Swiss companies

Formation of Swiss Companies

Taxation of Swiss Companies

Why Use Switzerland?

Switzerland is an attractive jurisdiction to start and operate a business, as a location for individuals and for family protection and safety. 

Advantages include:

  • Located in the centre of Europe.
  • Economic and political stability.
  • High regard for personal privacy and confidentiality.
  • Most ‘innovative’ and “competitive” country in the world with various strong industries.
  • A well respected jurisdiction with an excellent reputation.
  • A high quality and multilingual local workforce.
  • Low rates of corporate tax for Swiss companies.
  • Premier destination for international investment and asset protection.
  • Major commodity trading centre in the world.
  • Hub for HNWIs, international families and a wide variety of professionals including: lawyers, family offices, bankers, accountants, insurance companies.

Swiss Company Taxation

Swiss companies have a zero tax regime for capital gains and dividend income. 

Trading companies have always attracted a local canton (region) tax rate.

  • Federal tax on net profit is at an effective rate of 7.83%.
  • There are no capital taxes at the federal level. Capital tax varies between 0% and 0.2% depending on the Swiss canton that the company is registered in. In Geneva, the capital, the tax rate is 0.0012%. However, in circumstances where there are ‘substantial’ profits, no capital tax will be due.
  • In addition to federal taxes, cantons operate their own tax systems. The effective cantonal and federal corporate income tax rates (CIT) are between 12% and 14%.
  • Swiss Holding Companies benefit from a participation exemption and do not pay income tax on profits or capital gains arising from qualifying participations. This means that a pure Holding Company is exempt from Swiss tax.

Swiss Withholding Tax (WHT)

There is no WHT on dividend distributions to shareholders based in Switzerland and/or in the EU (EU Parent/Subsidiary Directive). 

If shareholders are domiciled outside Switzerland and outside the EU, and a double tax treaty applies, the final taxation on distributions will generally be between 5% and 15%.

Double Tax Treaties

Switzerland has an extensive double tax treaty network, with access to tax treaties with 100 countries.

About Swiss Companies 

  • Share Capital

SA: Authorised share capital minimum: CHF 100,000

SARL: Authorised share capital minimum: CHF 20,000

  • Shares

SA: The identity of the shareholders is not publicly available.

SARL: Participations are registered. The identity of the shareholder is public.

  • Directors

There must be at least one director. Directors domiciled outside of Switzerland are permitted but, at least one manager signing individually on behalf of the company, must be Swiss domiciled. Corporate directors are not permitted.

The names and domiciles of the directors are public.

  • Incorporation

Approximately three weeks from receipt of all of the requisite information.

  • Shareholders Meetings

A meeting of the ordinary shareholders must be held once a year.

  • Accounting/Audit

Annual accounts are required. An annual audit may be required depending on the turnover of the company.

  • Annual Return

An annual return is required.

Please also see our Business Support Services page.

Updated: May 2020

Move out of the UK

Why there is a Rise in Clients Requiring Succession Planning and Structuring Advice

Since the breakout of Covid-19, more individuals are now reviewing their estate and putting practical measures in place regarding succession planning. Although not a catalyst for encouraging individuals to review their affairs, Covid-19 has certainly reinforced the importance of it.

Covid-19 has provided a reason for many families to ‘take stock’ and to put in place or revise practical measures regarding succession planning. 

Since the breakout of Covid-19, more individuals are now reviewing their estate and putting practical measures in place regarding succession planning. Covid-19 is certainly not the main catalyst for encouraging individuals to review their affairs, it has definitely reinforced the importance of it. 

In a number of countries, succession planning can be complex, particularly some Latin American countries and other Civil Law countries, where forced heirship rules still apply. Unless alternative plans are put in place early, at least part of an estate, will be automatically divided between surviving family members, rather than shared according to the individual’s preference. 

International taxation is another reason why individuals may wish to put structuring measures in place. Many high net worth individuals and families incorporate one or more of a Corporate Family Investment Structure, a Trust or Foundation as part of their planning.

8 steps to successful succession planning 

  1. Identify exactly what the intended outcome of the succession planning should be.
  2. Establish policies and set up a review procedure to ensure the adequate preservation and transfer of wealth to the next generation.
  3. Review the ownership structure of any relevant businesses and other assets. Some family businesses may have employees they would also like to include within the planning, just as much as family members.
  4. Understand how relevant local laws would apply, in relation to inheritance. Consider where all relevant family members are resident, and also tax resident, and what the implications of this might be regarding the transition of family wealth.
  5. Consider or review structuring options, including the use of holding companies and/or family wealth protection vehicles such as family investment companies, foundations, trusts, etc.
  6. Review international investment structures, including the holding of real estate, from a tax and asset protection perspective.
  7. Confidentiality procedures needs to be developed to deal with relevant confidential information requests from financial institutions and third parties.
  8. Identify key successors and their roles, develop open communication amongst family members, especially regarding decision making and ongoing processes. 

All of the above steps should be considered in order to protect an individuals or family’s wealth and/or business(es) in the case of unexpected events occurring; it is also imperative to review the above steps on a regular basis and seek advice regarding the most appropriate legal structures.

Corporate Family Investment Structures 

A family investment company is a company to where the shareholders are drawn from different generations of the same family. The use of a family investment company has grown significantly in recent years, particularly in situations where it has become difficult to pass value into a trust, without incurring an immediate tax charges but there is a desire to continue to have some control and influence over the family’s wealth preservation. 

For more information regarding the benefits of a family investment company: Why use a Corporate Family Investment Structure and Why Use a Guernsey Corporation?

Trusts, Foundations & Private Trust Companies 

Trusts continue to be a popular structure when undertaking estate and succession planning and are used by many Common Law jurisdictions. A trust is a very flexible instrument; at a basic level, the concept of a trust is relatively simple: The Settlor places assets in the legal custody of another (Trustee), who holds the assets for the benefit of a third party (the Beneficiary). 

The Trustees are those who oversee and control the trust. Their role is to deal with the assets according to the Settlor’s wishes and manage the trust on a day-to-day basis. Therefore, the consideration of who is appointed Trustee is extremely important. 

In a similar vein a Foundation can fulfil many of the same functions in Civil Law countries. Assets are transferred to the ownership of the Foundation which is governed by its Charter and managed by a Council for the benefit of the beneficiaries. 

A Private Trust Company (PTC) is a corporate entity authorised to act as a Trustee and is often used as an asset protection vehicle. The use of a PTC can enable the client and his/her family to actively participate in the management of the assets and decision-making process. 

Switzerland recognised trusts with the ratification of The Hague Convention on the Law Applicable to Trusts (1985), on 1 July 2007. Switzerland is in the process of enabling its own trust legislation and already trusts from other jurisdictions, formed under their specific rules, are recognised and can be administered in Switzerland. The use of a Swiss company as a Trustee can be attractive with the perceived extra layer of confidentiality afforded by Swiss legislation. 

An English, Guernsey, Isle of Man, Maltese or Nevis Law based trust with Swiss Trustees can offer a number of tax efficiencies as well as advantages in terms of wealth preservation and confidentiality. Dixcart can establish and manage such trust structures. More information regarding the benefits of using a Swiss Trustee can be found here: The Use of a Swiss Trustee: How and Why?

Summary

During periods of uncertainty and global turmoil, as inflicted by Covid-19, more of our clients are focusing on making sure they are safe-guarding their family wealth for future generations, offering stability and long-term security. Succession planning and the transfer of wealth to the next generation is a critical issue that should not be overlooked. Not only is it a means to implement generational transition, but also to protect and structure a business. The ability and understanding of the next generation as to how to deal with the organisation and management of the wealth being passed to them is also an important consideration.

The Dixcart Group has over forty-five years’ experience in assisting clients to run and manage Family Offices. We are very familiar with the issues facing families in this ever-changing international world and have extensive experience in providing trustee services across a number of jurisdictions. 

We work with each family wealth structure to coordinate communication with the family and their advisors or to provide access to, and liaison with, additional independent professional advisors. Plans can be put in place to allow for changes in a family’s structure and relationships to be recognised. We also make sure that during the implementation of such structures, relevant tax implications are reviewed and there is full transparency. More information can be found here: Private Client Services: Trusts, Foundations, Family Office. 

If you would like further information regarding effective structuring and succession planning, please speak to your usual Dixcart Manager or contact: advice@dixcart.com.

Multi-Jurisdictional

Trusts and Foundations: Questions & Answers

A Changing World

Particularly, in light of the recent Covid-19 pandemic, many individuals are considering how they can best protect their family health and their family wealth, across future generations.

Many have already set up family offices and use Trusts and/or Foundations as wealth preservation vehicles within these.

This Article is intended for those considering taking such steps.

Dixcart has offer 45 year of experience in helping establish Trust and Foundation vehicles and providing Trustee services. We are licensed to offer these services across the six jurisdictions of; Cyprus, Guernsey, Isle of Man, Malta, Saint Kitts & Nevis and Switzerland.

What will be most appropriate, depends on your circumstances and we strongly advice that you take professional advice: advice@dixcart.com.

Questions and Answers

What is the History in Relation to each Vehicle?

Trusts have been used in common law countries for many hundreds of years, for a variety of reasons. With the development of international business, international tax and estate planners were quick to realise the benefits of using offshore trusts in mitigating tax liabilities and assisting in the flow of family wealth through the generations.

Historically, clients from civil law countries have been more familiar with the concept of the Foundation. However, now they are becoming increasingly aware of the benefits of Trusts, and it is the same in terms of common law countries and Foundations.  

How Can a Trust or Foundation Help Preserve Wealth Across Future Generations?

It is a legal arrangement where the ownership of the ‘Settlor’s’ assets (such as property, shares or cash) is transferred to the ‘Trustee’ (usually a small group of people or a trust company) to manage and use to benefit the ‘Beneficiaries’, a third person, or group of people, under the terms of a Trust Deed.

A Foundation creates a separate legal entity with its own legal personality, distinct from the ‘Founder(s)’, who transfers assets into the Foundation, the ‘Council’ manage the Foundation and the ‘Beneficiaries’, benefit from it.

Charitable foundations are the most common and the majority are set up to exist in perpetuity. This means that control over the foundation and its assets can be passed to countless generations of the family.

Are Trusts and Foundations ‘Private’?

In most jurisdictions, no requirements currently exist to register a Trust or for any document or information in connection with the Trust to be placed in the public domain, and the arrangement may therefore be kept completely private.

Limited information in relation to Foundations will be publicly available, but there is currently no requirement that the identity of the Founder, Beneficiaries or purposes of a Foundation should be made publicly available.

Trusts and Foundations can, therefore, both be private arrangements under current rules.

What are the Key Differences Between a Trust and a Foundation?

A number of the key differences are outlined below: 

  • A Trust is not a legal entity; a Foundation is a registered legal entity.
  • The ownership of the assets in a trust rests with the Trustee whilst the Foundation owns the property concerned directly.
  • A Foundation is more structured than a Trust as it is governed by its Charter and Articles or regulations.
  • Potentially, a Foundation provides more certainty than a Trust and it is less likely to be treated as a potential ‘sham’, particularly in civil law jurisdictions.
  • Unlike most Trusts, the Beneficiaries of a Foundation may be denied rights to information and they generally do not have any equitable or other forms of ownership of foundation assets.
  • Trusts are intrinsically more flexible than Foundations.
  • A Trust can be used for commercial purposes but Foundations, except under limited circumstances, cannot be so used.

What are the main Reasons for having a Trust or a Foundation, in addition to Wealth Preservation?

In addition to the preservation of wealth, selected distribution of assets and favourable tax treatment, Trusts and Foundations are used to achieve the following:

  • Circumvention of forced heirship laws
  • Asset protection
  • Confidentiality
  • Continuity on death
  • Philanthropy

Dixcart Offices Regulated to Provide Private Client Services:

Dixcart has six offices with extensive expertise in providing Private Client Services, including the provision of Trusts and Foundations:

  • Cyprus: Dixcart Management (Cyprus) Limited is regulated and holds a full fiduciary licence under the Cyprus Securities and Exchange Commission.

Email: advice.cyprus@dixcart.com.

  • Guernsey: Dixcart Trust Corporation Limited is regulated and holds a full fiduciary licence under the Guernsey Financial Services Commission. Dixcart Trust Corporation Limited is a member of the Guernsey Association of Trustees.

Email: guernsey@dixcart.com.

  • Isle of Man: Dixcart Management (IOM) Limited holds a full fiduciary licence and is regulated by the Isle of Man Financial Services Authority. Dixcart Management (IOM) Limited is a member of the Association of Corporate Service Providers.

Email: advice.iom@dixcart.com.

  • Malta: Elise Trustees Limited Dixcart House is regulated and holds a full fiduciary licence under the Malta Financial Services Authority.

Email: advice.malta@dixcart.com.

  • Nevis: Dixcart Management Nevis Limited is regulated and holds a full fiduciary licence under the Financial Services Regulatory Commission.

Email: advice.nevis@dixcart.com.

  • Switzerland: Dixcart Trustees (Switzerland) SA is a certified member of Swiss Association of Trust Companies (SATC). Dixcart Trustees (Switzerland) SA is affiliated to “Association Romande des Intermédiaires Financiers (ARIF)” a Swiss self-regulatory organization (SRO) officially recognised by Swiss Federal Financial Market Supervisory Authority (FINMA).

Email: advice@switzerland.com.

 Summary and Further Information

Trusts and Foundations can be used to achieve many objectives. The choice of jurisdiction for a Trust and/or Foundation is important and is generally governed by the specific circumstances of each family/family office.

If you would like additional information, please speak to your usual Dixcart contact,  one of the Dixcart offices above, or email: advice@dixcart.com

Low Tax Trading opportunities

Lifestyle Re-think: Guernsey, IOM, Malta and St Kitts & Nevis

Background

The recent pandemic is causing many individuals to re-evaluate what is of key importance in life.

CV-19, unwelcome in so many ways, has caused us to draw breath and consider that ‘fast and frantic’ may not be the best approach to life.

What Are the Alternatives?

People and their families are spending more time together and finding alternative ways to keep occupied, centred around the family home. Although restrictive, many have discovered new levels of appreciation of family and lifestyle during this time. New ways have been found to relax, including family exercise, new hobbies, a healthier focus on life, and calming and wellbeing focused activities.

Longer Term Alternatives

Longer term, a slower pace of life on an on-going basis, has become more attractive, to many.

One way to achieve this is to move location and a small island destination can be of appeal.

Not only is the lifestyle refreshing but an island can be ring-fenced rapidly when a crisis occurs, as witnessed with CV-19. The flow of people in and out can be restricted far more easily when a country does not have ‘on-land borders’ and is not a central hub for flights.

Dixcart Domiciles

Dixcart Domiciles assists individuals to relocate and/or to take up alternative residence or citizenship options.

Life-style related factors will always be a priority, and particularly so in the future due to recent circumstances. However, movement to a jurisdiction with an attractive tax regime will often be a major influencer as well, together with other financial and wealth planning factors including few or no forced heirship rules, a lack of exchange control, and a business-friendly environment encouraging and enabling entrepreneurial activity.

Lifestyle: Guernsey

The island of Guernsey is the second largest of the Channel Islands, which are situated in the English Channel close to the French coast of Normandy. It is well known for its temperate climate, relaxed high quality of living and has a quintessential British charm.

In addition to Guernsey, the island of Sark falls within the Bailiwick of Guernsey. Sark is a small island (2.10 square miles) with a population of approximately 600 and has no motorised transport.

The island of Guernsey is about 79 square kilometres, with almost the same area of stunning coastline. It has an approximate population of 65,000, with a warm and thriving community. It combines many of the reassuring elements of UK culture, with the benefits of living abroad.

Guernsey is perfect for families. Crime is extremely low on the island and the education system is superb. Guernsey offers around 2,000 hours of sun per annum and there is a range of sport and leisure activities available for all ages. These range from coastal walks, cycling, and golf, to surfing, sailing and diving. 

Lifestyle: Isle of Man

The Isle of Man is situated in the Irish Sea, centrally located between England, Ireland, Scotland and Wales and it is a beautiful place to live. Whilst the island may be small, just 572 square kilometres, with its rugged coastline and rolling hills, it offers plenty of space for families to breathe, relax and enjoy what island life has to offer.

The Isle of Man has been a self-governing Crown Dependency since 1866, and this political independence, combined with its strong democratic values, have enabled the Isle of Man to be governed efficiently over the past 154 years.

The Isle of Man Government adopts a forward-thinking and pragmatic approach, which allows the close-knit community of approximately 85,000 people to benefit from a healthy and relaxed lifestyle. The Isle of Man Sports Council supports various sport activities across, and the island is recognised as having one of the lowest crime rates across Europe. In the recent few years, the government has invested in programmes to modernise schools, and transport. In addition, the island has a high-quality workforce and access to a very good health care system.

Lifestyle: Malta

Malta offers the climate, the relaxed lifestyle and rich history to make living on this island, a real pleasure. Malta is a popular tourist destination with its warm climate, numerous recreational areas, and architectural and historical monuments, including three UNESCO World Heritage Sites.

Located in the Mediterranean, just south of Sicily, Malta offers all of the advantage of being a full member of the EU and Schengen Member States and has English as one of its two official languages. Malta is also very well connected with most of the international airlines (such as British Airways, Lufthansa, Emriates, Qatar, Turkish Airlines, Ryanair, EasyJet, WizzAir and swiss, to name a few), which fly to Malta almost daily.

With a population of about 475,000 over an area of 316 square kilometres, Malta is the world’s tenth smallest country in area and fifth most densely populated sovereign country. Its capital is Valletta, which is the smallest national capital in the European Union by area.

Its location in the centre of the Mediterranean has historically given it great strategic importance as a naval base, with a succession of powers having contested and ruled the islands. Most of the foreign influences have left some sort of mark on the country’s ancient history.

Malta’s economy has enjoyed large growth since joining the EU and the forward-thinking Government actively encourages new business sectors and technologies.

Lifestyle: St Kitts & Nevis

St Kitts & Nevis offers an extremely appealing Caribbean lifestyle.

The Federation of St Kitts & Nevis is made of up two islands situated in the Caribbean Sea and are approximately three hours by plane from Miami, four hours by plane from New York and eight hours by plane from London. There are direct flights from all of these cities and many local air connections to other Caribbean islands.

St Kitts & Nevis has a population of approximately 53,000 and English is the official language. Before gaining status as an independent country in 1983, St Kitts & Nevis was part of Britain for over 200 years, which is why British traditions still play an important role in the diverse culture of the islands.

St Kitts & Nevis has a tropical climate, with little variation and is therefore warm and sunny throughout the year. The islands have a volcanic origin and are dominated by centrally located mountains and tropical rainforests, fringed by beautiful sandy beaches and palm trees.

Real estate is of international standard. Applicants have the choice of investing in unique real estate or buying into a premier market with a ready inventory of condominiums, apartments, hotels, villas, and luxury homes, which continue to be developed across the islands. 

How Can Dixcart Help?

  • Dixcart offers advice and assistance to individuals seeking to relocate to; Guernsey, Isle of Man, Malta, and St Kitts & Nevis.

Additional Information

If you require additional information regarding relocation to any of the jurisdictions detailed in this Information Note, please contact: advice@dixcart.com or speak to one of the following Dixcart contacts:

Dixcart Trust Corporation Limited, Guernsey: Full Fiduciary Licence granted by the Guernsey Financial Services Commission, registered company number: 6512.

Dixcart Management (IOM) Limited is licensed by the Isle of Man Financial Services Authority.

Multi Jurisdiction

Dixcart Digest: An Analysis of Government Measures Taken in Response to Covid-19

The Covid-19 Pandemic

2020 is going to be a year remembered for the challenging pandemic, which has had a huge impact on people’s well-being, both health wise and financially.

On a positive note, people are appreciating the ‘simple’ things in life and there is a heightened attitude of looking out for and assisting others, particularly those falling into the vulnerable category.

Most Governments have taken sympathetic measures to support their health services and to try to keep business functioning during the challenging circumstances.

Measures taken in the Jurisdictions where Dixcart has Offices

Please see below a summary of the support measures being taken in the eight key jurisdictions where Dixcart has an office. This is by no means a comprehensive summary, rather an outline of some of the innovative measures being taken and is only relevant at the time of publication.

Cyprus

  • Suspension of the collection of loan instalments and interest until the end of 2020.
  • Central Bank of Cyprus guidelines to banks to provide short-term liquidity facilities, for up to 12 months, at preferential terms (interest rate and other charges). A maximum amount, to be available of double the annual payroll cost, or 25% of the entity’s most recent annual turnover.
  • Special plan for a ‘Full Suspension of Business or Partial Suspension of Operations’ – payment of a Special Unemployment Benefit to private sector employees.
  • Special Self-Employed Benefit, a similar concept to the above payment.
  • ‘Child Care Special Leave Allowance’ to be awarded to working parents who are responsible for the care of children up to 15 years of age and / or children with disabilities of any age and due to the nature of their work cannot work from home.

 Guernsey

  • As of 19 March, a requirement was imposed on all persons arriving in the Bailiwick from anywhere in the world (including, for the avoidance of doubt, Jersey and the United Kingdom), to self-isolate for 14 days on arrival. This is a legal requirement, and failure to comply is a criminal offence.
  • Testing and contact tracing have formed a major part of the response strategy. Guernsey has employed a high rate of testing, several times more per capita than many other jurisdictions.
  • Deferral of payment of Social Security contributions for both Quarter 1 (due mid-April), and Quarter 2 (due mid-July).
  • ‘Coronavirus Payroll Co-Funding Scheme’ – the Government will pay employees an amount equivalent to Guernsey’s minimum wage. For a 35-hour week, this figure equates to a gross figure of £298. The States of Guernsey will meet 80% of this figure (i.e. £238 per week based on a 35-hour week). Employers must make up the remaining 20%.
  • ‘Small Businesses and Self-employed Grant’ – the amount payable will be a flat sum of £3,000.
  • A loan guarantee scheme to enable further financial support for trading businesses with a turnover of less than £10m.
  • Commencement of phased relaxation of lockdown rules with businesses and workers for certain types of business able to operate from 25 April 2020, if public health requirements on social distancing and hygiene are met.
  • There is a weekly national ‘clap’ for the National Health Service, at 20.00 (GMT), every Thursday evening. Individuals and families stand outside their homes (preserving social distancing), or at their open windows and clap to show appreciation for healthcare workers and carers.

Isle of Man

  • As of 6am on Friday 27 March 2020, the Isle of Man’s borders closed to passengers, until further notice. The only exception is the return of Manx residents from overseas. 
  • To help viable businesses that have been affected to retain staff, a wage support package is available for 12 weeks, to provide businesses with a flat rate contribution of £280 per week for every full-time equivalent staff member.   
  • ‘Business Adaptation Grant’ – £3.5m is being made available to support businesses looking to evolve. 50% of any costs will be met, that can be shown to be involved in the adaptation of a business, as a result of changing market conditions due to the Coronavirus outbreak – the business must also have a viable business plan going forward
  • A range of support measure are available from Manx Utilities Authority, Manx Telecom, Sure, and Manx Gas, for individuals who are being affected.

 Malta

  • A two-month deferral for businesses, including the self-employed, to pay: Provisional Tax, VAT and National Insurance Contribution on salaries.
  • €900 million has been provided in bank guarantees, for companies requesting operational loans. These loans will enjoy low interest rates and longer repayment periods.
  • Employers and self-employed individuals investing in technology that enables working from home, can claim to partially cover the costs of this investment.
  • Full-time employees of businesses and self-employed individuals, operating in sectors that have suffered drastically due to the COVID-19 pandemic, will be entitled to up to five days’ salary a month, equivalent to a maximum €800 per month, to be financed by the Maltese Government. Part-time employees will be eligible to a maximum €500 per month.
  • The government has increase rent subsidies for individuals whose jobs have been terminated.
  • Companies that operate in adversely affected sectors and have suffered 25% loss in turnover will be entitled to one days’ salary per week equivalent to €160 per month per member of staff.

 Portugal

  • The Portuguese Government declared a State of Emergency on March 18 and it is currently in place until 2 May 2020.
  • A mandatory restriction on movement and measures relating to social isolation have been put in place.
  • Commercial passenger flights are not permitted during the State of Emergency, except for emergency or repatriation purposes. Individuals cannot cross between Spain and Portugal for leisure or tourist purposes.
  • As at the end of April, Social Security Lay-off Payments have been approved for over 40,000 companies. The average amount to be paid is €422 per employee per month.

St Kitts & Nevis

  • St Kitts and Nevis closed their borders and imposed a State of Emergency from Saturday 28th March 2020 for a period of three weeks.  However, this was then extended for a further period of six months from the date of expiry of the first State of Emergency.  
  • During this period citizens and residents have been subject to various degrees of curfew.  For the first three weeks, emergency regulations meant that there was a 24-hour home curfew, where households were mandated to stay within their own dwellings. During this time, a short period, twice a week was assigned for essential shopping and banking.  During this period, there was extensive business disruption, such as the Companies Registry and most Government being closed.
  • During the second State of Emergency, curfew conditions have so far been lightened.  Citizens and residents now have four days per week in which they may leave their dwellings during the day. The nighttime curfew remains in place seven nights per week.
  • Business disruption is now lessening, Government Departments are now opening and operating on a limited basis. 

 Switzerland

  • On March 25 the Swiss Government extended entry restrictions to all Schengen and non-Schengen states except Swiss nationals and foreigners with Swiss permits.
  • Salaries for the month of March are guaranteed, although in some cases there might be delays.
  • In total the government has set aside around CHF62 billion to support the economy. On April 3, it announced it was doubling the amount of emergency loans available to struggling companies to CHF40 billion ($41 billion). It has since presented a plan to offer additional loans of up to CHF154 million for start-up companies.
  • A grant to cover 80% of wages (up to CHF 12,350 per month), for employees who are not working due to the impact of Coronavirus but are retained on the payroll. This will be backdated to 1stMarch 2020 and will be open for a maximum one-year period.
  • The self-employed will be assisted for 2 months. They will receive CHF 5,880 maximum per month, backdated to 17 March 2020.
  • Since the beginning of the crisis, Switzerland has increased testing for the coronavirus to achieve one of the highest per capita rates.
  • A three-step easing of emergency lockdown measures began on April 27. With protection measures for staff and customers, hair stylists, beauticians and physiotherapists can re-open their doors, along with florists and garden/DIY stores. Dental and medical centres can offer non-urgent care. Bars, restaurants, museums, libraries and markets will reopen on 11 May.
  • The ban on gatherings of more than five people remains in place.

UK

  • As of the end of April, the British Government has announced that a phased and gradual easing of lockdown restrictions will take place, starting May 2020.
  • A grant to cover 80% of wages (up to £2,500 per month), for employees who are not working due to the impact of Coronavirus but are retained on the payroll. This will be backdated to 1stMarch 2020 and was open initially for a three-month period, now extended to 30th June 2020.
  • No business will have to pay any VAT from the third week in March 2020, until mid-June. The payment will be deferred, and businesses will have until the end of the 2020-21 tax year to settle any liabilities that have accumulated during the deferral period.
  • The Coronavirus Business Interruption Loan Scheme (CBILS) was launched on Monday 23rdMarch 2020. Loans will be delivered by lenders that partner with the British Business Bank, including all of the major banks. The lender will receive a guarantee of 80% of the loan amount from the government. The loan will be interest free for the first 12 months.
  • No ‘rates’ will payable to local authorities for the 2020-2021 tax year, for any business in the retail, hospitality or leisure sectors.
  • There is a weekly national ‘clap’ for the National Health Service, at 20.00 (GMT), every Thursday evening. Individuals and families stand outside their homes (preserving social distancing), or at their open windows and clap to show appreciation for healthcare workers and carers. It is a moving experience.

 Assistance

All of the Dixcart offices are fully operational.

Each office can provide you with an update on the status in their particular jurisdiction and can give advice in terms of applying for appropriate financial assistance. Please speak to you usual Dixcart contact or alternatively email: advice@dixcart.com.

Guernsey

UK Inheritance Tax – Appropriate Tax Planning Steps for UK and Non-UK Residents

Background

UK inheritance tax should be carefully considered, and appropriate tax planning should be taken by all individuals who have assets in the UK, not just those that live in the UK.

What is UK Inheritance Tax? 

On death, UK inheritance tax (IHT) is at a rate of 40%.

IHT is a tax on money or assets held at death, and on some gifts made during a lifetime (most importantly those gifts made less than 7 years prior to death). 

A certain amount can however be passed on tax-free. This is known as the ‘tax-free allowance’ or the ‘nil rate band’.  

Each individual has a tax-free inheritance tax allowance of £325,000. This allowance has remained the same since 2010-11. In the case of a married couple this tax-free allowance can be passed onto a surviving spouse, which means that, following their death, the estate will enjoy a £650,000 tax free allowance.

Additional Nil Rate Allowance

Individuals who died after 6 April 2017, with an estate value greater than their tax-free allowance of £325,000, due to the value of their home being passed to their children, may pass on an additional tax-free allowance. In tax year 2020 – 2021 this additional amount is £175,000 per estate.

Lifetime Gifts

Gifts made more than seven years prior to death, without the retention of a benefit (such as continuing to live in a gifted property rent free), will not be included in the deceased’s estate. Any gifts made within seven years will, in most circumstances, form part of the estate.

Gift Allowances

There are certain gift allowances that can be used year on year, where the seven-year rule is not applicable. The six key gift options are detailed below. These options, if planned for properly across several years, can reduce the inheritance tax liability considerably.

Dixcart recommends that a record of all gifts made is kept with the Will.

  • Give away money each year – each year an individual can give away up to £3,000. This gift can be to anybody or split across any number of people.
  • Wedding presents – parents can each give a wedding gift of up to £5,000 to their children. This gift allowance must be made before the ceremony.
  • Unlimited small gifts – an unlimited number of gifts of up to £250 each in any tax year can be made as long as they are to different people.
  • Charitable donations – charitable gifts are free from inheritance tax. If at least one-tenth of net wealth (calculated as a percentage of the estate, on death) is donated, the Government has the discretion to cut an individual’s inheritance tax rate from 40% to 36%.
  • Contributing to living costs – money used to support an elderly person, an ex-spouse, and/or a child under the age of 18 or in full-time education is not considered to be within the deceased’s estate on death, whatever amounts have been paid.
  • Payments from surplus income – an individual with surplus income should not ignore the opportunities provided by this provision. If the criteria, detailed below are met, the seven-year period is not relevant:
  1. it was made as part of the usual expenditure of the transferor; and
  2. the transferor retains sufficient income to maintain his usual standard of living, having taken account of all the income transfers that form part of his usual expenditure.

Does UK Inheritance Tax Apply to a Non-UK Tax Resident? 

The UK inheritance rules are different depending on a person’s domicile.  The concept of domicile is based on a complex set of laws (outside the scope of this note). However, as a broad overview, an individual is domiciled where they consider themselves to be indefinitely settled and “at home”. There may also be estate or inheritance tax liabilities in other jurisdictions.  Therefore, local advice should be taken in any jurisdiction where taxes might be chargeable. 

For UK IHT purposes, there are three categories of domicile:  

  • UK Domiciled – the worldwide assets of the individual will be subject to UK inheritance tax, whether the individual is UK resident or not.
  • Non-UK Domiciled (“non-dom”) – the assets of this individual, situated in the UK, will be subject to UK inheritance tax irrespective of whether the individual is UK resident or not.
  • Deemed UK Domiciled – where an individual is a non-dom but has lived in the UK in 15 out of the previous 20 tax years (prior to their death). According to UK inheritance tax rules he is considered to be UK domiciled and his worldwide assets will therefore be subject to inheritance tax on his death. The rules are slightly different if the individual has fulfilled this requirement but is no longer resident at the date of their death although IHT may well still be chargeable in this instance. 

When an individual moves to the UK, dependent on all of the circumstances of the move and the new life adopted in the UK, there may be an argument that an individual has immediately become UK domiciled.  Even if this is not the situation, once an individual has lived in the UK for 15 years, he/she will be deemed domiciled for UK inheritance tax.

As is often the case, a complex set of laws is best considered through explanatory examples. 

Tax Planning Opportunities for Non-UK Tax Residents 

Tom is an Australian citizen; he was born in Australia and has always lived and worked there. He is a UK non-dom and has a net worth of £5m.  He is divorced with one child aged 19. 

Tom’s child, Harry, chooses to study at a university in the UK and Tom is aware that UK real estate has over the last few years shown some good returns. 

Tom purchases a property in his sole name, mortgage free, near to his son’s university in the UK for £500,000 for his child to live in while studying in the UK. 

Planning Opportunity 1: Property Ownership 

Even though Tom is not UK tax resident and is non-dom, any assets that he has in his own name situated in the UK are subject to UK inheritance tax on his death.  If Tom dies while owning the property, leaving his whole estate to Harry, there will be a tax liability of £70,000 on his death.  This is 40% of the value of the property above the £325,000 nil rate band, assuming that Tom has no other UK assets. 

  • Tom could have considered purchasing the property jointly in the name of himself and his son. Had he done so; on his death the value of his UK asset would have been £250,000.  This is below the nil rate band threshold and therefore no UK inheritance tax would be payable. 

Planning Opportunity 2: Remittance of Money 

Tom is getting close to retirement and decides to move to the UK to be with his child, who has settled in the UK after finishing university. He sells his Australian home but keeps his Australian bank accounts and other investments. He sends £1m over to a newly opened UK bank account before moving to the UK, to live on once in the UK. 

  • Tom would be better advised to remit these funds to a tax neutral, sterling jurisdiction, such as Guernsey or the Isle of Man. If Tom was to die before becoming domiciled for UK inheritance tax purposes, these funds would be outside the inheritance tax net.
  • By structuring such an account correctly, Tom could bring capital only to the UK and thereby avoid any obligation to pay income tax. Please contact Dixcart to take advice on this topic, prior to moving to the UK.

Planning Opportunity 3: Use of a Trust 

Tom dies having lived in the UK for 25 years of his retirement.  He leaves his whole estate to his son.  As Tom was deemed domiciled at death, his entire worldwide estate, not just his UK situated assets, will be subject to UK inheritance tax at 40%, except for the nil rate band at the time of his death.  If his estate is still worth £5m, the inheritance tax payable will be £1.87m at current rates and nil rate band. 

  • Before Tom became deemed domiciled in the UK, he could have settled the non-UK assets he still had into a non-UK resident discretionary trust (traditionally in a tax neutral jurisdiction). This would place those assets outside his UK estate for UK inheritance tax purposes. Following Tom’s death, the trustees could distribute the trust assets to Harry; achieving the same results as a will but passing on the assets free from inheritance tax liabilities. 

Planning Opportunity 4: Distribution of Assets from a Trust 

Following Tom’s death, his son decides to leave the UK for New Zealand, having lived in the UK for the previous 30 years.  He sells all of his properties and other assets and deposits the proceeds in a New Zealand bank account. He dies within a year of moving to New Zealand. 

As Harry only left the UK a year prior to his death, he will still have been UK resident for more than 15 of the previous 20 years.  He will therefore still be considered UK deemed-domiciled at death and his entire estate would be taxable to UK inheritance tax at 40%, even though he had no assets in the UK on his death. 

  • Rather than the trustees distributing the assets to Harry on his father’s death, it might have been prudent for the trustees to only distribute assets as needed by Harry over time. This would mean that the entire estate would not be in his name on his death and would not therefore be subject to inheritance tax in the UK.  The assets would remain in the trust and be available for future generations of the family. Advice should be taken on distributions from a trust to ensure that these are as tax efficient as possible. 

Summary and Additional Information

UK inheritance tax is a complex issue. Careful consideration and advice need to be taken regarding the best manner to structure the holding of UK assets. 

It is important for both UK and non-UK tax residents to take advice, as early as possible, and this should be reviewed regularly to allow for any changes in the law and/or family circumstances. A number of important tax planning steps can be put in place, in particular for non-UK tax residents.

If you require additional information on this topic, please contact Paul Webb or Peter Robertson at the Dixcart office in the UK: advice.uk@dixcart.com.

Portugal 1

What Does Portugal Offer as a Family Office Location?

There are many factors to take into consideration when reviewing the best location for a Family Office. These factors naturally differ depending on the particular situation. Dixcart are well-positioned to offer advice and insight into determining which jurisdiction is best suited to meet specific family needs. 

Portugal is particularly well suited, being an EU member country, offering a beneficical mix of corporate and personal income tax advantages, which are touched on briefly below.  

General Reasons 

  • Portugal is a very safe country that is well established within the EU and under relevant EU Laws.
  • Portugal has a well-qualified and skilled labour force, with relatively low labour costs, within the EU. 

Tax Reasons 

  • Zero tax is payable on inherited wealth and on gifts and donations, in Portugal.
  • Portugal does not levy wealth tax, only income is taxed. This therefore reduces the potential tax burden on accumulated wealth, namely on assets with capitalised capital gains.
  • Gratuitous transfers of property, in life or upon death, between spouses, descendants and ascendants is covered by an exemption from Stamp Tax (10% tax rate), regardless of the amount and/or the type of taxpayer. This exemption applies to; shares, bonds, cash and immovable property (although the latter is subject to a 0.8% tax rate when transfers are made ‘in life’).
  • Portuguese companies, incorporated within the EU approved Madeira International Business Centre (IBC), benefit from a 5% corporate tax rate on international income. 

The Non-Habitual Tax Regime (NHR)

  • This regime provides several exemptions on foreign-sourced investment income, namely on interest and dividend income. This exemption, combined with the extensive Portuguese Double Tax Treaty network, is proving beneficial to multinational family office structures.
  • A special 10% flat tax rate on pension income exists, including third-pillar pension schemes (with capital or lump sum payments).
  • Reduced tax rates for certain Portuguese income streams are available, mainly employment and self-employment income derived from so-called high value-added activities. 

The NHR is available to individuals, moving to Portugal, who have not been tax resident there for the preceding five years. It is available for up to ten years.

A Good Double Tax Treaty Network 

  • The extensive Portuguese Double Tax Treaty network allows for withholding tax reductions from foreign-sourced dividends, interest and royalties, as well as enabling the NHR exemptions to operate more efficiently. 

An Attractive Participation Exemption Tax Regime 

  • A general participation exemption regime allows for withholding tax exemptions on dividends between related companies, with low thresholds facilitating ‘free’ equity flow between family-owned multinational structures. 

Trust Structures and the Portuguese Tax System 

Portugal, being a civil law jurisdiction, does not have a domestic legal trust regime. Trust structures held within a Family Office, subsequently established in Portugal, may require careful review and/or restructuring. 

Matters such as the location and nature of the trust, position of the settlor, trustee and beneficiary, revocability of the trust, and powers of the settlor regarding the nomination of trustees and the liquidation of the trust, must all be thoroughly analysed. 

Dixcart Portugal, being part of a group with a strong presence in a number of jurisdictions, can offer extensive experience and knowledge regarding ‘trust’ jurisdictions, having offices in a number of them. We are therefore uniquely positioned to advise foreigners moving to Portugal regarding the implementation of trust structures. 

Summary and Additional Information

Portugal offers a number of potential advantages for the location of a Family Office, in particular if the owners of the wealth take advantage of the Portuguese Golden Visa, move to Portugal and benefit from the NHR regime. 

We strongly recommend that professional advice should be taken. 

Dixcart are well placed to offer such professional advice, with experienced accountants and lawyers based at the Dixcart office in Portugal and other professionals, across the Group, with extensive expertise in the area of Trusts.

Please speak to your usual contact or Catarina Sardinha in Portugal: advice.portugal@dixcart.com.

Malta-nomad-residence-permit

Additional Reasons to Consider Malta for Yachting Solutions

Malta: Recent History – the Marine Sector

Over the past decade, Malta has consolidated its status as an international Mediterranean centre of maritime excellence. Currently Malta has the largest shipping register in Europe and the sixth largest in the world. In addition, Malta has become a world leader for commercial yacht registration.

As well as its strategic position, in the centre of the Mediterranean, one of the main contributors to Malta’s success is the business-friendly environment adopted by the Maltese authorities. The authorities are approachable and flexible in their practices, while at the same time meticulously follow a rigid framework of guidelines and regulations, and this has created a cutting edge for Malta within this sector.

Additional Benefits in Terms of VAT – Maltese Registered Yachts

The Malta Authorities recently announced further attractive measures, which have already been put in place, regarding the importation of yachts to Malta.

Yachts, intended for commercial use, can be imported into the EU via Malta, for relevant VAT and customs procedures to be undertaken.  Subsequently, the yacht can then be chartered, and can sail freely within EU waters.

Apart from the already inherent attraction for yachts to be imported into Malta, due to the low VAT rate of 18%, yachts used for commercial chartering can benefit from VAT deferral.

The deferral mechanism has now been made more attractive as follows:

  • Deferment of VAT on the importation of commercial yachts, by Maltese owning entities having a Maltese VAT registration, without the requirement for the importing entity to set up a bank guarantee;
  • Deferment of VAT on importation of commercial yachts, by EU owning entities having a Maltese VAT registration, provided that the company appoints a VAT agent in Malta, without the requirement for the importing entity to set up a bank guarantee;
  • Deferment of VAT on importation of commercial yachts by non–EU owning entities, as long as the importing entity sets up a bank guarantee for VAT, equivalent to 0.75% of the value of the yacht, capped at €1 million.

Dixcart: Yacht Registration Experience 

Our office in Malta has extensive experience and can assist clients with all of the commercial aspects in relation to yacht ownership:

  • Yacht ownership structures
  • Importation of yachts
  • Flag registrations
  • Deferment applications
  • Crew payrolls
  • Day-to-day administration
  • VAT registration in multiple jurisdictions
  • Resident agent services
  • Tax and VAT advice
  • Accounting and secretarial services

Assistance 

The Dixcart office in Malta has professionals who can assist your business with all aspects of yacht registration in Malta and can help ensure that you take advantage of the specific VAT deferment, applicable to your circumstances. Please speak to your usual Dixcart contact, or alternatively, please email: advice.malta@dixcart.com.