Gibraltar
This report analyses the implementation of the AEOI Standard in Gibraltar with respect to the requirements of the AEOI Terms of Reference. It assesses both the legal frameworks put in place to implement the AEOI Standard and the effectiveness of the implementation of the AEOI Standard in practice.
The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.
Overall findings
AEOI legal framework
Gibraltar’s legal framework implementing the AEOI Standard is in place and is consistent with the requirements of the AEOI Terms of Reference. This includes Gibraltar’s domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) and its international legal framework to exchange the information with all of Gibraltar’s Interested Appropriate Partners (CR2).
Effectiveness of AEOI in practice
Gibraltar’s implementation of the AEOI Standard is partially compliant with the requirements of the AEOI Terms of Reference to ensure the effectiveness of the AEOI Standard in practice. While Gibraltar is on track with respect to exchanging the information in an effective and timely manner (CR2), there are significant issues with respect to ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures (CR1).
Overall rating in relation to the effectiveness in practice: Partially Compliant
General context
Gibraltar commenced exchanges under the AEOI Standard in 2017.
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, Gibraltar:
enacted the Taxation (Mutual Administrative Assistance) Act 2014;
introduced the International Co-operation (Improvement of International Tax Compliance) (Amendment No. 2) Regulations 2017; and
Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 January 2016. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete due diligence procedures on High Value Individual Accounts by 31 December 2016 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2017.
With respect to the exchange of information under the AEOI Standard, Gibraltar:
has the Convention on Mutual Administrative Assistance in Tax Matters in place1 and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2017; and
put in place two bilateral agreements.2
Table 1 sets out the number of Financial Institutions in Gibraltar that reported information on Financial Accounts in 2021 as defined in the AEOI Standard (essentially because they maintained Financial Accounts for Account Holders, or that were related to Controlling Persons, resident in a Reportable Jurisdiction). It also sets out the number of Financial Accounts that they reported in 2021. In this regard, it should be noted that Gibraltar requires the reporting of Financial Accounts held by non-residents based on a prescribed list of exchange partners and some accounts may be required to be reported more than once (e.g. jointly held accounts or accounts with multiple related Controlling Persons), which is reflected in the figures below. These figures provide key contextual information to the development and implementation of Gibraltar’s administrative compliance strategy, which is analysed in the subsequent sections of this report.
Table 2 sets out the number of exchange partners to which information was successfully sent by Gibraltar in the past few years (including where the necessary frameworks were in place but no relevant Reportable Accounts were identified). These figures provide key contextual information in relation to Gibraltar’s exchanges in practice, which is also analysed in subsequent sections of this report.
In order to provide for the effective implementation of the AEOI Standard, in Gibraltar:
the Income Tax Office (the tax authority) has the responsibility to ensure the effective implementation of the due diligence and reporting obligations by Reporting Financial Institutions and for exchanging the information with Gibraltar’s exchange partners;
the technical solutions necessary to receive and validate the information reported by Reporting Financial Institutions were put in place through a dedicated reporting portal; and
the Common Transmission System (CTS) is used for the exchange of the information, along with the associated file preparation and encryption requirements.
It should be noted that the review of Gibraltar’s legal frameworks implementing the AEOI Standard concluded with the determination that Gibraltar’s domestic and international legal frameworks are In Place. This has been taken into account when reviewing the effectiveness of Gibraltar’s implementation of the AEOI Standard in practice.
Findings and conclusions on the legal frameworks
The detailed findings and conclusions on the AEOI legal frameworks for Gibraltar are below, organised per Core Requirement (CR) and sub-requirement (SR), as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.
Gibraltar’s domestic legislative framework is in place and contains all of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (SRs 1.1 – 1.3). It also provides for a framework to enforce the requirements (SR 1.4).
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
Gibraltar has defined the scope of Reporting Financial Institutions in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.
Gibraltar has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in accordance with the CRS and its Commentary.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
Gibraltar has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.
Gibraltar has a legislative framework in place to enforce the requirements in accordance with the CRS and its Commentary.
CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.
Gibraltar’s international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of Gibraltar’s Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from Gibraltar and that meet the required standard in relation to confidentiality and data safeguards) (SRs 2.1 – 2.3).
SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.
Gibraltar has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.
SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.
Gibraltar put in place its exchange agreements without undue delay.
SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.
Gibraltar’s exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.
Assessed jurisdiction’s comments on the assessment of its legal frameworks
Gibraltar would like to take this opportunity to thank the Global Forum Secretariat and in particular the AEOI Assessment Panel involved in the review of Gibraltar’s AEOI legal framework, namely Mr. Colin Yan, Mr. Antti Kurikka and Mr. Safarali Cavadov.
The result of this review demonstrates Gibraltar’s continuing commitment to maintaining the AEOI Standard consistently in-line with the requirements of the AEOI Terms of Reference.
Findings and conclusions in relation to effectiveness in practice
The detailed findings and conclusions in relation to effectiveness in practice of AEOI for Gibraltar are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Effectiveness in practice: Jurisdictions should ensure that in practice Reporting Financial Institutions correctly implement the due diligence and reporting procedures, which includes a requirement for jurisdictions to have in place an administrative framework to ensure the effective implementation of the CRS.
Gibraltar’s implementation of the AEOI Standard is partially compliant with respect to ensuring that Reporting Financial Institutions are correctly conducting the due diligence and reporting procedures. More specifically, while Gibraltar is meeting expectations with respect to collaboration with its exchange partners to ensure effectiveness (SR 1.6), there are significant issues with respect to ensuring effectiveness in a domestic context, such as through having an effective administrative compliance framework and related procedures (SR 1.5).
SR 1.5 Jurisdictions should ensure that in practice Reporting Financial Institutions identify the Financial Accounts they maintain, identify the Reportable Accounts among those Financial Accounts, as well as their Account Holders, and where relevant Controlling Persons, by correctly conducting the due diligence procedures and collect and report the required information with respect to each Reportable Account. This includes having in place:
an effective administrative compliance framework to ensure the effective implementation of, and compliance with, the CRS. This framework should:
be based on a strategy that facilitates compliance by Reporting Financial Institutions and which is informed by a risk assessment in respect of the effective implementation of the CRS that takes into account relevant information sources (including third party sources);
include procedures to ensure that Financial Institutions correctly apply the definitions of Reporting Financial Institutions and Non-Reporting Financial Institutions;
include procedures to periodically verify Reporting Financial Institutions’ compliance, conducted by authorities that have adequate powers with respect to the reviewed Reporting Financial Institutions, with procedures to access the records they maintain; and
effective procedures to ensure that Financial Institutions, persons or intermediaries do not circumvent the due diligence and reporting procedures;
effective enforcement mechanisms to address non-compliance by Reporting Financial Institutions;
strong measures to ensure that valid self-certifications are always obtained for New Accounts;
effective procedures to ensure that each, or each type of, jurisdiction-specific Non-Reporting Financial Institution and Excluded Account continue to present a low risk of being used to evade tax; and
effective procedures to follow up with a Reporting Financial Institution when undocumented accounts are reported in order to establish the reasons why such information is being reported.
In order to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, Gibraltar implemented many of the requirements in accordance with expectations. However, significant issues were identified. Key findings were as follows:
Gibraltar has in place an overarching strategy to ensure compliance with the AEOI Standard developed after conducting a risk assessment that took into account a range of relevant information sources, such as the information from the Gibraltar Financial Services Commission (the financial regulator) and other industry associations, e.g. the Association of Trust and Company Managers. Gibraltar intends to keep its compliance strategy and risk assessment under review to ensure its effectiveness on an ongoing basis.
Gibraltar has worked to understand its population of Financial Institutions, utilising various relevant information sources, such as the registrar of companies, the registrar of ultimate beneficial ownership, the lists of regulated entities from the financial regulator and of Foreign Financial Institutions for FATCA purposes. Gibraltar started analysing these lists of registered Reporting Financial Institutions and intends to keep its understanding of its Financial Institution population up to date on a routine basis. However, Gibraltar has not yet taken any actions to ensure that Reporting Financial Institutions are classifying themselves correctly under its domestic rules, nor to establish and validate the reasons for which Financial Institutions did not report.
The institution responsible for implementing Gibraltar’s compliance strategy appears to have the necessary powers and resources to discharge its functions. With respect to resourcing, Gibraltar has assigned the equivalent of one full time staff to monitor and ensure compliance by Reporting Financial Institutions, which has access to IT systems and tools to conduct risk assessments.
Gibraltar launched its administrative compliance framework in 2022 and started to review compliance with the requirements (i.e. that the information being reported is accurate and complete), in a number of selected Financial Institutions, using a questionnaire.
Gibraltar does not have procedures to follow up with Reporting Financial Institutions when undocumented accounts are reported nor does it have procedures to address circumvention of the due diligence and reporting procedures by Financial Institutions, persons or intermediaries.
There is also a lack of procedures in place to keep its jurisdiction-specific lists of Non-Reporting Financial Institutions and Excluded Accounts under review to ensure they continue to pose a low risk of being used for tax evasion purposes.
Table 3 provides a summary of the specific activities undertaken, or that are planned to be undertaken, in relation to each of the key parts of the framework described above.
Gibraltar was not able to confirm that it collects and monitors information on the proportion of Financial Accounts that are reported that include information on the Tax Identification Numbers and dates of birth with respect to the individuals associated with them. These data points are key to exchange partners to effectively utilise the information and are important to developing an effective compliance strategy to ensure the AEOI Standard is being effectively implemented. Gibraltar was also not able to confirm that it collects and monitors information on the number of undocumented accounts reported by its Reporting Financial Institutions. This information is crucial to implementing the requirement to follow up on undocumented accounts.
Two exchange partners highlighted issues with respect to the information received, such as missing accounts and abnormal variances in accounts. More generally, many of the exchange partners that received a significant number of records from Gibraltar indicated that they achieved a success rate when matching the information received from Gibraltar with their taxpayer database that was broadly equivalent to, or better than, what they usually achieve.
Based on these findings it was concluded that Gibraltar is partially meeting expectations in ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, including by having in place the required administrative compliance framework and related procedures. More specifically, significant issues have been identified, including with respect to a lack of action to implement its compliance strategy, such as periodically verifying Reporting Financial Institutions’ compliance and to ensure self-certifications are obtained as required. Gibraltar should therefore continue its implementation process accordingly, including by addressing the recommendations made.
Gibraltar should further develop and implement effective procedures to identify its population of Financial Institutions to ensure that they correctly apply the definitions of Reporting Financial Institution and Non-Reporting Financial Institution and report information as required, specifically including non-regulated entities that are Financial Institutions for the purposes of the AEOI Standard.
Gibraltar should implement systems to monitor the reporting of Tax Identification Numbers, dates of birth and undocumented accounts by Reporting Financial Institutions to inform its compliance strategy.
Gibraltar should put in place and implement a clearly defined policy to follow up with Reporting Financial Institutions that report undocumented accounts to ensure that the requirements are being complied with.
Gibraltar should put in place a clearly defined policy to ensure that, where circumvention of the AEOI Standard is identified, action is taken to address it.
Gibraltar should establish a plan to periodically review its list of jurisdiction-specific Non-Reporting Financial Institutions and Excluded Accounts to ensure they continue to present a low-risk of being used for tax evasion.
SR 1.6 Jurisdictions should collaborate on compliance and enforcement. This requires jurisdictions to:
use all appropriate measures available under the jurisdiction’s domestic law to address errors or non-compliance notified to the jurisdiction by an exchange partner; and
have in place effective procedures to notify an exchange partner of errors that may have led to incomplete or incorrect information reporting or non-compliance with the due diligence or reporting procedures by a Reporting Financial Institution in the jurisdiction of the exchange partner.
In order to collaborate on compliance and enforcement, it appears that Gibraltar implemented all of the requirements in relation to issues notified to them (i.e. under Section 4 of the MCAA or equivalent) in accordance with expectations. While no such notifications have yet been received, Gibraltar has the necessary systems and procedures to process them as required. It also appears that Gibraltar will notify its partners effectively of errors or suspected non-compliance it identifies when utilising the information received.
Based on these findings it was concluded that Gibraltar is fully meeting expectations in relation to collaborating with its exchange partners to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures. Gibraltar is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
CR2 Effectiveness in practice: Jurisdictions should exchange the information effectively in practice, in a timely manner, including by sorting, preparing, validating and transmitting it in accordance with the AEOI Standard.
Gibraltar’s implementation of the AEOI Standard is on track with respect to exchanging the information effectively in practice, including in relation to sorting, preparing and validating the information (SR 2.4), correctly transmitting the information in a timely manner (SRs 2.5 – 2.8) and providing corrections, amendments or additions to the information (SR 2.9). Gibraltar is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
SR 2.4 Jurisdictions should sort, prepare and validate the information in accordance with the CRS XML Schema and the associated requirements in the CRS XML Schema User Guide and the File Error and Correction-related validations in the Status Message User Guide (i.e. the 50000 and 80000 range).
One exchange partner highlighted particular issues with respect to preparation and format of the information sent by Gibraltar. This related to validation errors for two different reporting periods. This exchange partner also reported rejecting more than 25% of the files received, but not more than 50%, due to the technical requirements not being met. This is broadly in line with the general experience of other jurisdictions. It was noted that Gibraltar has not yet addressed all of the issues.
Based on these findings it was concluded that, overall, Gibraltar is meeting expectations in relation to sorting, preparing and validating the information. It was also noted that there is room for improvement with respect to addressing the errors reported by its exchange partners in a timely manner. Gibraltar is therefore encouraged to continue its implementation process accordingly, including in relation to the area highlighted.
Gibraltar should continue to work with its exchange partner to address the issues raised.
SR 2.5 Jurisdictions should agree and use, with each exchange partner, transmission methods that meet appropriate minimum standards to ensure the confidentiality and integrity of the data throughout the transmission, including its encryption to a minimum secure standard.
In order to put in place an agreed transmission method that meets appropriate minimum standards in confidentiality, integrity of the data and encryption for use with each of its exchange partners, Gibraltar linked to the CTS.
Based on these findings it was concluded that Gibraltar is fully meeting expectations in relation to agreeing and using appropriate transmission methods with each of its partners. Gibraltar is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.6 Jurisdictions should carry out all exchanges annually within nine months of the end of the calendar year to which the information relates.
Feedback from Gibraltar’s exchange partners did not raise any concerns with respect to timeliness of the exchanges by Gibraltar and therefore with respect to Gibraltar’s implementation of this requirement.
Based on these findings it was concluded that Gibraltar is fully meeting expectations in relation exchanging information in a timely manner. Gibraltar is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.7 Jurisdictions should send the information in accordance with the agreed transmission methods and encryption standards.
Feedback from Gibraltar’s exchange partners did not raise any concerns with respect to Gibraltar’s use of the agreed transmission methods and therefore with Gibraltar’s implementation of this requirement.
Based on these findings it was concluded that Gibraltar is fully meeting expectations in relation to sending the information in accordance with the agreed transmission methods and encryption standards. Gibraltar is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.8 Jurisdictions should have the systems in place to receive information and, once it has been received, should send a status message to the sending jurisdictions in accordance with the CRS Status Message XML Schema and the related User Guide.
Four exchange partners highlighted delays in the sending of status messages by Gibraltar, representing 4% of its partners. This represents a relatively high proportion of partners. Gibraltar has still not yet sent some of the status messages due to be sent in 2021, as well as some that were due to be sent in prior years.
Based on these findings it was concluded that, overall, Gibraltar is meeting expectations in relation to the receipt of the information. It was also noted that there is room for improvement with respect to the sending of status messages in a timely manner. Gibraltar is encouraged to continue to ensure the ongoing effectiveness of its implementation, including in relation to the area highlighted.
Gibraltar should ensure it sends status messages to all of its exchange partners in a timely manner.
SR 2.9 Jurisdictions should respond to a notification from an exchange partner as referred to in Section 4 of the Model CAA (which may include Status Messages) in accordance with the timelines set out in the Commentary to Section 4 of the Model CAA. In all other cases, jurisdictions should send corrected, amended or additional information received from a Reporting Financial Institution as soon as possible after it has been received.
Gibraltar appears ready to respond to notifications and to provide corrected, amended or additional information in a timely manner and no such concerns were raised by Gibraltar’s exchange partners and therefore with respect to Gibraltar’s implementation of these requirements.
Based on these findings it was concluded that Gibraltar appears to be fully meeting expectations in relation to responding to notifications from exchange partners and the sending of corrected, amended or additional information. Gibraltar is encouraged to continue to ensure the ongoing effectiveness of its implementation.
Assessed jurisdiction’s comments on the assessment of effectiveness in practice
The Gibraltar Competent Authority has made tremendous advancements in the short time period since launching its Administrative Compliance Framework in January 2022. Whilst disappointed with the rating allocated by the APRG in light of the resources, time and effort expended on this initiative, Gibraltar understands from the assessment team that the rating recognises these efforts but given that the ACF is in its relatively early stages an on-track rating is not yet possible.
Gibraltar will continue to build on the work being carried out thus far and will take into consideration the recommendations identified by the APRG on how best to reinforce and develop this process.
The Gibraltar Competent Authority also wishes to express their gratitude to the assessment team and the AEOI Panel for their guidance and support on this. Gibraltar looks forward to building on this relationship and continuing to work on ensuring compliance with the AEOI Standard.