Why Gibraltar for Trusts?
Gibraltar has been a leading offshore trust jurisdiction for over three decades. Its combination of English common law, a well-developed statutory framework, a sophisticated and regulated professional trustee community, and its proximity to — and historical relationship with — the United Kingdom makes it a natural choice for families and advisers seeking a trusted and well-understood trust jurisdiction.
The Gibraltar trust framework offers several structural advantages: a long permitted perpetuity period (up to 100 years), flexibility in the types of trust that can be established, a robust statutory base under the Trustee Act 1999, strong confidentiality protections, no local tax on trust income or capital gains (with no Gibraltar CGT, VAT or wealth tax), and a mature GFSC-regulated professional trustee sector. For international families with UK connections, these advantages must be weighed against the UK anti-avoidance provisions that apply to non-resident trusts — provisions that this guide addresses in detail.
The Trustee Act 1999
The Trustee Act 1999 is the primary legislation governing trusts in Gibraltar. It modernised and codified the law applicable to Gibraltar trusts, drawing on English trust law principles while introducing provisions tailored to the needs of an international trust jurisdiction.
Key provisions of the Trustee Act 1999 include:
- Choice of law: The Act permits the settlor to specify Gibraltar law as the governing law of the trust, regardless of where the trust assets are located or where the trustee is based. This choice of law provision gives certainty to international structures.
- Reserved powers: The Act expressly permits the settlor to reserve certain powers without affecting the validity of the trust — including powers to revoke, amend or add to the trust, to direct investments, and to appoint or remove trustees. This flexibility is particularly valued by settlors who wish to maintain an element of control over the trust's operations while achieving a genuine transfer of legal ownership.
- Trustee powers: The Act grants trustees broad investment powers and the authority to delegate investment management to professional managers. Trustees have the power to invest as if they were the absolute beneficial owner of the trust assets, subject to the duty to act prudently and in accordance with any restrictions in the trust deed.
- Protector provisions: The Act formally recognises the role of the protector and provides a statutory framework for the powers and duties that may be conferred on a protector (see below).
- Forced heirship protection: The Act provides that no rule of foreign law relating to forced heirship or similar mandatory provisions will be recognised in Gibraltar to the extent that it would affect the validity or administration of a Gibraltar trust. This provision is particularly important for settlors from civil-law jurisdictions with mandatory inheritance rules.
Types of Gibraltar Trust
Gibraltar law recognises and supports a range of trust structures, each suited to different family circumstances and planning objectives.
Discretionary trusts
The discretionary trust is the most commonly used structure in international wealth planning. In a discretionary trust, the trustee holds the legal title to the trust assets and has full discretion — subject to the terms of the trust deed and any letter of wishes — over how income and capital are distributed among the class of beneficiaries. No beneficiary has a fixed entitlement to any particular distribution; each has merely the right to be considered by the trustee when making distribution decisions.
The discretionary structure provides maximum flexibility for the trustee to respond to changing family circumstances, tax environments and beneficiary needs. It also provides asset protection: because no beneficiary has a fixed entitlement, creditors of a beneficiary cannot attach the trust assets in anticipation of a future distribution.
Fixed interest trusts
A fixed interest trust (also called an interest in possession trust) grants one or more beneficiaries a defined entitlement to income or capital. The most common form is a life interest trust, where a named beneficiary is entitled to receive the income of the trust fund during their lifetime, with the capital passing to remainder beneficiaries on death. Fixed interest structures are used where the settlor wishes to provide for a specific individual (such as a surviving spouse) before assets pass to the next generation.
Purpose trusts
The Trustee Act 1999 permits the establishment of non-charitable purpose trusts — trusts established for a defined purpose rather than for identifiable beneficiaries. Purpose trusts are widely used in structured finance (to hold special purpose vehicles in a manner that is off-balance-sheet for the originator), in private equity fund structures, and as the holding vehicle for shares in private trust companies. The Act requires that a purpose trust have an enforcer appointed to ensure the trustee carries out the purposes of the trust.
Charitable trusts
Charitable trusts in Gibraltar follow principles similar to English charity law. A charitable trust must have exclusively charitable objects, and its income and assets must be applied for those charitable purposes. Gibraltar-registered charities may benefit from tax exemptions on income applied for charitable purposes.
Private Trust Companies (PTCs)
A private trust company (PTC) is a company incorporated specifically to act as trustee of one trust or a defined group of trusts for a single family. Rather than appointing a professional third-party trustee, the family establishes their own corporate trustee, the PTC, which is then appointed as trustee of the family's trusts. The PTC's board is composed of family members, trusted advisers and (in many structures) a professional corporate services provider who provides governance support.
Advantages of PTCs
- Family control: Family members can sit on the PTC board and participate directly in trustee decision-making, maintaining a degree of control over the trust's investment and distribution decisions without technically being the trustee themselves.
- Privacy: The identity of the family members who control the PTC may be less visible than if they acted as individual trustees directly.
- Continuity: As a corporate entity, the PTC provides structural continuity — it does not die or become incapacitated, and the trustee role does not need to be formally transferred on the death of an individual trustee.
- Cost efficiency: For large family structures with multiple trusts, a PTC can be more cost-effective than retaining a professional trustee for each individual trust.
GFSC and the PTC exemption
In Gibraltar, a PTC acting only for a single family is generally exempt from the requirement to hold a GFSC trust licence (the requirement for a GFSC licence applies to persons acting as trustee by way of business for the public). However, many PTC structures engage a GFSC-regulated trust company to provide administrative and governance support, ensuring that the PTC benefits from professional oversight even if the trustee function itself is not separately licensed.
The Protector Role
The protector is a feature of Gibraltar trust law that has no direct parallel in traditional English trust law. The Trustee Act 1999 provides for the appointment of a protector — a person (or entity) given defined powers to oversee and, in some respects, constrain or guide the trustee's exercise of discretion.
Typical protector powers
Protector powers vary by trust deed, but commonly include:
- The power to appoint and remove trustees.
- A veto over trustee decisions on distributions above a defined threshold.
- The power to add or remove beneficiaries from the class of beneficiaries.
- A right to receive information about the trust's assets and administration.
- The power to amend the governing law of the trust.
Who acts as protector?
The protector is often the settlor (or a member of the settlor's family) where the settlor wants to retain an oversight role without being a trustee. It may also be a trusted professional adviser or a family office. The protector's powers create a system of checks and balances on the trustee, which can give the settlor confidence that the trustee's discretion will be exercised in line with the family's wishes — while maintaining the structural separation between the settlor and the trust assets that is necessary for the trust to achieve its planning objectives.
Perpetuity and Duration
Under the Trustee Act 1999, Gibraltar trusts may be established with a perpetuity period of up to 100 years. This is a key advantage over English trusts, which historically were subject to the common-law rule against perpetuities (broadly, a period measured by a life in being plus 21 years), although England has now moved to a statutory 125-year period under the Perpetuities and Accumulations Act 2009.
The ability to establish a multi-generational trust lasting up to 100 years makes Gibraltar well suited to family wealth preservation structures designed to maintain assets across two or three generations. The perpetuity period is specified in the trust deed; if no period is specified, the trust may be of unlimited duration for purpose trusts, but for trusts with beneficiaries it is prudent to include an explicit period.
GFSC Licensing for Professional Trustees
Any person who acts as a trustee by way of business — that is, who provides trustee services to the public in the course of a business — must hold a licence from the GFSC under the Financial Services (Investment and Fiduciary Services) Act and the associated rules and guidance issued by the GFSC for the fiduciary sector.
GFSC-licensed trustees are subject to:
- Fit and proper requirements for directors, beneficial owners and key personnel.
- AML/CFT obligations, including KYC on settlors, protectors, beneficiaries and any persons who exercise effective control over or benefit from the trust.
- Ongoing supervisory oversight, including GFSC visits and thematic reviews of the fiduciary sector.
- Minimum capital and professional indemnity insurance requirements.
- Client asset protection rules, including segregation of trust assets from the trustee's own assets.
Gibraltar's regulated trustee sector is one of the most experienced in the offshore world, with firms that have been providing trust services for decades under consistent GFSC supervision.
UK Anti-Avoidance Provisions
For families with UK-resident beneficiaries or UK-domiciled settlors, the use of a Gibraltar non-resident trust must be considered against the backdrop of the UK's anti-avoidance provisions. The principal provisions are as follows:
Section 86 TCGA 1992 — settlor-interested trusts
Where a UK-resident and UK-domiciled settlor has established a non-resident trust and the settlor (or their spouse or minor children) is or may become a beneficiary, any capital gains realised within the trust are treated as accruing to the settlor directly in the tax year in which they arise. This provision effectively eliminates the capital gains tax deferral that a non-resident trust might otherwise provide for a UK settlor with a continuing interest in the trust.
Section 87 TCGA 1992 — matching gains to beneficiary receipts
Where section 86 does not apply (typically because the settlor is not a beneficiary), section 87 operates to match capital gains that have accrued within the trust but not been attributed to the settlor against capital payments made to UK-resident beneficiaries. A capital payment to a UK beneficiary triggers a charge to capital gains tax on the beneficiary to the extent of the trust's unmatched gains pool, with a surcharge for gains matched in a later tax year than they arose.
Transfers of assets abroad
The transfers of assets abroad provisions in Chapter 2, Part 13, ITA 2007 can attribute income of a non-resident trust (or of a foreign company within a trust structure) to a UK-resident individual who is the settlor or who has transferred assets (directly or indirectly) to enable the income to arise. These provisions are broad and complex, and can apply even where the individual is not a beneficiary of the trust.
Domicile and the remittance basis
Under the pre-2025 UK rules, non-UK domiciled individuals could benefit from the remittance basis of taxation, which sheltered non-UK source income and gains from UK tax unless remitted to the UK. The UK's abolition of the remittance basis for income and gains arising from April 2025 (replaced by a four-year exemption for new arrivals) significantly changes the planning landscape for non-domiciled settlors and beneficiaries of offshore trusts. Specific advice should be sought in light of these changes.
The interaction of the UK anti-avoidance provisions with Gibraltar trust structures is complex, and planning should always be undertaken with specialist UK tax advice. A Gibraltar trust is not automatically UK tax-inefficient for families with UK connections — but the structure must be designed with full awareness of the applicable UK rules.
Practical Considerations
Beyond the legal and tax framework, the establishment and ongoing administration of a Gibraltar trust involves a number of practical decisions:
- Trustee selection: The choice of professional trustee is one of the most important decisions in establishing a trust. The trustee will have legal title to the assets and fiduciary obligations to the beneficiaries. Governance track record, regulatory standing, AUM capacity, depth of professional team and financial stability are all relevant factors.
- Letter of wishes: A letter of wishes from the settlor to the trustee is not legally binding but provides important guidance on the settlor's intentions regarding distributions, investment strategy and the circumstances in which the trust should be brought to an end. It should be reviewed and updated periodically.
- Investment policy: The trustee should agree an investment policy statement with the family, setting out the risk appetite, asset classes, currency exposure and liquidity requirements of the trust fund.
- Governance documentation: Well-administered trusts maintain proper records of trustee meetings, distribution resolutions, investment decisions and correspondence. This documentation is essential if the trust's validity or administration is ever challenged.
- Reporting: Beneficiaries have a right (subject to the terms of the trust) to receive information about the trust's assets and administration. The trust structure should include clear provisions on what information is provided, to whom and when.