Residence, Citizenship and Relocation Checklist

A move of residence can provide opportunities to review your affairs and holding structures. There may well be potential to implement wealth preservation and inheritance provisions, and advantageous strategic investment structures.

Every jurisdiction is different. There will always be some specific items to consider before relocating and taking bespoke professional advice at an early stage will always be the right thing to do. Carefully considered pre-exit and pre-arrival planning is essential to ensure a smooth and efficient move.

Please see below a comprehensive checklist that every individual and their family need to consider before relocating.

PRIOR TO ARRIVAL IN NEW COUNTRY

Consider Practical Issues
  • Travel documents (visas)

  • Formal enrolment in country/jurisdiction of ‘arrival’, including communication with tax authorities, healthcare, schooling, etc.

  • Succession and Inheritance  
  • Confirm which laws govern succession and whether a choice of different jurisdiction law is available.

  • Confirm whether marital/family laws are affected and whether a choice of different jurisdiction law is available.

  • Review estate planning documents (wills, succession, and prenuptial documents) and consider the interaction of wills, appropriate for different jurisdictions.

  • Implications of Transferring Physical Wealth
  • Family heirlooms, jewellery and works of art (possible ban on export or right of first refusal, etc.). Are import duties applicable?


  • Before Exit  
  • Confirm arrangements that affect heirs and family that remain behind.

  • Optimal timing of loss of tax residence and exit charges.

  • Consider establishing new banking arrangements to segregate income and gains, if this is relevant to the new residence regime.

  • Before Arrival
  • Seek early tax advice from a professional advisor.

  • Take advantage of any special tax regimes that are available.

  • Review if there are any changes to controlled foreign company rules and what the effects may be.

  • Ensure that previously established companies, trusts, life insurance policies, etc. are compliant.


  • Gifts and Donations  
  • Confirm whether gifts or donations should be executed in advance of acquiring a new residency.


  • ONGOING  
  • Annual review of estate planning documents (wills, succession, and prenuptial documents).

  • Annual review of trusts arrangements, structures, and bank accounts.

  • Annual review of any changes to tax laws and implications in relation to existing agreements and structures.

  • Residency versus Citizenship

    Residency and citizenship are not the same things. Individuals may seek alternative residency in another country and may still remain a citizen of their country of origin. Citizenship is the status of being a ‘citizen’ of a country. This will include the privilege of holding a passport for that country. Dual citizenship (nationality) may be an interesting option, but it is not always feasible, depending on an individual’s country of origin.

    Residence Programmes

    Residence programmes vary in what they offer and the criteria that need to be met. Depending on the country, there are differences regarding the time period that residence is valid for, how to apply, what the benefits are, tax obligations, and how to move on to apply for citizenship (and a passport), if the individual wishes to follow this route and it is permitted by the particular residence programme.

    There are many reasons why individuals and their families choose to take up residence in another country. They may wish to start a new life elsewhere, in a more attractive and relaxing environment, or they may find the greater political and economic stability that another country offers, of appeal.

    For individuals considering an alternative country of residence, the most important decision is where you and your family would like to live. It is critical that clients consider the long-term objectives for themselves and their family before applying for a particular residence (and/or citizenship programme), to help make sure that the decision is right for now and in the future.

    Citizenship – A Passport

    The benefit of gaining citizenship is the right to obtain a passport from a particular country. This may also make travel much easier, into and out of a considerable number of countries.

    A number of residence schemes can lead to citizenship and a passport. Countries where this is possible include: the Isle of Man, Malta, Portugal, St Kitts & Nevis, and the UK. If ease of travel and a relatively quick solution is required whilst plans are in progress to live elsewhere, a St Kitts & Nevis passport can offer a good interim solution.

    What else can Dixcart Domiciles help you achieve?

    Experts at Dixcart Domiciles will not only help you achieve your family goals but can assist further, by explaining the tax regimes that exist in different countries (a number of which are particularly attractive for new residents) and assist you to ensure that your affairs are structured in a tax efficient manner. The exit strategy from the country that you are moving from also needs to be planned for. We can also help on a practical level by organising visits to the country and helping you complete application forms and supply the right documentation. You may also need advice regarding the purchase of real estate – and even help with the move itself.

    If you would like to talk to one of our experts, please contact: advice.domiciles@dixcart.com. Alternatively, please contact your usual Dixcart contact.

    Introduction to Paul Webb, Karen Dyerson and Ravi Lal – Members of the UK Tax Team

    The Dixcart Tax Team in the UK office is a busy department, largely due to the fact that many of the vehicles and individuals to whom we provide advice, have a UK element and/or assets in the UK.

    The three members of the UK Tax Team, we are introducing you to today are; Paul Webb, Karen Dyerson and Ravi Lal.

    Tax Advice

    Prior to many decisions being taken, they should be considered and evaluated with a thorough knowledge of the potential tax implications

    Advice to UK and non-UK domiciliaries on; inheritance tax, UK property ownership matters, and ongoing UK residence tax status, are important aspects of individual tax planning.

    Corporates also need expertise regarding tax efficient UK share schemes, the tax aspects of mergers and acquisitions and working with maximising the tax relief available under the UK R&D and Patent Box regimes.

    Paul Webb

    paul.webb@dixcart.com

    Director

    CTA ATT BSc (Econ)

    After gaining an honours degree in Economics, Paul Webb qualified as a member of the Chartered Institute of Taxation in 2001. Paul has a broad base of tax knowledge and advises both clients and other tax practitioners, both in the UK and around the world.

    Paul joined the Dixcart Group in February 2013 and is based at the Dixcart office in the UK. He uses his extensive technical knowledge to help a varied portfolio of clients deal with their tax obligations in an efficient manner.

    Paul was made a Director of Dixcart International Limited in 2014 and heads up the tax department in the UK. When travel is permitted he regularly travels to India, and extensively within the UK.

    His main areas of expertise are; UK corporation tax, UK personal tax, and domestic and international tax structuring. He works alongside the Dixcart Immigration Department to assist non-UK domiciliaries and their families during their planning for a move to the UK, or when making an investment into the UK. Once in the UK, he advises internationally mobile individuals regarding the use of the UK remittance basis of taxation.

    Paul also provides expertise to UK and non-UK domiciliaries on inheritance tax planning, UK property ownership matters, and ongoing UK residence tax status, if needed.

    He invariably works with clients from the very early stages of tax planning and subsequently manages ongoing tax matters across the following years.

    In recent years, Paul has been involved in establishing tax efficient UK share schemes, advising clients on the tax aspects of mergers and acquisitions and working with clients to maximise the tax relief available under the UK R&D and Patent Box regimes.

    Karen Dyerson ATT

    karen.dyerson@dixcart.com  

                           
    Tax Manager, Dixcart International Limited 

    Ravi Lal

    ravi.lal@dixcart.com

    Tax Senior, Dixcart International Limited

    Karen and Ravi work closely with Paul and provide tax advice to both corporate and individual clients. They are both experienced professionals and assist on various tax matters such as corporation tax and R&D for businesses and income tax, capital gains tax and inheritance tax for individuals.

    Karen is a member of theAssociation of Tax Technicians and has been qualified for over 25 years.

    Ravi worked for a top 15 UK accountancy firm prior to joining Dixcart, working in all aspects of tax compliance including self-assessment, corporation tax, tax planning, P11Ds, PSA and ATED.

    Additional Information

    If you have a question regarding UK tax obligations, further guidance regarding your possible entitlement to use the UK remittance basis of taxation, or have a question in relation to UK corporate tax, please contact Paul Webb: advice.uk@dixcart.com.

    Key Compliance Checklist – When You Start a Business in The UK

    Introduction

    Whether you are an overseas business looking to expand into the UK, or already in the UK with plans for an exciting new busines, your time is valuable. Getting the compliance and administrative elements setup at an early stage is crucial to allow the business to grow efficiently, but can be a drain in terms of the time required. 

    At the Dixcart office in the UK, our combined team of accountants, lawyers, tax advisers and immigration consultants make this process as easy as possible for you.

    Bespoke Advice

    As every business is different, there will always be some specific items to consider for your particular business, and taking bespoke professional advice at an early stage will always be the right thing to do. 

    Please see below a checklist regarding the key compliance matters that every new UK business looking to take on employees needs to consider. 

    Checklist

    • Immigration: Unless you are looking to only employ workers already with the right to work in the UK, you may need to consider business related visas, such as a sponsor license or sole representative visa.
    • Employment contracts: all employees will need to have an employment contract compliant with UK employment laws.  Many businesses will also need to prepare staff handbooks and other policies.
    • Payroll: UK income tax rules, benefits-in-kind, pension auto-enrolment, employer’s liability insurance, all need to be understood and implemented correctly.  Administering a UK compliant payroll can be complex. 
    • Book-keeping, management reporting, statutory accounting and audits: well- maintained accounting records will help provide information for considered decision-making and financing and remaining compliant with Companies House and HMRC.
    • VAT: registering for VAT and filing, in compliance with requirements, will help ensure there will be no unexpected surprises and, if dealt with promptly, can help with early-stage cash-flow. 
    • Commercial contracts: whether an agreement with a; vendor, supplier, service provider or customer, a well prepared and robust contract will help protect your business and ensure it is well placed for any future exit strategy. 
    • Premises: whilst many businesses are operating more and more online, many will still require office or warehousing space.  Whether renting or purchasing space we can assist. We also have a Dixcart Business Centre in the UK, which may be helpful if a serviced office is needed, with professional accounting and legal services being available, in the same building.  

    Conclusion

    Failing to take the right advice at the right time can prove costly in terms of time and finance at a later stage.  By working as one professional team, the information Dixcart UK gain when we provide one professional service can be shared appropriately with other members of our team, so you do not need to have to have the same conversation twice.

    Additional Information 

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

    Multi-Jurisdictional

    Working Anywhere – Why Cyprus, Malta and Portugal are Popular Jurisdictions For Digital Nomads

    ‘Digital nomadism’ has never been so topical.

    Over recent years the concept of remote working has become an every day reality. Technology has improved and the way the workplace is structured is changing; a new culture of working from home is being adopted by a lot of companies, especially as a result of the Covid-19 pandemic and stay-at-home requirements enforced by many countries around the world. 

    There are numerous countries around the world offering Digital Nomad visas. Three of the most popular countries are; Cyprus, Malta, and Portugal – here is why.

    CYPRUS

    From January 2022, Cyprus is launching a Digital Nomad Visa for non-EU nationals wishing to work remotely for employers/clients based outside of Cyprus. Individuals who are self-employed, salaried, or on a freelance basis, can apply for the right to live and work in Cyprus.

    Individuals who apply for the Cyprus Digital Nomad visa will have the right to stay in Cyprus for a period of up to 1 year. They can renew the visa for another 2 years, if required.

    Cyprus is an attractive destination for individuals; it is a member of the EU, located in the eastern Mediterranean Sea and enjoys over 320 days of sunshine per year, it offers the warmest climate in Europe, has a good infrastructure and a convenient geographic location for internationally mobile individuals – it is easily accessible from in Europe, Asia, and Africa.

    The population of Cyprus is approximately 1.2 million, with 180,000 foreign nationals living in Cyprus. It offers an excellent private healthcare sector, a low cost of living, and a friendly expat community.

    As an incentive to attract and retain highly-skilled and highly-paid expats to Cyprus, foreign workers (for example, non-dom tax residents), do not need to pay taxes on international dividends, ‘passive’ interest income, or profit from the sale of securities.

    In addition, individuals who were not previously resident in Cyprus, but who take up residence in Cyprus for work purposes, and earn over €100,000 per annum, are entitled to the following tax benefit:

    • 50% of employment income earned in Cyprus is exempt from income tax for a period of 10 years.

    However, the proposal for 2022 (the relevant legislation has not yet been implemented) is to allow an income tax exemption of 50% to new resident employees with income of €55.000.

    MALTA

    Malta has introduced a Nomad Residence Permit which enables individuals to maintain their current job in another country whilst they legally reside in Malta. The permit is targeted at non-EU remote workers and entitles them to reside in Malta for 1 year. After this, the visa can be renewed.

    Malta offers the climate, the relaxed lifestyle and rich history to make living in Malta a real pleasure. 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, has English as one of its two official languages, and a climate many chase all year round. Malta is also very well connected with most of the international airlines, which makes travel to and from Malta easy.

    Since joining the EU and due to the forward-thinking Government actively encourages new business sectors and technologies, Malta’s economy has enjoyed large growth in recent years.

    With a population of about 475,000 over an area of 316 square kilometres, Malta is already home to many expats and 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 1 year and can be renewed at the discretion of Residency Malta, as long as the individual still meets the criteria.

    Applicants for the Nomad Residence Permit must prove they can:

    • Work remotely using telecommunication technologies, or
    • Work for an employer registered in a foreign country and have a contract for this work, or
    • Perform business activities for a company registered in a foreign country (and be a partner/shareholder of that company), or
    • Offer freelance or consulting services, mainly to customers whose permanent establishment is in a foreign country, or
    • Earn a monthly income of €2,700 gross of tax.

    One of the biggest advantages of relocating to Malta is the remittance basis of taxation. Malta non-domiciled individuals are taxed on Malta source income and certain gains arising in Malta but are not taxed on non-Malta source income not remitted to Malta. In addition, they are not taxed on capital gains, even if this income is remitted to Malta.

    PORTUGAL

    Portugal’s temporary residence visa is particularly popular with freelancers and entrepreneurs; it is an independent workers and entrepreneurs visa available to individuals for 1 year. After this it can be renewed for up to 5 years. After 5 years, individuals have the option to apply for permanent residency in Portugal if they wish.

    Portugal is located in the southwest of mainland Europe and is easily accessible in terms of travel to and from the rest of the world, which makes it very popular with international mobile individuals. The two islands of the Azores and Madeira are also autonomous regions of Portugal and, like the mainland, offers fantastic weather, a relaxed lifestyle, cosmopolitan cities, and stunning coastlines.

    The Portuguese government is very aware of Portugal’s reputation as an international hub for digital nomads and, in response, launched a ‘Madeira Digital Nomads’ project, to attract foreign professionals to the island. Those taking advantage of this initiative can live in the Digital Nomad village in Ponta do Sol which boasts both villa or hotel accommodation, free wi-fi, coworking stations and regular social events.

    For individuals who wish to live and work in Portugal, for example in Lisbon, Porto, or along the coast of the Algarve, there is also a large and established community to interact with. Lisbon is teeming with digital nomads, and Porto is the second most popular spot.

    Portugal is an attractive and popular location – not only for digital nomads to move to – but for a large variety of individuals, in many different circumstances. Not only is it a beautiful country, offering an attractive lifestyle, but it also offers the popular Non-Habitual Residents programme (NHR), which allows individuals moving to Portugal to enjoy tax advantages once they re-locate here.

    This has proven to be a major motivator for both EU and non-EU citizens. Provided they have not been resident in Portugal for the previous 5 years, they can enjoy non-habitual status for 10 years, whereby income derived from employment or independent personal services (from a domestic source) is taxed at a special flat rate of 20% provided the income is from high value-added activities or a scientific, artistic, or technical nature. In addition, a tax exemption might also apply to income derived from a foreign source.

    Summary

    Digital nomad visas and temporary residence permits have made travelling the world and working, easy and enjoyable. They provide new opportunities to individuals who can work remotely and independently of their location but continue to remain legally employed by their current employer. If you would like more information on applying for a Digital Nomad visa, please contact:

    Alternatively, please contact your usual Dixcart contact.

    Dixcart Management Malta Limited Licence Number: AKM-DIXC-21

    An Explanation of The Different Rules For Individuals to Move to Switzerland and The Relevant Bases of Taxation

    Background

    Many foreigners move to Switzerland for its high quality of life, outdoor lifestyle, excellent working conditions and business opportunities.

    A central location within Europe with a high standard of living, as well as connections to over 200 international locations via regular international flights, also make Switzerland an attractive location.

    Many of the world’s largest multi-nationals and international organisations have their headquarters in Switzerland.

    Switzerland is not part of the EU but one of 26 countries making up the ‘Schengen’ area. Together with Iceland, Liechtenstein and Norway, Switzerland forms the European Free Trade Association (EFTA).

    Residence

    Foreign nationals are allowed to stay in Switzerland as tourists, without registration, for up to three months.

    After three months, anyone planning to stay in Switzerland must obtain a work and/or residence permit, and formally register with the Swiss authorities.

    When applying for Swiss work and/or residence permits, different regulations apply to EU and EFTA nationals, compared to other nationals.

    EU/EFTA Nationals

    EU/EFTA – Working

    EU/EFTA nationals enjoy priority access to the labour market.

    Should an EU/EFTA citizen want to live and work in Switzerland, they can freely enter the country but will require a work permit.

    The individual will need to find a job and the employer must register the employment, before the individual can actually start to work.

    The procedure is made easier if the new resident forms a Swiss company and is employed by it.

    EU/EFTA – Not Working

    The process is relatively straightforward for EU/EFTA nationals wanting to live, but not work, in Switzerland.

    They must fulfil the following criteria:

    • Have sufficient financial resources to live in Switzerland and to ensure that they will not become dependent on Swiss welfare.
    • Take out Swiss health and accident insurance.

    Non-EU/EFTA Nationals

    Non-EU/EFTA – Working

    Third country nationals are allowed to enter the Swiss labour market if they are appropriately qualified, for example managers, specialists and those with higher educational qualifications.

    The employer needs to apply to the Swiss authorities for a work visa, while the employee applies for an entry visa from their home country. The work visa will allow the individual to live and work in Switzerland.

    Again, this procedure is made easier if the new resident forms a Swiss company and is employed by it.

    Non-EU/EFTA – Not Working

    Non-EU/EFTA nationals, without gainful employment are divided into two categories:

    1. Older than 55;
    • Must apply for a Swiss residence permit through a Swiss consulate/embassy from their current country of residence.
    • Provide proof of adequate financial resources to support their life in Switzerland.
    • Take out Swiss health and accident insurance.
    • Demonstrate a close connection to Switzerland (for example: frequent trips, family members living in the country, past residency or ownership of real estate in Switzerland).
    • Abstain from gainful employment activity in Switzerland and abroad.
    • Under 55;
    • A residence permit will be approved on the basis of “predominant cantonal interest”. This generally equates to paying tax on deemed (or actual) annual income, of between CHF 400,000 and CHF 1,000,000. The precise amount of deemed annual income depends on a number of factors, including the specific canton in which the individual lives.

    TAXATION

    Standard Taxation

    Each canton sets its own tax rates and generally imposes the following taxes; income, net wealth, real estate, inheritance and gift tax. The specific tax rate varies by canton and is between 21% and 46%.

    In Switzerland, the transfer of assets, on death, to a spouse, children and/or grandchildren is exempt from gift and inheritance tax, in most cantons.

    Capital gains are generally tax free, except in the case of real estate. The sale of company shares is one of the assets, that is exempt from capital gains tax.

    Lump Sum Taxation

    Lump sum taxation is a special tax status, available to resident non-Swiss nationals, without gainful employment in Switzerland.

    The taxpayer’s lifestyle expenses are used as a tax base instead of their global income and wealth. This means that it is not necessary to report effective global earnings and assets.

    Once the tax base has been determined and agreed with the tax authorities, it will be subject to the standard tax rate relevant in that particular canton.

    It is possible for an individual to have gainful employment outside Switzerland and to take advantage of Swiss lump-sum taxation. Activities relating to the administration of private assets in Switzerland can also be undertaken.

    Additional Information

    If you would like additional information regarding moving to Switzerland, please contact Christine Breitler at the Dixcart office in Switzerland: advice.switzerland@dixcart.com

    Guernsey

    Have UK Tax Reforms for Holding UK Real Estate Affected the Use of Guernsey Structures?

    The Aim of this Note

    The aim of this Article is to highlight the many other reasons for using Guernsey structures, besides the mitigation of tax leakage for holding UK real estate (and other assets). In the past the focus on the benefits of using Guernsey structures was often concentrated purely on the tax benefits available, whilst ignoring other potential benefits.

    What’s Changed? – Tax Reforms for Non-UK Resident Owners

    Since 2015 the UK government has announced various tax reforms to more closely align the tax treatment of non-UK resident owners of UK property (both residential and commercial) with that of UK residents holding UK property.

    These reforms were introduced as part of the UK government’s wider efforts to tackle tax avoidance, evasion and non-compliance and were designed to ‘level the playing field’ in terms of taxation of gains between non-UK resident and UK-resident investors in UK real estate.

    Notwithstanding these reforms, investors are still free to structure their investments in UK real estate through Guernsey structures reducing some of the adverse UK tax implications which use of UK vehicles may incur.

    Lawful mitigation of tax liabilities is still permissible.

    Why the Use of Guernsey Structures Can be Beneficial

    There are a number of important non-tax related reasons why structuring through a Guernsey structure is beneficial for holding UK real estate (and other assets):

    1. The Versatility of Guernsey Vehicle Options Available

    Guernsey legislation allows a versatile variety of structures that can be used.  Some of the key advantages are the flexibility of the laws such as:

    Companies – Very flexible company law, distributions on a solvency basis (not limited to distribution of profits), no withholding tax on distributions, re-domiciliation allowed, Guernsey corporation tax is currently 0% with no capital gains tax.

    Limited Partnerships / Guernsey Property Unit Trusts (GPUTS) – Both of these provide options for tax transparent structures which can aid planning, particularly where there is a diverse pool of international investors.

    Protected Cell Companies – Provides a company which has the ability to appoint different shareholders to different cells and ring fence assets in those cells, and can be an alternative to a Collective Investment Scheme.

    Trusts and Foundations – For those investors who have estate planning in mind, Guernsey is a world leader in this area with a well-developed trust regime. Since 2012 Guernsey has been able to offer Foundations for wealth planning and asset holding which are increasingly popular, particularly with clients from civil law jurisdictions. Guernsey Foundations are particularly interesting due to their ‘disenfranchised’ beneficiary legislation.

    2. Guernsey Collective Investment Schemes and Listed Real Estate Investment Trusts

    Guernsey Collective Investment Schemes (CIS) and The International Stock Exchange (TISE) listed Real Estate Investment Trusts (REITs), which use British offshore entities as the listing vehicles, offer the following benefits to investors:

    • improved returns – exemption or potential exemption from UK corporation tax on rental income and from UK capital gains tax on corporate profits at the fund level, through the “transparency election” or an “exemption election”;
    • reduced or no transaction costs – no stamp duty arises in relation to the sale of shares in or units of a Guernsey entity unlike the SDLT suffered with a UK entity;
    • Private Investment Fund (PIF) Regime – provides a lighter touch regulation for a CIS and is therefore more cost-effective to use, rather than other more regulated fund structures.

    3. Eurobond Exemption to UK Withholding Taxes

    The TISE is an internationally recognised stock exchange headquartered in Guernsey, with offices in Isle of Man, Jersey, Dublin and London.

    Currently, nearly one third of all UK REITs are listed on the TISE to take advantage of the Eurobond Exemption to UK Withholding Taxes, as non-UK companies issuing debt secured on UK real estate can list the debt on a recognised stock exchange in order to pay interest to non-UK Entities and Persons, without deducting UK withholding tax.

    4. Privacy and Confidentiality (not secrecy)

    Ultimate beneficial ownership of structures is not currently publicly available, but is required to be disclosed to the Guernsey Registry, and shared to fully meet the obligations of the Common Reporting Standard and Tax Information Exchange Agreements. 

    In addition, trust and foundation instruments, limited partnership agreements and limited liability company (LLC) agreements are not publicly available, so investors can manage their affairs privately.

    5. Internationally Recognised Jurisdiction

    Guernsey has a reputation for being a well-regulated and transparent international finance centre. Guernsey has robust and extensive anti-money laundering laws and has entered into over 61 TIEAs based on the OECD model arrangement.  Guernsey also has a world-class, professional infrastructure with numerous legal, tax, accounting and corporate service providers providing the high level of services required from investors.  Other benefits include:

    • All trust and corporate services providers must be regulated (not a requirement in many other countries including the UK).
    • Most major UK, EU and US financial institutions are familiar with Guernsey and willing to provide services. Compliance related matters and therefore procedures such as opening bank accounts and raising finance can be carried out with minimal issues arising.

    6. Guernsey: Ability to Redomicile Entities

    It is often necessary or advantageous to move, or redomicile structures to other jurisdictions. For example, where geopolitical events or legislation become adverse, or there is a change in the investment strategy being followed, or there is adverse opinion regarding the structure’s current jurisdiction.

    One of the attractions of this re-domiciliation option is that it permits an entity to transfer its legal base to a different jurisdiction, while maintaining its legal personality and so remaining subject to all agreements (including external financing arrangements and related security), to which the entity was party prior to re-domiciliation taking effect.

    By contrast, companies incorporated in the UK or in some other jurisdictions cannot be redomiciled, which can limit the multi-jurisdictional structuring options available to such onshore companies.

    7. Ability to Open Up to a Wider Buyer Audience on Exit

    Holding UK real estate or infrastructure assets through a Guernsey entity can create a wider international buying audience at the time of exit.  An international buyer may not wish to hold shares directly in a UK company if they do not currently have a UK tax exposure.

    It is also perfectly acceptable for a UK resident to have the asset held through a Guernsey company, to register the company as UK tax resident, and run the company’s affairs from the UK.  At the time of sale, the shares in the Guernsey company can be sold and the Guernsey company either re-domiciled (as described above), or have its tax residency changed to suit the new owner.

    Have UK Tax Reforms Changed the Use of Guernsey Structures?

    In short, no, not entirely.  

    CIS benefits continue to persist as the UK government permits CIS to make either a transparency election or an exemption election, thereby meaning that investors will not be subject to possible double taxation.  As a result, we have seen a steady use of Guernsey holding structures and continue to see new enquiries.

    We have also experienced a number of structures migrating to Guernsey to benefit from the jurisdiction’s reputation and expertise, particularly as substance requirements are now increasingly important to demonstrate.

    In addition, advisers and clients are less focused on tax advantages but reverting back to traditional reasons for using Guernsey structures, such as; wealth preservation and succession planning. 

    There are clearly a considerable number of benefits to investors in utilising Guernsey structures to hold real estate and other assets, with a great deal of flexibility and variety, to form a structure and to suit any investor.

    Additional Information

    For more information regarding the use of Guernsey structures to hold UK real estate and other assets, please contact Steven de Jersey or Bruce Watterson at the Dixcart office in Guernsey: advice.guernsey@dixcart.com

    Dixcart Trust Corporation Limited has a Full Fiduciary Licence granted by the Guernsey Financial Services Commission

    The Advantages of Portuguese Companies – Including Portuguese Holding Companies

    Background

    Portugal is a member of the EU and offers an internationally competitive tax framework that is both transparent and compliant.

    The corporate tax rate is 21% of net profit, but tax incentives apply to certain types of business and the participation-exemption regime allows for a credit in relation to foreign tax.  

    Key Advantages Available Through the Portuguese Tax Regime

    Capital Gains

    Capital gains are generally included in taxable profit.

    A 50% relief can however be enjoyed where the total amount of the capital gain is re-invested in tangible fixed assets (shares and investment property are excluded), during the previous financial year, or up until the end of the second subsequent  financial year.

    Patent Box Regime

    There is a 50% exemption to tax on income generated by intellectual property. This is applicable to the income generated by the assignment or sub-licensing of patents, models and industrial designs protected by intellectual property and which have been subject to registration.

    The acquisition costs of certain intangible assets, with unlimited durability, and goodwill are deductible on an annual basis of 5% for a period of 20 years. In addition, all costs associated with the development of the intellectual property are tax deductible.

    Investment Incentives

    Several tax incentives are available to Portuguese businesses undertaking investments. If you would like more information, please contact us: advice.portugal@dixcart.com

    Special Rates for SMEs

    A corporate tax rate of 17% is levied on the first €25,000 profit of an SME, with profits exceeding this rate then taxed at the standard rate of 21%. An SME is defined as a business having a turnover of less than €50million.

    This initial ‘low’ corporate tax rate falls to 12.5% in some low population density and interior regions of Portugal.

    The Portuguese Corporate Tax Structure

    Portuguese companies are subject to tax on their worldwide income. However, branches of non-resident companies are only taxed on Portuguese-source profits.

    Corporate tax is charged at a rate of 21% on a company’s profit, although some exemptions may apply in relation to passive income, under the participation exemption method.

    Worldwide Participation Exemption Regime: Applicable to Capital Gains and Dividend Payments Inbound and Outbound

    Under Portugal’s participation exemption regime, dividends received and capital gains received and distributed by a Portuguese resident company from a domestic or foreign shareholding are exempt from tax, provided that the shareholder holds, directly or indirectly, at least 10% of the capital or voting rights of the other company for 12 months.

    The subsidiary may not be resident in a listed tax haven and must be subject to, and not exempt from, income tax at a rate which is equivalent to at least 60% of the Portuguese corporate tax rate (currently 21%).

    A tax credit may be applicable, when the conditions for the application of the participation exemption regime are not fully met, with an option for an underlying tax credit for dividends on foreign shareholdings held for 12 months, of at least 10%.

    In terms of capital gains, the participation exemption method applies to gains on the disposal of shares.

    Advantages for Portuguese Companies Registered in Madeira

    A number of extremely attractive corporate tax incentives are available to companies licensed in the International Business Centre of Madeira (IBCM). Please see our Dixcart Article:  A Madeira (Portugal) Company – An Attractive Way to Establish a Company in the EU.

    Additional Information

    If you require additional information regarding Portuguese companies and the benefits they offer, please contact your usual Dixcart adviser or speak to Lionel Freitas or Catarina Sardinha in the Portugal office: advice.portugal@dixcart.com.