Gibraltar Private Foundations: An overview

Introduction

In an era where intergenerational wealth transfer and asset protection have grown increasingly complex, Gibraltar’s Private Foundations Act 2017 provides a modern solution tailored for discerning global investors. Moreover, Gibraltar offers a safe legal and political environment in an increasingly volatile world (a port in a storm). 

Private foundations offer a flexible and efficient structure for preserving, managing, and growing capital while providing tax benefits and privacy. They can be used as part of individual wealth planning and also as part of a more complex restructuring involving a family office private wealth structure.

This article delves into some of the basic features of Gibraltar private foundations, exploring their purpose, legal structure, benefits, and other main considerations.

1. Understanding Private Foundations

A private foundation in Gibraltar is a distinct legal entity without shareholders or members. It is established by a founder, who endows initial assets to the foundation. A council of counselors, responsible for upholding the foundation’s purpose and charter then manages these assets. The foundation can benefit designated individuals or classes of beneficiaries.

Unlike trusts, Gibraltar private foundations are separate legal entities, which makes them particularly attractive in civil law jurisdictions where trusts may not be recognized. Gibraltar’s framework offers enhanced flexibility and compliance with international regulations, ensuring their global appeal.

2. Advantages of Gibraltar Private Foundations

• Asset Protection: By irrevocably transferring ownership to the foundation, assets can be shielded from creditors, divorce proceedings, family disputes and other potential claims.
• Wealth Management and Tax Efficiency: Foundations provide a structured approach to managing wealth, with potential for tax-efficient income and benefit distributions. Gibraltar’s absence of inheritance tax further enhances their appeal.
• Efficiency: As a body corporate the foundation is subject to its own rules, legal and tax requirements and has legal personality. This makes it much easier to administer than a trust structure. 
• Privacy: While adhering to international anti-money laundering (AML) regulations, Gibraltar foundations maintain privacy for founders and beneficiaries.
• Flexibility: Foundations can hold various asset classes, including real estate, shares, and intellectual property, and can adapt their purpose over time within the parameters of their charter. The only restriction is that the foundation can not itself be a trading company (i.e. with clients and revenue from providing services) but it can own such companies.
• Dispute Resolution: Clearly defined governance structures minimize disputes among beneficiaries, as distribution rules are predetermined.

Gibraltar’s stability and alignment with EU AML directives add credibility, making its foundations a preferred choice for high-net-worth individuals (HNWIs) and multinational families.

3. Legal and Tax Considerations

• Legal Structure: The foundation’s charter and rules define its purpose, governance, and the rights and responsibilities of involved parties.
• Taxation: A Gibraltar private foundation is taxed similarly to a company, with a 15% headline tax rate if they are tax resident. Additionally, they are not subject to capital gains or inheritance tax. Foundations that exclude Gibraltar residents as beneficiaries are not tax resident in Gibraltar.
• Beneficial Ownership: Founders, counselors, guardians (if appointed), and beneficiaries are considered beneficial owners for AML purposes.
• Financial Reporting: Financial accounts must be prepared and distributions of benefits disclosed but the names of persons receiving benefits does not need to be shown in public accounts (thus providing privacy protection).
• Cross-Border Considerations: Gibraltar’s robust regulatory framework aligns with international regulatory requirements, offering confidence to those with global operations.

4. Roles and Responsibilities

• Founder: Establishes the foundation, endowing initial assets. The founder may retain certain powers, such as amending the charter or appointing/removing counselors and guardians.
• Councilors: Responsible for managing the foundation’s assets and ensuring distributions are made according to the charter and rules. The licensed corporate counsellor (e.g. Ramparts) is responsible for all statutory filings and meeting AML requirements.
• Guardian: Oversees the council and protects founder or beneficiary interests.
• Beneficiaries: Receive benefits as specified in the foundation’s charter and rules or on an ad-hoc basis.

Best practices recommend a robust governance framework to balance flexibility with accountability, ensuring the foundation’s objectives are met without conflict.

5. Uses and Applications

• Family Wealth Preservation: Foundations are widely used to preserve wealth across generations, ensuring orderly inheritance.
• Charitable Purposes: Foundations can support non-profits and community projects, offering structured philanthropy.
• Philanthropy: HNWIs can channel philanthropic efforts through foundations, ensuring long-term impact and alignment with their values.
• Holding Assets: Foundations can hold diverse asset classes, including shares, real estate and digital assets, making them ideal for modern investors.
• Cross-Border Estate Planning: Especially useful for families with assets in multiple jurisdictions, ensuring compliance and efficiency in wealth transfer.

6. Comparison with Trusts

Gibraltar private foundations offer greater flexibility and recognition for HNWI’s and families, particularly in civil law jurisdictions where trusts may face challenges. 

7. Choosing a Jurisdiction

Choosing the right jurisdiction for a private foundation is crucial for legal and tax compliance. Gibraltar stands out with:

• A competitive 15% corporate tax rate (although many private foundations can be treated as not tax resident and therefore not subject to corporate tax).
• No inheritance tax or capital gains tax.
• A stable, well-regulated environment aligned with international (FATF) AML standards.

When compared with jurisdictions like Malta, Liechtenstein or the Channel Islands, Gibraltar offers a streamlined, cost-effective framework that is based on English law without compromising on privacy or compliance.

Conclusion

Gibraltar private foundations are versatile solutions for wealth management, asset protection and philanthropy. Their flexible structure, tax advantages, and privacy features make them an attractive option for individuals and families seeking long-term financial security and control.

By understanding their legal and tax considerations and working with experienced professionals, individuals can establish a foundation tailored to their unique needs and objectives. 

We work closely with lawyers, financial advisors, investment managers and tax experts in many jurisdictions as part of our private foundation work for our clients. 

Contact us to learn how we can help you set up a Gibraltar private foundation to secure your or your client’s financial legacy.