Gibraltar has implemented economic substance requirements to comply with international standards, particularly those set by the EU and OECD. These requirements aim to ensure that companies registered in Gibraltar are conducting real economic activities within the jurisdiction. Here’s an overview of Gibraltar’s economic substance requirements:

Scope of Economic Substance Requirements

1. Applicability:
   • Economic substance requirements apply to entities engaged in specific categories of "relevant activities." These activities typically include:
     • Banking
     • Insurance
     • Fund management
     • Shipping
     • Intellectual property holding and licensing
     • Headquarters and distribution centers
     • Holding companies engaged in core income-generating activities
2. Exemptions:
   • Certain entities may be exempt from economic substance requirements, such as those with a low level of income or that are tax-exempt under Gibraltar law.

Key Requirements

1. Core Income-Generating Activities (CIGAs):
   • Entities must conduct substantial and genuine business activities in Gibraltar related to their relevant activities. The specific CIGAs will vary depending on the type of business.
2. Management and Control:
   • The entity must have an adequate number of qualified employees and physical presence (office space, equipment) in Gibraltar to carry out its core activities.
   • Decisions relating to the relevant activities should be made at board meetings held in Gibraltar, and the board must have sufficient expertise to make these decisions.
3. Operational Expenditure and Physical Presence:
   • The entity should have adequate operating expenditure, proportionate to the nature and scale of its relevant activities.
   • Maintain physical presence, such as a physical office space in Gibraltar.
4. Reporting Requirements:
   • Entities subject to economic substance requirements must annually report to the Gibraltar authorities, demonstrating compliance with the substance requirements.
5. Monitoring and Enforcement:
   • The Gibraltar authorities, particularly the Gibraltar Financial Services Commission (GFSC) for financial services entities, monitor compliance with economic substance requirements.
   • Non-compliance may result in penalties, sanctions, or potential de-registration of the entity.

Implementation and Compliance

• Transition Period: Gibraltar has implemented a transition period for companies to meet these requirements, allowing time for entities to adjust their operations and structures.
• Guidance: The Gibraltar authorities provide guidance to assist companies in understanding and implementing economic substance requirements effectively.
• Professional Advice: Companies should seek professional advice to ensure compliance with these requirements, tailored to their specific business activities and circumstances.

Summary

Gibraltar’s economic substance requirements are designed to ensure that companies registered in the jurisdiction conduct genuine economic activities and have a substantial presence. Compliance with these requirements is crucial for entities engaged in relevant activities to maintain their legal status and operational continuity in Gibraltar.

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