The British overseas territory known as Gibraltar borders southern Spain, where it covers a mere six square kilometers comprising a single city-state. With about 28,000 inhabitants, it ranks as one of the most densely populated territories in the world.
The two major industries of Gibraltar are tourism and financial services. Cruise ships and day visitors from Spain in large numbers frequent “The Rock,” which features a bustling retail trade led by such noted British brands as Dorothy Perkins and Marks & Spencer, among others. The official currency is the Gibraltar Pound, roughly equivalent to the pound sterling, and English is the official language, although most locals also speak Spanish.
The financial services industry in Gibraltar is regulated by the Financial Services Commission (FSC). Because the territory entered the EC at the time of the accession of the United Kingdom, it is required by statute to match U.K. standards in all matters where EU legislation applies, including those related to money laundering and fair taxation. However, the EU rules regarding CAP, VAT and CCT are exempted.
To attract businesses to its shores, Gibraltar has established very favourable laws of incorporation. A company may be formed as one limited by shares, limited by guarantee having a share capital, limited by guarantee without a share capital or as an unlimited company. There is no tax on capital gains and reporting requirements are minimal.
In 1998, Gibraltar began offering licenses to online gaming sites, from virtual casinos to sportsbooks and betting exchanges, with no start-up licensing fees. By 2005, the territory had gained a reputation as an online gambling center, hosting 20 online betting and gaming firms that employed around 2,000 people, which made the gaming industry Gibraltar’s largest employer and tenant.
Today, no fewer than 304 gaming web sites are based in Gibraltar. Conversely, some 473 sports betting sites worldwide accept play from residents of the territory, as there are no restrictions governing wagering on offshore sites.
Of course, an industry so reliant on the Internet required access to a state-of-the-art telecommunications infrastructure. Towards that end, the Gibraltar government entered into separate joint ventures with Verizon (formerly American Bell Atlantic) and British Telecom (BT). Now the Rock’s International Network is fully digitalized, equipped with a full range of satellite, mobile and Internet communications services.
Among Gibraltar’s resident gaming site operators are some of the world’s most respected brands. ladbrokes and william hill both have their online bookmaking based here. In March of 2011, the Sport Betting Exchange known as betfair announced their intention to move to a Gibraltar license to save money on British gambling tax payments.
The trend of online gaming sites relocating in Gibraltar will be slowed somewhat by a change in taxation effected in 2011. The previous tax rate of 1% of turnover, capped at €500,000 per year, has been raised to 10%. However, businesses already registered in Gibraltar will still not pay the Value Added Tax (VAT).
Offline, Gibraltar has a trio of land-based casinos—the Rock Hotel-Casino and the Stakis Casino within the city proper and the new gala Casino at Ocean Village Marina. All three offer slot machines and table games, including American Roulette, Blackjack, Poker and Brit Brag.
The territory has also operated the Gibraltar National Lottery since 1947, with 21 biweekly drawings per year plus three “bumper” drawings with larger prizes. The return rates on tickets are among the highest anywhere, averaging 77 percent, and a single ticket can win multiple prizes, which are not subject to tax.
The annual Christmas Draw is the year’s biggest event, with tickets priced at £20 each and a top prize worth £250,000. The lottery, which was initiated to cover the costs of new housing following World War II, brings in an estimated £4.5 million each year. Non-residents are permitted to purchase tickets.