31 March 2017, a bill to permit the establishment of Private Foundations in Gibraltar was passed by Parliament together with the consequential amendments to the Income Tax (2010) Act..
A foundation is an entity with a separate legal personality. The foundation charter and foundation rules establish the foundation, set out its purposes and rules for its administration and provide details of the beneficiaries and guardian. Details of the foundation are filed at Companies House in Gibraltar, which is to maintain a Register of Foundations.
The founder provides the initial assets, as an irrevocable endowment, and may reserve certain powers – to appoint or remove the guardian or councillors, or to amend the constitution of the foundation. The foundation council manages the foundation and makes distributions to the beneficiaries. It must include a Gibraltar resident company that is licensed as a professional trustee in Gibraltar.
Beneficiaries may be either enfranchised or disenfranchised. Enfranchised beneficiaries are entitled to copies of the accounts and other documents relating to a foundation. A guardian may be appointed to provide protection for the beneficiaries. In certain cases, for example, if there are no designated beneficiaries, or more than 50 beneficiaries, a guardian is required to be appointed.
Books of account with respect to monies received and expended and the assets and liabilities of the foundation must be kept for five years. Financial statements, including a profit and loss account, a balance sheet, and a report made by the councillors, are to be filed annually at Companies House.
The rate of tax is 10%, which will be charged on profits or gains accrued or derived in Gibraltar from any trade, profession or vocation. The beneficiaries of a foundation who are ordinarily resident in Gibraltar will be taxed in Gibraltar on distributions received from the foundation, the use of assets owned, used or leased by the foundation, or any loan received from it.