Cyprus

New Double Taxation Treaty: Cyprus and The Netherlands

Background

On 1st June 2021, the Republic of Cyprus and the Netherlands signed, for the first time ever for the two countries, a Double Taxation Treaty (DTT). This DTT relates to tax on income earned in Cyprus and/or in the Netherlands, and the prevention of tax evasion and avoidance.  

The Treaty will become effective, the year following the year in which the ratification process in both countries is completed.  

The Treaty Covers the Following Withholding Taxes

  1. Dividends

There is no withholding tax (WHT) on dividends, if the dividends are beneficially owned by:

  • a recipient that holds at least 5% of the capital of the company paying the dividends for at least one year, OR
  • a recipient that has a recognised pension fund.  

The WHT in all other cases shall not exceed 15% of the gross amount of dividends.

2. Interest

There is no withholding tax on payments of interest, provided that the recipient is the beneficial owner of the income.

3. Royalties

There is no withholding tax on payments of royalties, provided that the recipient is the beneficial owner of the income.

4. Capital Gains

Capital gains arising from the disposal of shares are taxed exclusively in the country of residence .

The exception to this is capital gains arising from the disposal of shares or comparable interests, deriving more than 50% of their value directly or indirectly from immovable property situated in the other Contracting State. Such capital gains may be taxed in that other State. Certain exemptions apply.

The Principal Purpose Test (PPT)

BEPS (Base Erosion and Profit Shifting (BEPS) Package), introduced the principal purpose test (PPT), as one of the Minimum Standards to be implemented by the countries participating in the BEPS Inclusive Framework. BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity.

The PPT aims to deny tax treaty benefits in the case of treaty abuse.

Each case or situation, will be submitted to the PPT and the authorities will decide whether the benefits arising from the DTT can be granted or not.

Additional Information

If you require additional information as to how this new DTT might be of benefit, please contact the Dixcart office in Cyprus: advice.cyprus@dixcart.com. Alternatively, please contact your usual Dixcart contact.

Importance of having a will

UK Statutory Residence Test – Don’t Get It Wrong!

Background

“Don’t worry, I never spend more than 90 days in the UK”.

This test for UK tax residence was replaced with a statutory residence test, but it is still commonly believed that the above statement is correct.

It is not and, whilst in many cases, the test might result in an individual triggering UK tax residency without expecting it, in many other circumstances, they might have been limiting themselves to the wrong number of days.

For anyone renting or buying property in the UK and starting to spend more and more time in the UK, they should seek advice to be clear what their day pattern in the UK should or can be.

This note considers a couple who have not previously been tax resident in the UK.  For more information about correctly losing UK tax residence, please see – Tax Residence Planning Opportunities – Case Studies and How To Get it Right. It also does not consider immigration but more information on how Dixcart can assist with UK Immigration can be found here – Dixcart Immigration.

Case Study

Mr Overseas has lived in Europe his whole life.  Having sold his successful overseas business a number of years ago, he took early retirement. He is not married.

Having retired, he wants to spend more time in the UK as he has nephews and nieces whom he enjoys seeing more of.

He also feels that the UK real estate market might be a good investment, so he purchases an apartment that he lives in when he is here.  It is empty the rest of the time.

Thinking he is doing some clever tax planning, he chooses to limit his days in the UK to 85-89 days, because everyone tells him that if he stays in the UK for fewer than 90 days, he won’t become tax resident. 

Mr O Should Take Some Advice!

The part of the UK statutory resident test (Test) relevant to him is part 3, the Connecting Factors.  In the first year he starts spending time in the UK, he does not have a tax resident family member, he has not exceeded 90 days in the UK in either of the two previous tax years, and he does not work in the UK for more than 40 days each tax year.  He does have available accommodation though, so he has just one Connecting Factor.  In the first year, he could spend up to 182 days in the UK without becoming UK tax resident, double what he had originally thought.

In the second year, he would still have available accommodation but also now would have spent more than 90 days in one of the previous two tax years.  His day limit is now 120 days, still more than the “90 days rule” he had been told about.

Once he discovers this, he starts spending up to 115-119 days in the UK

However – The Rules Need Constant Review

As Mr O is now spending more time in the UK, he meets someone special and gets married.  He also gets bored of early retirement and starts a consulting role for most of the days he is in the UK.

Thinking that he has now taken his UK tax advice about residence, he doesn’t think to check it again.

Mr O now has a tax resident spouse, he works for more than 40 days in the UK, he has spent more than 90 days in the UK in at least one of the last two previous tax years and he still has available accommodation.

His tax circumstances have changed dramatically and, in fact, if he wants to still remain non-resident in the UK, his day count would be capped at 45 days!

There is still planning to do though as he might be able to claim the remittance basis as a non-domiciled individual, and, like the residence rules, “Don’t Get it Wrong!” – UK Remittance Basis of Taxation – Don’t Get it Wrong.

Summary and Additional Information

Whilst Mr O’s circumstances shifted during the course of this case study, it is interesting to note that at no point in time was Mr O’s day count cap at 90 days, despite the common belief that those are the rules for UK residence.

The remittance basis of taxation, which is available for non-UK domiciled individuals, can be a very attractive and tax efficient position, but it is crucial that it is properly planned for and properly claimed at the right time. 

If you require additional information on this topic, further guidance regarding your possible entitlement to use the UK remittance basis of taxation, and how to properly claim it, please contact your usual Dixcart adviser in the UK office: advice.uk@dixcart.com.

Dixcart UK, is a combined accounting, legal, tax and immigration firm.  We are well placed to provide these services to international groups and families with members in the UK. The combined expertise that we provide, from one building, means that we work efficiently and coordinate a variety of professional advisers, which is key for families and businesses with cross-border activities.

By working as one professional team, the information we obtain from providing one service, can be shared appropriately with other members of the team, so that you do not need to have the same conversation twice!  We are ideally placed to assist in situations as detailed in the case study above. We can provide cost effective individual and company administration services and also offer in-house expertise to provide assistance with more complex legal and tax matters.

Green Finance Investing and the Guernsey Green Fund

‘ESG’ and Green Finance Investing – the Guernsey Green Fund

Environmental, social and governance (‘ESG’) and Green Finance investing have risen to the top of regulatory and investor agendas, as the strong momentum to act as better-engaged, more pro-active custodians of global ESG change continues.

This change is being delivered through the financial services landscape.

Delivery, Strategy and Expertise

Institutional, family office and sophisticated private investor strategies are evolving to include greater elements of ESG investment – but how are those investment opportunities being delivered?

Private and institutional investment houses and family offices continue to create expert advisory teams to guide their ESG strategies and to offer these strategies and  expertise to a wider population of investors, through new and existing fund structures.

For new investor groups, be they institutional, family office or other, looking to directly control and deliver their own bespoke ESG strategies, a fund structure is the globally accepted norm for delivery.

The Guernsey Green Fund Credibility

In 2018 the Guernsey Financial Services (‘GFSC’), published the Guernsey Green Fund rules, creating the world’s first regulated green investment fund product.

The objective of the Guernsey Green Fund is to provide a platform upon which investments into various green initiatives can be made.

The Guernsey Green Fund enhances investor access to the green investment space by providing a trusted and transparent product that contributes to the internationally agreed objectives of mitigating environmental damage and climate change.

Investors in a Guernsey Green Fund are able to rely on the Guernsey Green Fund designation, provided through compliance with the Guernsey Green Fund Rules, to represent a scheme that meets strict eligibility criteria for green investing and has the objective of a net positive impact on the planet’s environment.

Delivering a Guernsey Green Fund

Any class of Guernsey fund can notify of its intention to be designated a Guernsey Green Fund; whether registered or authorised, open-ended or closed-ended, providing it meets the eligibility criteria.

The GFSC will designate Guernsey Green Funds on its website and authorise the use of the Guernsey Green Fund logo to be used on its various marketing and information materials (in accordance with the GFSC’s guidelines on logo use). An appropriate fund can therefore clearly display its Guernsey Green Fund designation and compliance with the Guernsey Green Fund Rules.

The GFSC is currently in the process of registering the Guernsey Green Fund logo as a trade-mark with Guernsey’s Intellectual Property Office website.

Dixcart Fund Services in Guernsey

We see the lighter-touch, closed-ended, Guernsey Private Investment Fund structures as being particularly attractive to family offices and managers of sophisticated private investor groups, seeking to take direct control of and deliver bespoke ESG investment strategies.

We work directly with expert legal advisers and investment managers to deliver, manage and administer fund structures.

Additional Information

For further information on Dixcart Fund Services in Guernsey and where to start, please contact Bruce Watterson or Steve de Jersey, in the Dixcart office in Guernsey: advice.guernsey@dixcart.com.

Portugal

Clarification of the Madeira International Business Centre Regime

Extension of the Deadline for New Licences

On the April 20th 2021, the Portuguese Tax Benefits Code was changed, including Article 36-A, which regulates the regime applicable to licensed entities in the Madeira Free Trade Zone. 

The main impact of this law is the extension of the deadline to apply for new licences to operate under the Madeira Free Trade Zone (‘MIBC’), until the end of the year 2021, allowing companies to benefit from the tax advantages until the end of 2027.

Additional Clarification

Additionally, this law also clarified several concepts and questions that were not clear in the previous legislation, namely:

  • The jobs to be created and maintained in the company, must be filled by full-time workers (or by two or more part-time workers who together represent at least one full-time worker, in terms of annual work units).
  •  The jobs to be created and maintained in the company, must be filled by workers with tax residence in the Autonomous Region of Madeira, if not residing, they must exercise their activity there or be a crew member of a ship/ vessel registered in the International Shipping Register of Madeira.
  •  Only income generated/realized in the Autonomous Region of Madeira and through a business structure appropriate to the activity in the Autonomous Region of Madeira, can benefit from the 5% of Corporate Income Tax (CIT) rate.

Dixcart Expertise

We at Dixcart have more than 30 years advising businesses and companies regrading establishment and management in Madeira, always following strict policies of governance and compliance.

Tax Advantages Available to Companies Operating in the MIBC

Entities operating within the scope of the MIBC benefit from one of the most advantageous tax regimes in the European Union, enjoying all of the following:

  • Reduced corporate income tax rate: 5% (until 2027);
  • Participation exemption regime applicable internationally to dividends, reserves, capital gains and capital losses;
  • Exemption from withholding tax on the distribution of dividends to shareholders;
  • No withholding tax on royalties, services or interest paid to third parties;
  • Tax credit for international double taxation, both legal and economic;
  • Capital gains tax exemption for the sale of shares in Madeira companies;
  • Capital gains tax exemption on the sale of subsidiary companies, under the conditions of the participation exemption;
  • No withholding tax on dividends, interest and royalties received from associated companies from the EU, providing that the requirements of the parent-subsidiary directive or the interest and royalties directive have been met;
  • 80% reduction on the rates of; stamp duty, Real Estate Transfer Tax (IMT), Municipal Property Tax (IMI), regional and municipal surcharge, notary and registration fees;

Criteria

MIBC registered companies, must meet ONE of the following eligibility requirements:

  1. Create 1 to 5 jobs, during the first 6 months of activity, and make a minimum investment of €75,000 in the acquisition of tangible or intangible fixed assets during the 2 first years of activity; OR
  2. Create 6 jobs or more, during the first 6 months of activity.

Tax benefits are limited to the following ceiling amounts, depending on the number of full-time employees residing or carrying out their activity in Madeira:

If the tax base exceeds the limit detailed above, the excess will be taxed at the 14.7% rate (Madeira general corporate tax rate).

The tax benefits are also subject to one of the following maximum annual thresholds:

  • 15.1% of the turnover obtained in Madeira; OR
  • 20.1% of the gross value added generated in Madeira; OR
  • 30.1% of labour costs borne in Madeira.

Summary and Additional Information

MIBCs offer a number of attractive advantages and certainty has been established in terms of formation of these companies until at least the end of 2021.

If you would like additional information regrading MIBCs, please contact Catarina Sardinha in the Dixcart office in Madeira: advice.portugal@dixcart.com

Dixcart Malta Managing Director – Co-opted to Malta Chamber’s Yachting Services Executive Committee

Jonathan Vassallo has been co-opted to join the Executive Committee of the Yachting Services Business Section, within the Malta Chamber.

Jonathan Vassallo

This section represents one of the biggest categories within the Chamber in terms of members.

During the past couple of years the Chamber has been dealing with the challenges faced by the industry. It has continued to work closely with the authorities to propose new, and re-visit existing practical applications and procedures, designed to have a positive impact on the yachting industry in Malta.

This is an ongoing exercise to ensure that this yachting sector remains dynamic and at the forefront of the industry internationally. A number of procedures and guidelines have been adopted and fine-tuned, and this has helped to ensure that Malta remains an attractive jurisdiction for yacht owners and operators.

Jonathan is keen to be part of this team and use his experience to contribute to the Executive Committee for the benefit of this sector within the Malta economy.

For the next two years, the key objective of the Committee is to continue to offer a robust platform for the yachting industry and to collaborate with the authorities and stakeholders to improve Malta’s already strong position within the yachting world.

You can contact Jonathan, in the Dixcart Malta office at: advice.malta@dixcart.com

Malta-nomad-residence-permit

The Malta Nomad Residence Permit – Legally Reside in Malta Whilst Maintaining a Job in Another Country

Introduction to the Malta Nomad Residence Permit

The new Malta Nomad Residence Permit, enables individuals to maintain their current job in another country, whilst they legally reside in Malta.

Malta Nomad Residence Permit – Eligibility for Third Country Individuals

To be eligible for this Permit, an individual must be able to work remotely and independently of his/her location, and needs to use telecommunication technologies.

Malta has already welcomed a number of EU digital nomads. This community of ‘nomads’, enjoys Malta’s climate and lifestyle, and have already begun to interact with people with similar ideas, to add value to the community.

The Nomad Residence Permit in Malta opens up this opportunity to third country citizens, who would usually need a visa to travel to Malta. This permit lasts for one year and can be renewed at the discretion of Residency Malta, as long as the individual still meets the criteria.

If the third-country applicant for the digital nomad permit wants to stay less than a year in Malta, he/she will receive a National Visa for the duration of the stay, rather than a residence card.

Criteria

Applicants for the Nomad Residence Permit must:

  1. Prove they can work remotely using telecommunication technologies.
  2. Be third country nationals.
  3. Prove they work in any of the following categories:
  4. Work for an employer registered in a foreign country and have a contract for this work, or
  5. Perform business activities for a company registered in a foreign country, and be a partner/shareholder of said company, or
  6. Offer freelance or consulting services, mainly to customers whose permanent establishment is in a foreign country, and have supporting contracts to verify this.
  7. Earn a monthly income of €2,700 gross of tax. If there are additional family members, they will each have to satisfy the income requirements as specified by the Agency Policy.

In addition to the above, applicants must also:

  1. Possess a valid travel document.
  2. Have health insurance, which covers all risks in Malta.
  3. Have a valid contract of property rental or property purchase.
  4. Pass a background verification check.

Application Process

  • The applicant must complete all of the documents required by the Residency Malta Agency.
  • After submitting all of the documents digitally, the individual will receive instructions for payment of a €300 administrative fee, for each applicant.
  • The application will then be reviewed by the Agency and other Maltese Authorities, who will contact the individual by email, when the process is complete.
  • Finally, the applicant will need to submit biometric data for the Nomad Residence Permit or National Visa, and the process will then be concluded.

Additional Information

If you require any further information regarding the Nomad Residence Permit, please contact Jonathan Vassallo or Henno Kotze at the Dixcart office in Malta: advice.malta@dixcart.com, or speak to your usual Dixcart contact.

Dixcart Management Malta Limited Licence Number: AKM-DIXC-22

Malta Funds – What Are The Benefits?

Background

Malta has long been an established choice for fund managers seeking to set-up in a reputable EU jurisdiction whilst being cost-effective.

What Type of Funds Does Malta Offer?

Since Malta became an EU member in 2004, it has incorporated a number of EU fund regimes, most notably; the ‘Alternative Investment Fund (AIF)’, the ‘Undertakings for the Collective Investment in Transferable Securities (UCITS)’ regime, and the ‘Professional Investor Fund (PIF)’.

In 2016 Malta also introduced a ‘Notified Alternative Investment Fund (NAIF)’, within ten business days of completed notification documentation being filed, the Malta Financial Services Authority (MFSA), will include the NAIF on its online list of notified AIFs of good standing. Such a fund remains fully EU compliant and also benefits from EU passporting rights.

EU Collective Investment Schemes

A series of European Union Directives allow collective investment schemes to operate freely throughout the EU, on the basis of a single authorisation from one member state

Characteristics of these EU regulated funds include:

  • A framework for cross-border mergers between all types of EU regulated funds, allowed and recognised by each member state.
  • Cross-border master-feeder structures.
  • Management company passport, which allows an EU regulated fund established in one EU member state to be managed by a management company in another member state.

Dixcart Malta Fund Licence

The Dixcart office in Malta holds a fund licence and can therefore provide a comprehensive range of services including; fund administration, accounting and shareholder reporting, corporate secretarial services, shareholder services and valuations.

The Benefits of Establishing a Fund in Malta

A key benefit of using Malta as a jurisdiction for the establishment of a fund is the cost savings. The fees for establishing a fund in Malta and for fund administration services are considerably lower than in many other jurisdictions. 

The advantages offered by Malta include: 

  • An EU Member State since 2004
  • A highly reputable financial services centre, Malta was placed among the top three financial centres in the Global Financial Centres Index
  • Single regulator for Banking, Securities and Insurance – highly accessible and robust
  • Regulated quality global service providers in all areas
  • Qualified professionals
  • Lower operational costs than other European jurisdictions
  • Quick and simple set-up processes
  • Flexible investment structures (SICAV’s, trusts, partnerships etc.)
  • Multilingual and professional work-force – an English-speaking country with professionals usually speaking four languages
  • Fund listing on the Malta Stock Exchange
  • Possibility of creation of umbrella funds
  • Re-domiciliation regulations are in place
  • Possibility of using foreign fund managers and custodians
  • The most competitive tax structure within the EU, yet fully OECD compliant
  • An excellent network of double taxation agreements
  • Part of the Eurozone

What are the Tax Advantages of Establishing a Fund in Malta?

Malta has a favourable tax regime and a comprehensive Double Tax Treaty network.  English is the official business language, and all laws and regulations are published in English.

Funds in Malta enjoy a number of specific tax advantages, including:

  • No stamp duty on the issue or transfer of shares.
  • No tax on the net asset value of the scheme.
  • No withholding tax on dividends paid to non-residents.
  • No taxation on capital gains on the sale of shares or units by non-residents.
  • No taxation on capital gains on the sale of shares or units by residents provided such shares/units are listed on the Malta Stock Exchange.
  • Non prescribed funds enjoy an important exemption, which applies to the income and gains of the fund.

Summary

Maltese funds are popular due to their flexibility and the tax efficient features that they offer. Typical UCITS funds include equity funds, bond funds, money market funds and absolute return funds.

Additional Information

If you require any further information regarding establishing a fund in Malta, please speak to your usual Dixcart contact or to Jonathan Vassallo at the Dixcart office in Malta: advice.malta@dixcart.com

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