Gibraltar

Ian Le Breton is Managing Director at Sovereign Trust (Gibraltar) Limited. He explains why Gibraltar can no longer be characterised as an “offshore tax haven”.

When Gibraltar’s new income tax regime came into force on 1 January 2011, it signalled the end of a long journey to reposition its financial services centre from an offshore tax haven to an onshore European Union (EU) finance centre.

The new regime brought Gibraltar into compliance with the rest of the EU by doing away with the previous exempt status tax regime. The new Act ended any discriminatory distinctions between onshore and offshore business by introducing a single 10% corporation tax across the board.

As an onshore EU country with competitive rates of corporate and personal taxation – as well as the absence of capital gains, value added, inheritance, wealth or gift taxes – Gibraltar now offers opportunities that few other international finance centres, or specialised finance centres as Gibraltar prefers to be known, can match.

Gibraltar firms engaged in financial services are regulated by the Financial Services Commission. Implementation is critically important and by all measures, Gibraltar benefits from excellent regulation. The Gibraltar government is highly responsive; recent changes to legislation have allowed the industry to develop in such vital areas as insurance, funds and investment management. 

When considering financial services, professional advice should be sought at the earliest opportunity.  Options can be explored but it is critically important that corporate or trust structures comply with reporting requirements and that any tax implications are carefully considered. 

One way to demonstrate international credibility is to appear on the OECD Global Forum’s “white list”. The main criterion for achieving such a cherished position was for a jurisdiction to have entered into a series of bilateral Tax Information Exchange Agreements (TIEAs). Demonstrating the willingness of the two signatory countries to exchange information relating to a taxpayer, Gibraltar has engaged fully with the process and entered into such accords with 20 separate countries. 

Gibraltar competes effectively with its peers within the diverse sectors that make up the finance centre. Several global banks are represented providing a full range of banking services and investment management is another important cog in the wheel. In particular, Gibraltar benefits from Experienced Investor Fund (EIF) legislation and its funds regime has a well-deserved excellent reputation globally. Insurance is another vitally important component of the finance industry. 

Under EU “passporting” rules, regulated Gibraltar firms are permitted to expand across Europe in respect of insurance, reinsurance, banking and investment services.

The establishment of companies, trusts and other structures remains core to firms such as Sovereign. The larger firms have diversified into other areas including investment management, accounting and insurance services. A few also able provide marine and aviation services including registration of yachts and aircraft. In our own case, established a quarter of a century ago, we boast 25 offices around the world. With over 70 staff, Gibraltar remains our largest office hence we are well placed to provide the services and advice international clients will need.

Overall then, Gibraltar has a good story to tell. The next time you come across lurid reports about international tax havens, rest assured that Gibraltar is now recognised as a preeminent onshore EU finance centre and all of us in the finance industry are striving to ensure that this story can only get better in the future.

Trust & Company Management: International reach and depth of service

Milestone GRP - The main trend over the last decade has been global integration and compliance. How has this im- pacted  Gibraltar's economy and how has it impacted  the Trust and Company Management industry in particular?

Mr. Ian Le Breton - Looking at compliance, we are regulated by the Financial Services Commission (FSC) with a strong but, at the same time, cooperative hand. They have turned what could otherwise have been extremely onerous, difficult to im- plement policies, into something that remains costly and time consuming, but is  done with a cooperative spirit with them. From  time to time we have discussions  with them,  and the relationship is good. I describe it as a hand in hand approach, not a hand in glove one. It is a partnership type of approach. There is lot of new regulation to take on, and other internati- onal groups, the OECD, IMF, the EU, are going to impact us.

You need to have a pragmatic view and simply live with this, and even the Government cannot  do anything about it. We work with this, whether we like it or not, we have to move with the times  and we do it fairly successfully. That means  that Gibraltar can look to the world and say that we comply with all these groups; we are signing all these TIEAs, we might soon have double tax  agreements, and we’ve moved from being considered an offshore financial centre to what  it is now an international specialised financial centre.

Milestone GRP -  Gibraltar and the  Government  are often described as agile and nimble. Do you agree with that cha- racterization?

Mr. Le Breton - It is very true. Agile and nimble, but also po- sitively reactive is the type of word  to describe it. Proactive too, as we tend, in Gibraltar, to identify trends and adapt to them. That is what we do in Sovereign and a number of firms with whom we share the space in Gibraltar, too. We need to reinvent ourselves as we go along, and any firm like us that does not have this approach is going to find themselves falling behind because legislation and rules are changing all over the world at all times. So if you cannot be agile and nimble then you are lost. That  takes us back to our small but  perfectly formed nature.

It is not difficult to talk to the Government's departments, even to members of the  Government themselves, if we need to, quickly. Obviously legislation changes take time but we cer- tainly have a good rapport with these people and that means that we can be agile and nimble.

Milestone GRP - How has the global downturn affected the growth of the company? What  areas are you are develo- ping?

Mr. Le Breton - We have certainly seen growth  despite the economic downturn. In the last 4 years our staffing has grown by 10%  or more.  As  for our product  here, it is certain that

there is an increasing depth to our services. We do a certain amount of work on the personal pension side, particularly the UK transfers, the  Qualifying Recognised Overseas Pension Schemes (QROPS), and Qualifying Non-UK Pension Schemes (QNUPS), which is a different model altogether but has simi- larities. We are  expending our marine division that is based in  Gibraltar, looking at yachts, and last year we  established an aviation division. Again looking at clients with big jets, big yachts: these are the  types of clients we need to approach anywhere. So our strategy is to use these subsidiary groups to look at markets in a slightly different way.

Milestone GRP - How have Gibraltar’s infrastructure deve- lopment contributed to  these specific opportunities, such as the registration of yachts or aircraft?

Mr.  Le Breton -  The growth  of Gibraltar's  infrastructure  is extremely useful to us. For Sovereign it is important that the infrastructure continues to develop in Gibraltar, not just for the business itself, but also for our staff. It is important that they continue to find this an attractive place to live and work. From Sovereign's point of view, we are one of 25 offices, so whilst we were established here in 1987 and here is where everything started and it continues to be our largest base.

Milestone GRP - Are there any limitations to operating here?

Mr. Le Breton - There are limitations. We are never going to land a jumbo jet at the airport, so are we going to set up direct links with New York with 300 people on board  a plane? No, we will not. But, using this as an example, we have infrastruc- ture that is not right here but just a short drive up the road in Malaga where we have  a full international airport, so that is not a real limitation.
We have a wonderful  time  zone advantage,  the  climate  is great, and this is important since people are attracted to Gib- raltar for its climate and lifestyle. A lot of people like our firm are doing what they can to build it up. We have a lot of compe- tition out there, but generally overall we are doing a good job. I encourage executives from wherever they are in the world to come and have a look.
Milestone GRP - As a well established foreigner in Gibraltar, what do you see as existing misconceptions about the place?

Mr. Le Breton - One area I want to work on is the impression that Gibraltar is just open for the British. That is not the case. Brits make up a percentage of the client base, but just a  per- centage of it, and that is a message I want to get across. We are ready to build our market from around the world. Europe is obviously a main area of course, but there are advantages for other parts of the world, too. Gibraltar is a good place to headquarter a company and maybe the CEOs from around the world may want to start considering that, and then come to talk with us when they do.

Partnerships in today’s world

We keep hearing governments across Europe tell us that “we’re all in this together”. British newspapers in particular seem to take great delight in reporting examples of how some of the more wealthy members of the current cabinet are “out of touch” with ordinary people. The recent story about whether or not to charge VAT on hot “pasties” was just one example. But in general, it seems that most people in the UK realise that by working together – in partnership if you will – things will eventually get better. Certainly the huge deficit is being reined in although there is a long way to go.

Since the last edition, I have had the pleasure of attending the long awaited wedding of two good friends. It was a lovely affair; my partner and I had a very jolly time and we wish the newlyweds a long and above all, a very happy, marriage.

Going to the ceremony got me thinking – weddings do that, don’t they? – and all the talk of partnerships led me down several paths. What constitutes a partnership anyway? And when we hear the term in a business context, is it based on the same principles as two people who call themselves “partners”?

A simple definition of partnership is that it is an arrangement where parties agree to cooperate to advance their mutual interests. But let’s go back a little to explore the term used by individuals in their personal lives, rather than the business context.

Years ago, if one was neither married nor engaged but still committed to another person in a steady relationship, the words “boyfriend” or “girlfriend” seemed to do perfectly well (although I accept it sounded rather odd when describing people old enough to be one’s parents). The term “common law marriage” was one taught to me by my mother although I used to get alarmed at the level of vitriol in her voice when she said “common” – as if there were something dreadfully wrong about it all.

Fast forward 25 years and the word “partner” seems now to be the in-phrase. Time was, just a few years ago in fact, that if I had referred to my partner in polite company, there’d be a short intake of breath for it was taken as read that I had to be referring to another man. In these days when so many people maintain a relationship without ever entering into marriage, the term partner could just as well refer to a girlfriend of several years’ standing. It’s all become rather confusing.

In the UK, it was the Labour government that took the politically brave and potentially risky decision to enact civil partnership legislation in 2004. Possibly soon to be extended to Gibraltar, the legislation set out clear guidelines for the first time relating to the responsibilities of partners and the benefits to be gained from entering into such an arrangement. Aimed at same-sex couples, there have been complaints of discrimination ever since from straight couples who do not wish to enter into marriage but seek the financial and legal benefits of a partnership arrangement. So far the government has maintained that such people can simply get married but sometimes it’s more complicated than that.

The civil partnership legislation is very clear. In exchange for a series of undertakings and legal definitions of what constitutes the partnership between two people, several important benefits arise. The most important implications from a financial perspective are probably those dealing with succession issues and inheritance tax in the UK and the setting out of new rules relating to next of kin and a lot more besides. Sadly – but inevitably – it also goes into considerable detail about how such partnerships should be dissolved.

These new rules in effect brought into force for individuals important aspects of legislation that had previously only been available in a corporate setting. Business partnerships, as we shall see, are nothing new. Legal partnerships come in several shapes and sizes but they all follow a similar pattern. It is also now very common to see the initials LP (standing for limited partnership) or LLP (limited liability partnership) appended to the name of many of our large firms, legal and accountancy in particular.

But hang on. Surely partnerships – law firms, doctors and so on – were not supposed to be able to limit their liability. Wasn’t that the whole point? In exchange for the comforting knowledge that the partners in question, whether they were drafting a contract or diagnosing a condition, were putting not just their professional reputations on the line but also their assets. Of course, insurance was used to mitigate some of this risk but ultimately their judgment, and that of their colleagues, was backed by individual partners’ wealth.

In several jurisdictions, many of them based on English law, partnerships as a separate legal entity have become far more popular in recent years. Essentially the intention was to retain the benefits of partnership whilst allowing at least some protection associated with limited liability. But this concept is not restricted to English law and is certainly nothing new.

In the third Century BC, Roman societates publicanorum exhibited many similarities to the company structures we see today – but at least one partner had to be included who was fully liable for the entity’s debts. Across the Islamic world too, such arrangements became common. In Europe, the Italian commenda of the tenth Century were the forerunners of the LPs and LLPs we see today.

As always there are differences across the various jurisdictions where such structures can be established but the general principles are similar enough. A limited partnership may typically have up to 20 members, at least one of which is a “general” partner. This general partner has the power to bind the partnership by entering into contracts and so on and also assumes unlimited liability for the debts and obligations of the partnership. This potential liability can itself be mitigated if the general partner is itself established as a limited company.

In these circumstances, the other partners could enjoy “limited” liability in respect of the partnership in much the same way that shareholders in a company know that their financial risk is limited to the amount of capital that they have invested into the company. It follows that these limited partners may not take part in the management of the company nor are they able to bind it contractually. The limited liability partnership differs in that there are limitations in liability for all partners.

Assuming such partnerships are properly structured from the outset, limited partnerships can be extremely flexible. Within reason, they are able to do anything a “natural person” – that is someone like you or me acting in an individual capacity – can do. A partnership can enter into contracts, own assets and, importantly, it can carry on in existence despite any changes in the status of the individual partners. In other words, in many ways such partnership “entities” are much more closely related to companies than a traditional partnership of old.

Tax advantages are likely to result because, generally speaking, these types of structures are established so that profits are taxable in the hands of the partners rather than the partnership itself – in the US, this is often referred to as “look-through treatment” because the taxman will “look-through” the partnership structure to assess the individual partners. Additionally, limited partnerships allow for the issue of shares in cases where other corporate facilities may not be desirable.

In summary, partnerships can offer the managers of businesses a more flexible, modern approach to liability and risk management in general. Their benefits were there for the Romans more than 2,000 years ago and I imagine the law relating to partnerships will continue to develop further in millennia to come. They are not necessarily simple to establish so, as always, professional advice should be sought at the earliest stage.

And so back to those friends whose marriage we have just celebrated. I happen to know that they read The Gibraltar Magazine – at least I hope they do for the lady in question happens to be the magazine’s editor. From my own partner and me and on behalf of my colleagues at Sovereign too, I say congratulations and we wish you a long and happy partnership.

Investing in today’s uncertain climate

People reading my piece last month about the state of the world’s economy may have detected a more pessimistic tone than in previous issues. This was not accidental. It came about as a result of the continuing Eurozone crisis in particular and other areas of concern in general that suggest it is going to be a considerable time yet before things start returning to normal.

In particular, one of my Spanish readers took umbrage at my rather negative comments on the position in his country. But the truth is that we see record levels of unemployment in Spain – the highest in Europe – the end of the construction boom and painful austerity measures adopted by the new government. The intention is to reduce the sky high deficit in what is after all a contracting economy – i.e. one that is clearly in recession. Developments since my piece last month have simply confirmed the negative outlook.

And when I say it will be some time before things start “returning to normal” I do not mean “back to where we were before”. One thing this crisis should have taught us is that simply adding to the debt mountain to pay for current expenditure is plainly not sustainable. But as I also tried to make clear last month, it’s not all unadulterated doom and gloom. There are distinct signs of improvement in certain economies – or should that be in certain sectors of those economies – that provide real evidence that growth is returning as opposed to a financial commentator’s sense of optimism.

For example, there is real evidence that many of the stronger companies in Europe and across the Atlantic in the US are building up huge cash reserves. It is all too easy to be totally negative when reading reports on practically a daily basis that this company or that has either announced losses, collapsed into administration or filed for Chapter 11 bankruptcy protection – the curious American convention that broadly speaking allows a bust company to carry on trading whilst conveniently ignoring its creditors, at least for a while.

The reality however is that capitalism relies on investment, mainly into companies be they private or public, and there is still a great deal of investment going on. As usual when discussing investment related topics in this column, anything I say is my personal view and should not in any way be construed as advice. So is this the time for those private investors who may have stood back from the markets in the last few years to start considering their investment options?

After all, individuals in the happy position of having savings or maybe cash released from sales of property, other assets or perhaps those in receipt of an inheritance are not going to see decent returns from bank deposits any time soon. True, some of the banking institutions are currently offering more interesting products whereby returns are considerably higher than the pittance offered on regular bank deposits, but with inflation in Gibraltar and other areas stubbornly high, due in very large measure to constantly increasing energy prices, the net return (that is the real increase in the value of one’s investment after one deducts the effect of inflation) is still disappointingly low.

I was minded to have a look at the investment climate for private investors when preparing this piece, not least because of the publicity generated locally in recent weeks concerning the changes in the EIF rules here in Gibraltar. The acronym stands for Experienced Investor Fund and the original legislation was enacted here in 2005. The funds can be used to invest in a wide range of asset classes and can also be established using what is known as a Protected Cell Structure for even more flexibility. New rules have been agreed that will enter force next year. These will enhance significantly the appeal of the Gibraltar EIF which is of course good news for local firms and the employment they generate. For a summary of the recent changes that should lead to increased international interest in Gibraltar, I refer readers to the excellent article penned by Grant Thornton’s Adrian Hogg in the May 2012 edition of The Gibraltar Magazine.

Gibraltar is well placed to compete in this area and with the infrastructure and industry experience to be found here, I can see significant growth opportunities. Gibraltar is of course a full EU member so can exploit its ability for investment firms to “passport” their services, something not so readily available to competing jurisdictions such as the Channel Islands and Cayman.

So this is all very well and good but let’s step back a moment. Is an investment fund a suitable way for ordinary people like you and me if we are considering investing or is it just something for these “experienced investors”. What about the rest of us?

There are many thousands of investment funds to choose from and they come in all types of shapes and sizes but the broad principles are straightforward. There are a number of very good reasons why a new investor might want to consider using a fund when thinking about their options.

By using a professional fund manager, an investor will benefit from years of experience and access to the world’s financial markets that are simply not available to the general public. Depending on the fund, they may provide diversity by asset class or geography while the level of risk involved can be matched to the deemed risk appetite of the investor. Every private investor will be different. It is easy to see why someone a year or two away from retirement will have a very different investment outlook than a single thirty-year-old with no dependents (Incidentally, most 30-year-olds will probably say they have no spare money to invest anyway but, as I was told, “it’s never too early to start”.)

But would anyone want to invest in the markets these days? It would be all too easy to say no, stay away, but times of uncertainty are also times of opportunity. Certainly, careful selection is needed and above all professional advice should be sought right from the outset. It is altogether too easy to look, say, at the (fictional) Ruritanian stock market and see that it has gone up by 60% in the last 12 months. But if the Ruritanian currency – the Cowrie Shell – has depreciated against the pound by 50% over the same period then it starts look rather less attractive. Add to that the problem of researching the right investments in Ruritania, the dangers perhaps of nationalisation or civil strife, and one can begin to see the inherent risks involved in such international exposure.

So if you do wish to invest in that particular country, it is better to do so as part of a regulated fund in which you are investing alongside others. In this way, the costs and the risks are spread and there is a professional team to make sure that investments are properly managed, monitored and administered.

So here’s my summary. If you are considering investment possibilities, there should always be markets somewhere that should be attractive. Many economies around the world, particularly in Europe, are still struggling and may do so for some time. Despite this, or maybe because of it, there are going to be opportunities for future growth or recovery. And with virtually zero returns available on deposits, if nothing is ventured then nothing will be gained.

The World PLC is Unwell

“World plc” is unwell. Before anyone gets the wrong idea – this is after all the Finance Column – I’m not about to stray into areas medical, psychological or spiritual. But after a period of extreme economic intoxication and dissipation, it seems appropriate to echo The Spectator magazine which, whenever the lifestyle of its late “low life” correspondent took its inevitable effect on his health and reliability, would simply post the notice "Jeffrey Bernard is unwell" in place of his column.

Conventional wisdom tells us that the onset of the present financial crisis dates back to 2008. But that only tells us when the disease presented – the symptoms were certainly there well before 2008. In Spain’s case, for example, the housing boom that ended in such a spectacular crash had been building for a decade or more.

It’s clear that World plc remains on the sick list – and parts of it are still in a critical state. As with any illness, it took a while before any doctors were consulted and still longer to think about taking the nasty medicines they prescribed. Second problem. The doctors were faced with so many competing symptoms when World plc was admitted for treatment that it was difficult to know what to tackle first. These and other questions have plagued world markets ever since. Now that we are fast approaching mid-2012, I thought I would step back and consider where we are now (My “plain English campaign” also demands that I try to explain, in passing, what on earth is meant by a “haircut”, quantitative easing and the LTRO).

It won’t surprise readers that when considering the overall state of World plc’s health, my first answer is to say that it depends on which bit one is considering. Before looking at those countries that affect us most here in Gibraltar, let’s start with the worst European case. Greece’s problems have been gripping the financial markets. Readers could be forgiven for thinking that Greece is now sorted. After all, a haircut has been ordered, EU funds lent and austerity in place. Problem over, right? Err, no – not exactly. Read on.

In March, Greece finally secured backing to cut over €100bn from its total government debt. The vast majority of Greece’s creditors accepted the terms – this is the so-called “haircut” on bond yields ­– and, as a result, the EU and IMF have agreed to the latest bailout worth €130bn. The objective is to cut Greece’s government debt from 160% of GDP to a little over 120% over the next eight years.

All seems well and good. The Greeks are off the hook and those who have had to take losses on their bonds seem to have accepted that this is better than a complete default. EU politicians are preening themselves at a job well done. All jolly useful given imminent French elections and the fragility of the German coalition.

The problem is that the crisis hasn’t gone away. Sure the Greeks owe substantially less now than before – but it’s still a debt mountain that will be impossible to finance in an economy that is not growing. And Greece is certainly not growing – it is contracting at an alarming rate. As tax revenues shrink and welfare costs rise, it is difficult to see how Greece can comply with the new debt restrictions. Unless of course there is a third bailout and Greece contemplates leaving the euro. Nothing much changes does it?

Closer to home it is said that Spain is nothing like Greece, and in many ways that is true. Spain is quite simply “too big to fail”. The economy is not contracting at anything like the same rate and the recently-installed Spanish government has just brought in an austerity budget more radical than anything seen before. As a consequence, officials admit that 2012 is likely to be the most difficult year yet for Spain since the onset of the crisis

Normally bullish, in recent months I have become rather more pessimistic about Spain’s chances and whether this “austerity” medicine is going to work. Firstly, after 25 years of spending, the Spanish don’t like austerity. Look at the shiny new airports, motorways and AVE trains criss-crossing the country at 200 mph. The collapse in the property market has been astonishing. Literally millions are out of work with little or no chance of imminent re-employment. In places across Spain one person in three is out of work. Nationally the official rate is more than 23%.

Aside from increased welfare costs, another result of all this is that hundreds of thousands of Spain’s young are moving abroad to find work. London is just one example where the Spanish diaspora has grown exponentially in the last couple of years. Those leaving are more likely to be better educated, perhaps bi-lingual and more skilled. None of this bodes well for the future.

Across much of the EU, particularly across the Mediterranean, recovery is as far away as ever. The problems confronting Portugal, Italy and others remain. During a recent competition aimed at stimulating ideas on what to do about the Eurozone crisis, 11-year-old Jurre Hermans from the Netherlands got it about right. Singled out for a special mention as the youngest entrant in the recent Wolfson Economics Prize, his suggested solution for sorting out the crisis in Greece used slices of pizza as an analogy with Greeks exchanging their euro for “new drachmae”. It remains to be seen whether this will happen but in an effort to ease the strain elsewhere, the EU has joined the US and the UK by increasing market liquidity. Oh dear, jargon time again.

“Quantitative easing”, as undertaken by the US and the UK, is quite simply the issuing of government debt that is then purchased by the government. The result is that more money is pumped into the economy. National debt rises but the idea is that this is better than the alternative scenario. The EU’s version is called the Long Term Refinancing Operation (LTRO). Under this initiative, hundreds of billions of euro are lent to banks at extremely low interest rates for three years in an effort to facilitate bank lending. Even if the intended lending doesn’t happen, the banks have at least used the facility to shore up their balance sheets – so easing the strain during the crisis.  

So how about some good news? There are signs of a fragile recovery in the US and it is perhaps to be expected that it is in the States that the global recovery will begin. After all, there’s the small matter of a US presidential election to distract us between now and November. Another country that has actually taken a strong dose of the austerity medicine is the UK.

The British government is faced with a slowing service sector, a limited manufacturing base and a massive public debt burden. There is little or no room for manoeuvre in areas such as reducing interest rates or raising taxes. Yet one can point to several areas where the UK economy is starting to recover – albeit very gradually and vulnerable to external shocks. The UK’s currency floats freely depending on the world’s view of how Britain is doing, which is not a luxury available to the eurozone. This is one reason why all of us in Gibraltar take a keen interest in the UK and the impact seen on the euro exchange rate.

And in Ireland, there are some real signs that the recovery may be happening. Earlier this year Taioseach Enda Kenny said that by nature he was an optimist and that “Irish people are very pragmatic”. Ireland was the first EU country to approach the EU for assistance. Its banking system collapsed and several years of painful austerity lie ahead. But the “pragmatic” Irish are taking their medicine and, by all accounts, it is starting to work.

We have also come to realise that the US is no longer the only “superpower”. The effects of China’s insatiable appetite for natural resources can be readily seen in Australia, Africa and Latin America. Add to that the impact of Middle Eastern money – “sovereign” or state funding – that is buying up assets from Western banks and factories to hotels and football clubs, and we can readily see that the world economic order has changed for ever.

Contemplating just these few examples, my conclusion is that the economic prognosis is a very fragile version of the Curate’s egg – good in parts, but still pretty bad in others. And here’s the rub. Globalisation means interdependency. Those countries that are seemingly in better shape than others are dependent on growth elsewhere to create a market for their goods. There is still a long road ahead and we’re all in this together. I can’t tell you when the medicine will start to work but I know it has to work, eventually. As the editors of The Spectator surely appreciated, it is all very well to say “get well soon” but it may be better just to say “get well”.

Cyprus lowers VAT for Yacht Leasing Scheme

Under the Scheme, a Cypriot company can purchase a pleasure yacht and enter into a lease-sale agreement for the yacht with a third-party lessee - an individual or company irrespective of their location. Since this is a service deemed to be supplied in Cyprus, VAT is due on the lease at the normal rates of VAT in Cyprus - currently 17% - but is payable only on that portion of the lease which the yacht spends in EU waters.

To avoid the difficulty of establishing the exact length of stays in EU waters, the VAT Service has issued its own percentage scales based upon "presumed" lengths of stay for different types and lengths of yacht. Motor and sailing boats over 24-metres in length are deemed to spend only 20% of their time in EU waters (compared to 30% under the Malta equivalent scheme) to give an effective VAT rate of 3.4%, while motor boats below 8-metres and sailing boats below 10-metres are deemed to spend 60%, giving an effective VAT rate of 10.2%.

The yacht, which can be registered anywhere within the EU, must arrive in Cyprus within one month of the date of inception of the lease agreement and the initial lease payment must amount to at least 40% of the value of the yacht. Further lease payments are payable on a monthly basis, and the lease period must under no circumstances exceed the period of 48 months (36 months in Malta).

The lessee may purchase the yacht at the end of the lease period, for a final consideration of not less than 5% of the initial value of the yacht. The VAT authorities will then issue a certificate to the lessee confirming full payment of the total VAT liability. The lessor is expected to make a total profit from the leasing agreement of at least 10% on the initial value of the yacht.

Prior approval from the VAT Commissioner is required for every application of the Yacht Leasing Guidelines.

Getting into the time Zone

For as long as I can remember I have always been fascinated by the quirks of geography and in particular, different time zones and unusual facts relating to dates. I am always looking out for the oddities around the world that make unusual exceptions. For example, did you know that not only are some time zones measured in ½ hours from CET – India is actually four and a half hours ahead, while neighbouring Nepal goes one better and is four and three-quarters hours in advance. Try explaining that to your gap year teenager when they are trying to ring home from Kathmandu!

Another example is brought home every New Year’s Eve when half way through our day we see news coverage of the fireworks in Auckland, then Sydney and Hong Kong before we even think about going out to begin our nochevieja celebrations. And of course even the longest lasting parties in Europe will be over before Honolulu finally gets to greet the same New Year.

And it doesn’t end simply with one day at a time. Readers may recall the publicity generated when the western-most islands of the Samoan chain skipped Friday 30 December 2011 altogether. The population went to bed on a Thursday and woke up on Saturday morning – but why? Read on.

Further back in history the change from the Julian calendar to the Gregorian version began in the 16th Century – although some countries took several decades to catch up. As a result, to this day, the Orthodox church celebrates festivals a full fortnight after the rest of us. In Britain, the change wasn’t implemented until 1752. By then, unfortunate Britons missed out on 11 whole days – they went to sleep on Wednesday, 2 September, and woke up on Thursday, 14 September.

Except, that is, in Pembrokeshire’s Gwaun Valley where they ignored this decree and carried on ringing in the Julian New Year regardless. To this day children in the valley still walk from house to house on 13 January and sing traditional songs in Welsh that have not altered for centuries. In return, householders shower them with sweets and money – or "calennig", literally "New Year gift or celebration".

I could go on to cite many other examples of such international oddities and eccentricities that survive to this day. That’s all very interesting, I hear you say, but other than helping one show off at Trivial Pursuit why does all this matter?

Let us consider time zones first. As the globalisation of international business becomes ever more important, it is vital that we work to take advantage of the opportunities offered and minimise any disruption caused by the fact that many of us work on a daily basis with people all over the world. For international groups such as the one for which I work, active steps are taken to ensure that someone is available throughout the working day – wherever that may be.

Some of the larger institutions, such as global banks, seek to avoid any such difficulties by offering clients online services 24-hours a day. Some even allow you to speak to a human being at all hours of the day and night – heaven forfend! – although you can be sure extra fees are involved for that kind of attention.

But despite all this, markets are still open only for limited periods. By the time the European bourses start their daily trading – typically at 9 a.m. CET, the Far East is already closing and the Americas are nowhere near awake. In these days of 24-hour non-stop news it can take these markets quite a while to catch up. Readers may have noticed how very common it now is for important corporate announcements to be made on Friday evening – the “Friday Night Drop” in PR parlance. This means that everyone has the weekend to digest the story before relevant stock markets open again on Monday morning. For the same reason, much of the work relating to the bailout of the British banking system was conducted over several weekends; there are many more such examples in recent years.

Turning to dates in the calendar, these can be even more critical. For example, every company will have a “year end” and it’s very common, particularly in those countries whose systems are based on English law, for such dates to be spread out across the year. Indeed using alternative year-end dates can be a real boon for anyone working in financial services who, like me, has toiled until late on several New Year’s Eves so that important transactions be completed – and when most of the world is already out partying,

But such niceties are not limited to the corporate world. For most individuals too, year-ends – and in particular fiscal or tax year dates – can throw up both real challenges and useful opportunities. Consider this simple example. Suppose Mr Brown of England decides that the climate, austerity and Sky News has become too much for him. He decides to move to Spain for a year or two. Then, having read some of these fascinating finance columns in the Gibraltar Magazine, he decides to move again – to Gibraltar. Depending on the dates chosen for all this gallivanting, he may be in for an unpleasant shock. But with some careful planning and help from his professional adviser, the result could be the opposite. Why? It’s all to do with tax years.

In the UK, the tax year for individuals starts on 6 April. This is because while the British moved to the Gregorian calendar (as mentioned above), the tax year remained tied to the Julian version. So the date for the tax year jumped from 25 March to 5 April. The tax year then moved to its current 6 April after a Julian leap year in 1800 – but didn’t change to the 7th after the 1900 Julian leap year. Easy isn’t it? You can see why tax planners charge fees?

Spain, in common with many civil law jurisdictions, works to the altogether more convenient and readily understandable calendar year – ending on 31 December. Here in Gibraltar, as in so many things, we like to be a little different. Our tax year starts on 1 July. Readers can readily see how with careful thought, one’s personal tax affairs, at least during the year or two following an initial move away from home could be managed using periods of residence across these jurisdictions.

You should not however make the mistake of believing that the oft-used phrase “I don’t pay tax anywhere” – what we might refer to as attempting to become a long-term “fiscal nomad” – is going to work. It won’t. Someone somewhere is going to want to tie you down to at least one domestic taxation system. But there is certainly no harm in exploiting the intricacies of the different tax years to your benefit from the outset. As with anything involving tax, get advice as soon as possible once you have decided to take the plunge.And to finish, let’s go back to the unfortunate burghers in Samoa and Tokelau who missed out on 30 December last year. What was all that about? Put simply, it was to do with the commercial realities of world trade in the 21st Century. By remaining east of the International Date Line – around the same time as Hawaii – when Sydney and Auckland woke up on Monday morning, Samoans were still enjoying Sunday breakfast. And of course the same thing happened at the end of the working week – while Samoans downed tools on Friday evening, New Zealanders were already playing rugby (or whatever it is they do on Saturday nights). This may have made commercial sense at the end of the 19th Century when the overwhelming majority of Samoan trade was with the US – but it did not make sense today. The decision was therefore taken that the Date Line should simply be re-drawn such that Samoa moved to the same day as Australia and New Zealand.

Sadly such options are not open to individuals – but, with careful thought and advance planning, it is possible to exploit the opportunities that arise from such differences. And not just in time zones, but in dates themselves. As for whether the UK should adopt Central European Time, that’s all about milking times for Scottish farmers. Don’t get me started!