Month: February 2019

Malta

Increased Cash Rebates Film Production in Malta

Posted on | by Charlotte Clabon

Background

The Maltese Government is committed to promoting the film production sector and cash rebates can be claimed, as a financial incentive, to the growing Audio-visual Industry in Malta.

What Rebates are Available?

  • Starting from January 2019, qualifying companies can receive a maximum 40% cash rebate for film production in Malta.

The cash rebates are rebates on the expenses in Malta, and are available at three different levels: 30%, 35% and 40%.

The level of rebate is dependent on the cultural test which includes consideration of such factors as how much of the production is filmed outside in Malta and how recognisable Malta is as the location.

Eligibility Criteria

To be eligible for this scheme the following criteria must be met:

  • The production must be carried out by a ‘Qualifying Company’, responsible for all of the activities involved in making a ‘Qualifying Production’ and having access to full financial information in relation to the total production worldwide. There can only be one Qualifying Company with respect to each Qualifying Production.
  • A Qualifying Production means an audio-visual work that must be partially or wholly carried out in Malta and processed to commercial release standards, for international distribution for cinema and international telecast (including VOD/SVOD platforms) and is categorised as follows:
  1. Feature film;
  2. Television production (including a film, a series or mini-series including pilots);
  3. Creative documentary;
  4. Reality programmes (scripted/unscripted);
  5. Game shows.
  • The minimum spend in Malta must be €100,000 and the total budget must exceed €200,000.
  • The Qualifying Company must take a cultural test. This is to ensure that the audio-visual work is considered to be a cultural product and that it makes a valid contribution in terms of creative expression and culture through the development of production capability skills in the audio-visual sector in Malta.
  • Companies need to use a registered Production Service Company for coordination of the production.

Additional Tax Benefits

Qualifying companies can also qualify for tax credits.

This is in addition to the Maltese corporate tax imputation system which, for non-Maltese resident shareholders, results in an effective Maltese tax rate of 5% on active profit, used to pay dividends, and 10% on passive income.

This makes Malta a very attractive destination for the audio-visual industry.

Additional Information

Dixcart can assist with advice on this matter and other related corporate and residency issues in Malta For further assistance please contact us on advice.malta@dixcart.com or speak to your usual Dixcart contact.

Key Measures Relating to EU ATAD Now Implemented in Malta

Posted on | by Charlotte Clabon

As a member of the EU, Malta has implemented the EU Anti-Tax Avoidance Directive (ATAD) and has incorporated it into domestic legislation.

Malta incorporated the ATAD measures into its domestic legislation at the beginning of December 2018 through implementation of Legal Notice 411, which includes the following:

  • an interest limitation rule;
  • general anti-abuse rules (GAAR);
  • controlled foreign company rules (CFC);
  • an exit tax.

These measures came into force as from 1st of January 2019, with the exception of the exit tax, which will be introduced as from 1st of January 2020.

Interest Limitation Rule

This regulation limits the deductibility of borrowing costs for a taxpayer. If borrowing costs exceed interest receivable, the maximum allowable tax deduction from the excess costs (referred to as “exceeding borrowing costs”), during a specific tax year, will be 30% of EBIDTA (the taxpayer’s earnings before interest, depreciation, tax and amortisation).

The unutilised exceeding borrowing costs can be carried forward, subject to further limitations and criteria. In addition, no capping applies for borrowing costs less than €3 million.

The “interest capacity” that a taxpayer has in a tax year can also be carried forward for up to 5 years.

These rules do not apply to financial institutions such as banks, funds, insurance companies, etc. and also to companies which do not form part of a group or have no permanent establishments or associated companies.

There is also an exception to the general rule, whereby it is possible to enjoy full deductibility of the exceeding borrowing costs. This is subject to the taxpayer proving that the ratio of equity over total assets is equal to, or higher than, the equivalent ratio of the group.

GAAR

General anti-abuse rules have been included, for a considerable length of time, in the Malta Income Tax Act and the EU directive re-iterates the importance of these rules.

CFC Rules

An entity or permanent establishment, whose profits are not subject to tax or are exempt from tax, will be treated as a controlled foreign company in the following circumstances:

  • an entity (the ‘taxpayer’ and/or associated enterprises), holds a direct or indirect participation of more than 50% of the voting rights, or owns directly or indirectly more than 50% of the capital, or is entitled to receive more than 50% of the profit of that entity; and
  • the corporate tax paid by the entity or permanent establishment is lower than the difference between the tax that would have been liable under the Malta Income Tax Act plus any foreign corporate tax paid.

The CFC rule does not apply to an entity or permanent establishment:

  • with accounting profits not exceeding €750,000 and non-trading income of not more than €75,000; or
  • where the accounting profit is less than 10% of operating costs in the relevant tax year.

Exit Tax

A taxpayer will be subject to tax on unrealised capital gains where assets owned by the taxpayer are moved or transferred outside of Malta.

The capital gain is calculated as the market value of the transferred assets, at the time of exit, less their value for tax purposes, and is applicable in any one of the following circumstances: 

  • a taxpayer transfers assets from its head office in Malta to its permanent establishment in another EU Member State or other country;
  • a taxpayer transfers assets from its permanent establishment in Malta to its head office or another permanent establishment in another EU Member State or other country;
  • a taxpayer transfers tax residence from Malta to another EU Member State or other country (excluding assets which remain effectively connected with a permanent establishment in Malta);
  • a taxpayer transfers the business conducted by its permanent establishment in Malta to another EU Member State or other country.

Additional Information

The Dixcart office in Malta has extensive experience in establishing and managing tax-efficient companies in Malta, can assist with all relevant compliance matters, and related corporate and residence issues. For further assistance please contact us on advice.malta@dixcart.com or speak to your usual Dixcart contact.

UK

Individual Taxation in the UK

Posted on | by Charlotte Clabon

Liability to UK tax is broadly determined by the application of the concepts of “domicile” and “residence”.

Domicile

UK law relating to domicile is complex and differs from the laws of most other countries. Domicile is distinct from the concepts of nationality or residence. In essence, you are domiciled in the country where you consider you belong and where your real and permanent home is.

When you come to live in the UK you will not generally become UK domiciled if you intend, at some point in the future, to leave the UK.

Residence

The UK introduced a statutory residence test in 6 April 2013.  Residence in the UK normally affects a whole tax year (6 April – 5 April the following year) although in certain circumstances “split year” treatment may apply.

For more details on residence please read our separate UK Resident/Non-Resident Test  information note.

Remittance Basis

An individual who is resident but not domiciled in the UK can choose to have his or her non-UK income and gains taxed in the UK only to the extent that they are brought into or enjoyed in the UK. These are called ‘remitted’ income and gains. Income and gains made abroad, which are left abroad, are called ‘unremitted’ income and gains. Major reforms regarding how non-UK domiciliaries (“non-doms”) are taxed were implemented in April 2017. Additional advice should be requested.

The rules are complex but in summary, the remittance basis will generally  apply in the following circumstances:

  • If unremitted foreign income is less than £2,000 at the end of the tax year. The remittance basis automatically applies without a formal claim and there is no tax cost to the individual. UK tax will be due only on foreign income remitted to the UK.
  • If unremitted foreign income is over £2,000 then the remittance basis can still be claimed, but at a cost:
    • Individuals who have been resident in the UK for at least 7 out of the prior 9 tax years must pay a Remittance Basis Charge of £30,000 in order to use the remittance basis.
    • Individuals who have been resident in the UK for at least 12 out of the prior 14 tax years must pay a Remittance Basis Charge of £60,000 in order to use the remittance basis.
    • Anyone who has been resident in the UK in more than 15 of the previous 20 tax years, will not be able to enjoy the remittance basis and will therefore be taxed in the UK on a worldwide basis for income and capital gains tax purposes.

In all cases (except where unremitted income is less than £2,000) the individual will lose the use of his or her UK tax-free personal allowances and capital gains tax exemption.

Income Tax

For the current tax year the UK top rate of income tax is 45% on taxable income of £150,000 or more. Married persons (or those in a civil partnership) are taxed independently on their individual incomes.

As detailed above, if you are resident, but not domiciled, in the UK and choose to be taxed on the “remittance basis” you are taxable in the UK only on income that either arises in, or is brought to, the UK in any tax year.

Individuals resident and domiciled in the UK, or those who do not use the remittance basis, pay tax on all income worldwide on an arising basis.

Careful planning prior to arriving in the UK is needed to avoid unintentional remittances. In each case, attention must be paid to any relevant double taxation treaty.

Any remittances to the UK of income (or gains) used to make a commercial investment in a UK business are exempt from an income tax charge.

Capital Gains Tax

The UK rate of capital gains tax ranges from 10% to 28% depending on the nature of the asset and the income level of the individual. Married persons (or those in a civil partnership) are taxed separately.

As above if you are resident, but not domiciled in, the UK and choose to be taxed on the “remittance basis” you are liable to capital gains tax on gains made from the disposal of assets situated in the UK or from those which are outside the UK if you remit the proceeds to the UK. Non-sterling currency is treated as an asset for capital gains tax purposes and therefore any currency gain (measured against sterling) is potentially chargeable.

As with income, gains realised by certain offshore structures can be attributed to a UK resident individual under complex anti-avoidance rules; for example, gains realised by “closely controlled” non-UK companies (broadly companies under the control of five or fewer “participators”) are attributed to the participators individually.

Gains on the disposal of certain types of asset, such as a main residence, UK government securities, cars, life assurance policies, savings certificates and premium bonds may be relieved from capital gains tax.

Inheritance Tax

Inheritance tax (IHT) is a tax on an individual’s wealth on death and may also be payable on gifts made during an individual’s lifetime. The UK inheritance rate is 40% with a tax free threshold of £325,000 for the tax year 2019/2020.

Liability to inheritance tax depends on your domicile. If you are domiciled in the UK you are taxable on a worldwide basis.

A person who is not domiciled in the UK is taxable only on the transfer of assets situated in the UK (including transfers to successors/beneficiaries that occur on death). For inheritance tax purposes only, special rules apply. Any person who has been resident in the UK (for income tax purposes) for more than 15 years out of a continuous period of 20 years will be treated as being domiciled in the UK for IHT. This is called “deemed domicile”.

Certain lifetime gifts are exempt from inheritance tax provided the donor survives seven years and divests himself of any benefit. Strict rules have been introduced in cases where the donor retains or reserves a benefit out of the gift (e.g. gives away his house but continues to live in it). The effect of these changes will be to treat the donor for IHT purposes, in most cases, as if he had never made the gift.

Transfers of property between spouses of the same domicile status are exempt from inheritance tax, as are transfers by a spouse with a non-UK domicile to a UK domiciled spouse. However the amount that can be transferred by a UK domiciled spouse to a non-UK domiciled spouse without incurring an inheritance tax charge is limited to £325,000. It is, however, possible for a non-domiciled spouse to elect to be treated as domiciled, which would enable the full spouse exemption to be claimed. Once such a deemed domicile had been claimed the spouse would remain deemed domiciled until a number of years of non-residence had subsequently been re-established.

Why use The Azores (Portugal) for Yacht Importation?

Posted on | by Charlotte Clabon

Background

The Archipelago of the Azores is composed of nine volcanic islands and is situated in the North Atlantic, about 1,500 kilometres west of Lisbon. These islands are an autonomous region of Portugal.

What Advantages are Offered by the Azores for Yacht Importation into the EU?

  • The standard rate of Portuguese VAT is 23% but the Azores benefits from a reduced VAT rate of 18%.

In relation to the EU as a whole, the Azores has the second lowest rate of VAT within the EU (equal to Malta), with only Luxembourg enjoying a lower rate at 17%. The low rate of VAT is a major reason why the Azores continues to be a popular location for yacht importation into the EU.

The Azores also provides a geographical advantage as it is on the route used by yachts crossing the Atlantic, from the US and the Caribbean, to Europe.

Dixcart: Yacht Importation Services Using the Azores

Dixcart has extensive experience importing yachts through the Azores.

The yacht must physically travel to the Azores and it must  be moored there for two to three working days, to enable customs clearance to take place.

Dixcart undertakes the preparation work at their office in Madeira and then organises for the appropriate professionals to travel to the Azores, to be there at the correct time and for the relevant number of days. These professionals assist with the customs clearance procedures and payment of VAT.

Steps and Procedures

Four steps take place:

Step 1: Application for a VAT number for the yacht owning company, as a Portuguese taxpayer

Requirements:

  1. Relevant documents to prove the yacht owner’s identity.
  2. Power of Attorney from the yacht owner in favour of the relevant Dixcart company. This company will apply for a VAT number and will be registered as the yacht owner’s fiscal representative, for VAT purposes, with the Portuguese Tax Authorities.

Step 2: Preparation of the relevant VAT and other customs forms

Requirements:

  1. ‘Declaration of Conformity’.
  2. ‘Bill of Sale’ and related invoices.
  3. Customs in the Azores will make their own evaluation as to the value of the yacht.

Step 3: Importation

The Azores Customs Authority will:

  1. Survey the yacht.
  2. Calculate the applicable VAT on importation, and any other relevant charges.
  3. Implement the customs clearance.

Step 4: VAT payment

The Portuguese tax representative of the yacht owner (provided by Dixcart) will pay the VAT applicable on the yacht importation and will receive the following items:

  1. ‘Declaration of Importation’. This document confirms customs clearance for the yacht and details of the relevant VAT payment. It must be kept on board the yacht at all times.
  2. Receipt of payment.

Additional Information

If you require additional information regarding yacht importation using the Azores, please speak to your usual Dixcart contact or to Gisela Martins at the Dixcart office in Madeira: advice.portugal@dixcart.com.