lifetime.

Appointment of a Counselor (Protector)

To provide ongoing guidance to the Trustees it is possible to appoint a counselor (protector). The counselor is normally a trusted friend, lawyer or colleague of the settlor.

The powers which may not be exercised without the consent of the counselor usually include the addition and removal of beneficiaries. The counselor may also be entrusted with the power to remove and appoint trustees, change the proper law of the trust and its place of administration.

Underlying Gibraltar Company

It is usual for an underlying company to be utilised as a vehicle to hold assets of the Gibraltar trust. The company acquires assets such as real estate, marketable securities, pleasure yachts or any other investments or businesses, and it is the shares in the company that are entirely owned by the Gibraltar trust. Normal practice is to have a number of companies owned by a trust, each of which holds one asset type.


Taxation of Gibraltar Trusts

Gibraltar trusts established for non-residents of Gibraltar do not pay any tax in Gibraltar even where the trustees are Gibraltar residents and the trust is fully managed from Gibraltar.

Moreover, Gibraltar has no capital gains tax, gift tax, wealth tax, estate duty, inheritance or death tax.

In view of the limited circumstances in which a liability to Gibraltar tax may arise, it is possible to accumulate income and realise capital gains without a tax liability arising.

Registration Option

Gibraltar's Registered Trusts Act 1999 allows a Gibraltar trust to be registered. Registration, however, is entirely voluntary.

Asset Protection Trust

An amendment made in 1990 to Gibraltar's Bankruptcy Act enables asset protection trusts to be established in Gibraltar. In order to take advantage of this option certain strict criteria must be met and the Gibraltar Trust must register and pay an annual registration fee.

The Gibraltar/EU Advantage

Gibraltar enjoys a special status within the European Union. Under article 299(4) of the EC Treaty, it is within the Union by virtue of being a European territory for whose external relations the United Kingdom is responsible; however, article 28 of the UK Accession Treaty 1972 specifically excludes Gibraltar from the Common Customs Tariff, the Common Agricultural Policy and the harmonisation of turnover taxes, in particular value added tax.

Gibraltar is treated as part of a Member State via the United Kingdom and must comply with all EU Directives relating to financial services.

Gibraltar can take advantage of the single European passport for banking, insurance and investment services that allows Gibraltar licensed banks, insurance companies and investment services providers to operate in other EU Member States enabling them to sell their financial products throughout the European Union and the European Economic Area.

Other General Notes on Gibraltar

Jurisdictional Characteristics and Advantages of Gibraltar:

  • A politically stable and democratic government
  • Clear and fair laws, applied by a competent judiciary
  • Accessibility in terms of location and time zone
  • Appropriate official language
  • Modern reliable communications
  • Excellent support services including a choice of quality legal and accounting firms
  • Sensible and effective regulation and supervision
  • Advantageous tax environment