Importance of having a will

The UK – A Truly Excellent Holding Company Location

Background – What the UK Offers as a Tax Efficient Jurisdiction

The UK is one of the world’s leading financial countries given its financial services industry and its robust corporate law and governance frame works. This information concentrates on its highly competitive corporation tax system for holding companies.

One of the UK Government’s key ambitions has been to create the most competitive tax system in the G20. It has developed strategies to support, rather than hinder, growth and to boost investment.

Through the implementation of these strategies the Government is aiming to make the UK the most attractive location for corporate headquarters in Europe.

In order to achieve this the UK Government has created an environment where:

  • There are low corporate taxes
  • Most dividend income is tax exempt
  • Most share disposals are tax exempt
  • There is a very good double tax treaty network to minimise withholding taxes on dividends, interest and royalties received by a UK company
  • There is no withholding tax on the distribution of dividends
  • Withholding tax on interest can be reduced due to the UK’s double tax agreements
  • There is no tax on profits arising from the sale of shares in a holding company by non-resident shareholders
  • No capital duty is applicable on the issue of share capital
  • There is no minimum share capital
  • An election is available to exempt overseas branches from UK taxation
  • Informal tax clearances are available
  • Controlled Foreign Company Legislation only applies to narrowly targeted profits

Tax Advantages in More Detail

  • Corporation Tax Rate

Since 1 April 2017 the UK corporation tax rate has been 19% but will increase to 25% with effect from 10th April 2023.

The 19% rate will continue to apply to companies with profits of no more than £50,000 with marginal relief for profits up to £250,000.

  • Tax Exemption for Foreign Income Dividends

Small Companies

Small companies are companies with less than 50 employees that meet one or both of the financial criteria below:

  • Turnover less than €10 million
  • Balance sheet total of less than €10 million

Small companies receive a full exemption from the taxation of foreign income dividends if these are received from a territory that has a double taxation agreement with the UK which contains a non-discrimination article.

Medium and Large Companies

A full exemption from taxation of foreign dividends will apply if the dividend falls into one of several classes of exempt dividend. The most relevant classes are:

  • Dividends paid by a company that is controlled by the UK recipient company
  • Dividends paid in respect of ordinary share capital that is non-redeemable
  • Most portfolio dividends
  • Dividends derived from transactions not designed to reduce UK tax

Where these exemption classifications do not apply, foreign dividends received by a UK company will be subject to UK corporation tax. However, relief will be given for foreign taxation, including underlying taxation, where the UK company controls at least 10% of the voting power of the overseas company.

  • Capital Gains Tax Exemption

There is no capital gains tax on disposals of a trading company, by a member of a trading group, where the disposal is all or part of a substantial shareholding in a trading company or where the disposal is of the holding company of a trading group or sub-group.

To have a substantial shareholding a company must have owned at least 10% of the ordinary shares in the company and have held these shares for a continuous period of twelve months during the two years before disposal. The company must also have an entitlement to at least 10% of the assets on winding up.

A trading company or trading group is a company or group with activities that do not include ‘to a substantial extent’ activities other than trading activities.

Generally, if the non-trading turnover (assets, expenses and management time) of a company or a group does not exceed 20% of the total, it will be considered to be a trading company or group.

  • Tax Treaty Network

The UK has the largest network of double tax treaties in the world.  In most situations, where a UK company owns more than 10% of the issued share capital of an overseas subsidiary, the rate of withholding tax is reduced to 5%.

  • Interest

Interest is generally a tax deductible expense for a UK company providing loans for commercial purposes. There are, of course, transfer pricing and thin capitalisation rules.

Whilst there is a 20% withholding tax on interest, this can be reduced or eliminated by the UK’s double tax agreements.

  • No Withholding Tax

The UK does not impose withholding tax on the distribution of dividends to shareholders or parent companies, regardless of where the shareholder is resident in the world.

  • Sale of Shares in the Holding Company

The UK does not charge capital gains tax on the sale of assets situated in the UK (other than UK residential property) held by non-residents of the UK. 

Since April 2016 UK residents have paid capital gains tax on share disposals at a rate of 10% or 20%, depending on whether they are basic or higher rate taxpayers.

  • Capital Duty

In the UK there is no capital duty on paid up or issued share capital. Stamp duty at 0.5% is, however, payable on subsequent transfers.

  • No Minimum Paid up Share Capital

There is no minimum paid up share capital for normal limited companies in the UK.

In the event that a client wishes to use a public company, the minimum issued share capital is £50,000, of which 25% must be paid up.  Public companies are generally only used for substantial activities.

  • Overseas Branches

A company may elect to exempt from UK corporation tax all of the profits of its overseas branches that are involved in active operating business.  If this election is made, branch losses may not be offset against UK profits.

  • Controlled Foreign Company Rules

Controlled Foreign Company Rules (CFC) are intended to apply only where profits have been artificially diverted from the UK.

Subsidiaries in jurisdictions detailed on a wide list of excluded territories are generally exempt from CFC taxation if less than 10% of the income generated in that territory is exempt from or benefits from a notional interest deduction.

Profit, other than interest income, in all remaining companies is only subject to a CFC charge if a majority of the business functions relating to assets used or risks borne are performed in the UK; even then only if taxed at an effective rate less than 75% of the UK rate.

Interest income, if taxed at less than 75% of the UK rate, is subject to a CFC taxation charge, but only if it arises ultimately from capital invested from the UK or if the funds are managed from the UK.

An election can be made to exempt from CFC taxation 75% of the interest received from lending to direct or indirect non-UK subsidiaries of the UK parent.

Introduction of a New UK Tax – Directed Towards Large Multinational Companies

On April 2015 the UK introduced a new Diverted Profits Tax (DPT) which has also been called the “Google Tax.” It is aimed at countering aggressive tax avoidance by multinational companies, which historically has eroded the UK tax base.

Where applicable, DPT is charged at 25% (compared to the corporation tax rate of 20%) on all profits diverted from the UK.  It is important to note that this is a new tax and is entirely separate from corporation tax or income tax and, as such, losses cannot be set against the DPT.

Conclusion

The UK continues to be regarded as a leading holding company jurisdiction. Due to the number of tax benefits that are legitimately available, its access to capital markets, its robust corporate law and governance frame works.

The recently introduced Diverted Profits Tax is directed towards a specific and limited group of large multinational organisations.

Which UK Services can Dixcart Provide?

Dixcart can provide a comprehensive range of services relating to the formation and management of UK companies. These include:

  • Formation of holding companies
  • Registered office facilities
  • Tax compliance services
  • Accountancy services
  • Director services
  • Dealing with all aspects of acquisitions and disposals

Contact

If you would like further information on this subject, please contact Laurence Binge or Paul Webb: advice.uk@dixcart.com, or your usual Dixcart contact.

Malta-Ukraine Double Taxation Agreement and Additional Attractive Malta DTAs

Background

A new Double Taxation Agreement between Malta and the Ukraine was ratified in 2017 and was made effective as from 1 January 2018.

As a result of this DTA, tax advantages for both countries are available and the Maltese holding company regime may prove attractive to Ukrainian investors. This DTA allows for dividends to be taxed in the country of source, at a withholding tax rate of 5%, if the volume of shares held is greater than 20%.

Taxation of Income

The tax treaty provides a low withholding tax rate on dividends, interest and royalties. 

  • Dividends

Withholding tax for dividends is capped at 15%. A lower rate of 5% applies to dividends received by a company owning at least 20% of the capital of the company paying the dividends. 

Due to its full imputation tax system, Malta does not withhold tax on distribution of dividends, irrespective of the nationality, domicile or residence of the beneficial owner of those dividends.

  • Interest and Royalties

Interest and royalty income is subject to a maximum 10% withholding tax.

The country of source has a limited primary right to tax the income, while the country of residence has a secondary right, with the obligation to grant relief from double taxation.

According to the Maltese Income Tax Act, interest and royalties received by non-residents is exempt from Malta tax and therefore no tax is withheld on such payments.

Additional Attractive Malta Double Tax Treaties

Malta has a network of over 70 double tax treaties.

In addition to the Ukraine, Cyprus and Switzerland have particularly beneficial double tax treaties with Malta.

Malta-Cyprus Double Tax Treaty

Foreign companies seeking to establish a certain type of entity in Europe, for example a company established for financing activities, should consider establishing a Cyprus company and managing it from Malta. This can result in double non-taxation for the passive foreign sourced income.

  • The Malta-Cyprus Double Tax Treaty contains a tie breaker clause that provides that the tax residence of the company is where its effective place of management is. A Cyprus company with its effective place of management in Malta will be resident in Malta and would therefore only be subject to Cyprus tax on its Cyprus source income.

It will not pay Maltese tax on non-Maltese passive source income not remitted to Malta. It is therefore possible to have a Cyprus company resident in Malta that enjoys tax-free profits, as long as the proceeds are not remitted to Malta.

Malta-Switzerland Double Tax Treaty

Malta’s holding company regime, coupled with the beneficial Double Taxation Agreement between Malta and Switzerland, provides a number of advantages when a Malta company is used to hold shares in a Swiss subsidiary.

The key features of the Double Taxation Agreement are:

  • The standard withholding tax on dividends paid from Switzerland is 35%. The agreement provides for a withholding tax exemption on dividends from Switzerland to a Maltese company, where the Maltese company directly holds 10% or more of the Swiss company’s capital for at least one year. Both companies must be subject to taxation.
  • Interest received in Malta is taxed at 35%. However a shareholder can claim a refund from the Maltese tax authorities in respect of a substantial element of the taxation paid by the Maltese company relating to dividend payments to shareholders.  This results in low net Maltese taxation on interest, generally an effective Maltese tax rate of 10%.
  • There is no withholding tax on royalties. This, coupled with Malta’s tax refund regime and unilateral double tax relief, in the form of a flat rate tax credit, results in very low net Maltese tax on royalty income.

Additional Information

If you would like additional information regarding the double tax treaty between Malta and Ukraine, or other Maltese Double Taxation Treaties, please contact Sean Dowden or Jonathan Vassallo at the Dixcart office in Malta: advice.malta@dixcart.com or your usual Dixcart contact.

UK

Living Overseas with Property Assets in the UK, or Intending to Buy? Here is what you need to know.

Five years have passed since the UK government set out its intention to create a public register of the beneficial ownership of “overseas entities’” UK assets – progress was slow to say the least with Brexit and then the pandemic slowing progress further.  The recent invasion of the Ukraine by Russia saw the government expedite that intention and the new  Economic Crime (Transparency and Enforcement) Act  2022 (“the ECA”) received royal assent on the 15 March 2022.

What is an “overseas entity”?

To understand the ECA we need to understand that it is an addition to a raft of historical measures seeking to impose financial or coercive measures on overseas legal entities to identify, control, change or stop them from behaving criminally. The ECA seeks to identify the ultimate foreign beneficial owner(s) on a public register even if that owner tries to hide behind a complex structure of shell companies.

Any corporate body including a partnership that is governed by the law of a country or a territory outside of the United Kingdom will be caught under the new rules. This will include  those holding more than 25% of the shares or voting rights in the entity. If this test cannot be satisfied then the ECA looks to any beneficial foreign owner who nonetheless exercises significant control over the relevant entity (or has the right to do so), including those with the right to remove (or appoint) a majority of the board of directors.

What does the new ECA do and when will you need to comply by?

There are three main parts to the ECA:

Part 1  – establishes a new register of foreign owners of UK property, which will be held at Companies House and will be retrospective, in that it will (subject to a few limited exceptions) include all property purchases in England & Wales since 1999 (2014 for Scotland). 

Foreigners looking to buy UK property will have 6 months, from the date of acquisition of freehold or leasehold land with over 7 years to run, to comply with the new rules. 

In practice, it is unlikely the Land Registry will register an overseas entity as owner of a UK property until it has registered its beneficial ownership at Companies House first. 

Those  who already own UK property will have six months from the date of the ECA’s commencement to either apply for registration or dispose of their property.  However, overseas entities trying to sell their UK property to get around the new rules, will not be allowed to without being registered first. Would-be sellers of property between 28 February 2022 and the date of full implementation of the new register are obliged to submit their details for registration.

Part 2 –  makes wide ranging amendments to powers under the unexplained wealth order (or UWO) regime –  a mechanism designed to confiscate the proceeds of crime, using civil rather than criminal powers pursuant to section 1 of the Criminal Finances Act 2017 (CFA 2017). This includes giving authorities the ability to apply for interim freezing orders.

Part 3 – strengthens provisions about sanctions. Fines of up to £2,500 per day can be levied against those who break the new rules, including criminal penalties for non-compliance of up to 5 years.  Even where no monetary fine is imposed, the Office of Financial Sanctions will be empowered to publicly identify companies and individuals that it suspects to have breached financial sanction rules.

Further guidance and action

Bearing in mind the speed at which the UK government rushed the ECA through,  further guidance from government and regulators regarding how and when entities should report is expected imminently. 

In practical terms there is a lot to do and only time will tell whether Companies House and the Land Registry will cope with the deluge of applications.

To learn more

To learn more, please see:

https://www.legislation.gov.uk/ukpga/2022/10/contents/enacted

https://www.gov.uk/government/news/new-measures-to-tackle-corrupt-elites-and-dirty-money-become-law

Additional information

Dixcart Legal can assist with property related enquiries in the UK. If you have any questions about this article or require any further information, please contact Kuldip Matharoo or Peter Robertson: advice.uk@dixcart.com.

Effective First Steps Towards Establishing a Company in Switzerland

The jurisdiction of Switzerland offers numerous advantages.

Based in the heart of Europe, it has a long tradition as an internationally respected finance and banking hub. It is renowned as a centre for private wealth.

The Challenge

Switzerland is considered a top level jurisdiction, in terms of international standards.

This has an impact on the establishment and management of companies, as much as it affects other areas of life in Switzerland.

  • We are often asked by clients, if there might be an alternative, a first step towards setting up a company in Switzerland.

The answer is yes.

The Solutions

Non-Swiss companies often need Swiss based employees, particularly when they are expanding into the Swiss market for the first time. Quite often this is to carry out a business development role, but there are many other situations when a Swiss employee or employees are needed.

Frequently, a local representative is needed in Switzerland, but it might be a little early to establish a Swiss company.

Two Options

There are two options:

  • The non-Swiss company directly hires the employees and Dixcart Switzerland represents the company;

OR

  • Dixcart Switzerland opens a branch, in Switzerland, for the non-Swiss company and runs the branch. This offers the advantage of providing more substance in Switzerland.

What Advice and Support can Dixcart in Switzerland Provide?

We can provide advice as to the best solution to meet the particular circumstances and can help generate an effective business plan. In addition we can provide day to day administrative services to ensure the smooth running of this first step into the Swiss market.

Dixcart Switzerland services include:

  • Bookkeeping
  • Business plans
  • Payroll
  • Preparation of annual accounts
  • Preparation of annual returns
  • Swiss insurance expertise
  • Swiss social security expertise
  • Value added tax reporting and payment (VAT)

Payroll Services

Specific services in relation to the payroll function include:

  • Salary calculations
  • Social security calculations and payments
  • Payroll tax calculations and payments

Serviced Offices

Serviced offices are available in the same premises as Dixcart Switzerland. Desks with internet connection, are used by serviced office clients, with telephone lines and secretarial support available, if required.

What Additional Support is Available – When a Company is Established in Switzerland?

If the business in Switzerland expands and it becomes viable and beneficial to establish a Swiss company, Dixcart Switzerland can assist with:

  • Accounting

Working with clients at every stage of their business life cycle, we are able to set up the complete internal finance function, if required. 

  • Management Accounts

Dixcart frequently provide management accounts for a large variety of different companies. These can be generated monthly, quarterly or annually, to help make running the company as efficient as possible.

  • Provision of Directors

A number of the companies that Dixcart manage have a Dixcart professional on their Board of Directors. The technical professional expertise, impartial perspective and extensive experience at director level  that a Dixcart director can provide, is often of substantial benefit.

Additional Information

If you would like additional information regarding the first steps towards setting up a company in Switzerland, please contact Christine Breitler at the Dixcart office in Switzerland: advice.switzerland@dixcart.com.

Portugal 1

The Craze Around Portugal Explained – Companies and People

What is it about Portugal, other than the great food and weather, that everyone is talking about? You may have heard that Portugal has become a hotspot for millennials wishing to embark on a business venture start-up, or it is where crypto traders are now relocating to, or the fact that companies like Google and Amazon are setting up offices in the acclaimed ‘Florida’ of Europe.

Tax Advantages for Individuals

The buzz and energy in Portugal has sparked interest in many and for various reasons – Portugal is currently attracting the affluent, as well as a wide range of other individuals, through their favourable tax regime.

Individuals may be exempt from foreign income, or taxed at a flat rate of 20% for income earned in Portugal, for a period of 10 consecutive years. Those wishing to be eligible for this regime; the non-habitual resident regime (NHR), need to register specifically for this regime to be entitled to the tax related benefits. It is definitely  worth using a tax specialist, such as Dixcart Portugal to assist as the regime can be quite complex.

The main criteria are; an individual becomes Portuguese tax resident and has not been a Portuguese tax resident for any of the previous five years, and his/her income must be earned from a high value-added activity or is of a scientific, artistic or technical nature.

Benefits Offered by the International Business Centre of Madeira

The Portuguese island of Madeira has famously been acclaimed as one of the best islands in the world due to its natural beauty. It has won awards for several consecutive years up to 2021, namely; “Europe’s Leading Island Destination” and “World’s Leading Island Destination”. It also boasts an attractive international shipping registry, regarded as among the highest in the world. Efficient tax structures are also available for shipping companies and crew members.

This autonomous Portuguese island presents numerous opportunities – the International Business Centre of Madeira (IBC) allows for the registration of companies where income from international or online activities is taxed at a flat rate of 5%, provided certain criteria are met such as having a full time employee employed in Madeira and making a specified initial investment into the company. Companies wishing to register outside this framework are taxed at rates ranging from 11.7% to 14.7% . Companies registered in the IBC also have access to all of the double taxation agreements entered into by Portugal and have full access to the EU single market.

Incorporating Companies in Portugal

Companies also consider Portugal as a location to create an efficient tax structure, by making use of the participation regime. This regime means that companies may be exempt from dividend tax, provided certain conditions are met.

The conditions include the shareholder; holding at least 10% of the shares (the shareholdings in question must have been held, uninterruptedly, during the year prior to the distribution), and not being tax resident in a country considered to be a tax haven by Portugal. In addition, there must be no distribution of income in the first year of operation.

Although it is becoming harder, it is still possible for companies to find an affordable place to rent (or even purchase) as office space. Over the last decade, popular areas of Lisbon and Porto have however seen incremental price escalations as a result of the increased attention Portugal has received.

Why Are Individuals Moving to Portugal?

The recent popularity of Portugal is also witnessed in the tourist sector. Many individuals have moved onto relocate, after visiting. The streets of Lisbon and Porto are culturally rich with traditions that the country boasts proudly of. It is not hard to understand why tourists are in love with these cities! From the trams in Lisbon to the port wine in Porto.

D7 and D2 Visas

Through the introduction of various visas by the Portuguese government, it has become possible for almost anyone to come to Portugal, and apply for a residence permit.

Individuals are typically applying for D7 or digital nomad related visas, essentially a visa for those earning passive and/or independent income, and able to support themselves. This income can be for example from: property rentals, financial investments, profits and dividends from a company, copyright, etc.

Others, who are more entrepreneurially wired and wishing to venture to Portugal, are applying for a D2 visa. Those who can benefit are self-employed individuals or individuals who intend to set up or buy a company in Portugal. This visa  requires a business plan to be submitted to the Portuguese authorities, amongst other criteria.

The country has shifted gear in ensuring the right calibre of people are moving to this jurisdiction and it is clear that there are many opportunities in this country situated in the far West tip of Europe.

Golden Visa Program

Those wishing to keep Portugal as an option for relocation purposes, can register for the Golden Visa program. It is a quick way for foreign investors from non-EU countries to obtain a valid permanent residence permit in Portugal, and also allows them to travel freely in most European countries (Schengen Area).

Since inception of this program, over 17,000 family members have benefited from the Portuguese Golden Visa. The program has specific investment criteria – the most popular in recent times has been an investment in a fund to the value of €500,000. The program has been so successful that the Portuguese government has raised the limit, from the previous minimum of €350,000.

The stay requirements in Portugal are minimal, with an average of only 7 days stay per annum, over a 5 year period, unlike the other visas which require you to make a permanent move to Portugal.

Summary

As you can see from the above, there is more than just the crispy custard tarts and more than 300 days of sun that Portugal has to ‘shout’ about.

The reasons many are relocating to Portugal are numerous – with each person having their own story and set of circumstances.

Dixcart Assistance

Dixcart has assisted many families and businesses to relocate to various parts of the world, including Portugal.

Please reach out to Dixcart Portugal should you have any questions: advice@portugal.com.

We appreciate that better decisions can often be made with a professional adviser by your side.

St Kitts & Nevis

Nevis Multiform Foundations – Key Characteristics and Practical Uses

Nevis Multiform Foundation Characteristics

Foundations are often regarded simply as the civil law version of the common law Trust. However, there are a number of distinct characteristics of a Nevis Multiform Foundation which make it stand out as a unique and advantageous wealth planning tool quite separate from a Trust and even that of a Foundation, formed elsewhere in the world. We shall explore these more fully throughout this note.

Legal Personality – the most notable difference between a Foundation and a Trust is that a Foundation possesses a separate legal personality and has the capacity to sue and be sued. A Nevis Multiform Foundation has the capacity, rights, powers, and privileges of an individual person.

Ownership and Purpose – A Foundation is a self-owned entity which does not have shareholders or equity holders, instead it is formed for any purpose which may be charitable, non-charitable, commercial or non-commercial which the management board will carry out on behalf of the Foundation.

Control – A concern some individuals face when considering settling an offshore Trust, is surrendering complete control in relation to the ownership, investment, and distribution of their assets. Conversely, the Founder of a Foundation (otherwise known as a Subscriber) can maintain an element of control, by becoming a member of the management board and assist in setting the purpose and investment strategy of the Foundation. Alternatively, they can form a supervisory board to oversee the management of the Foundation and fulfilment of the Foundation’s purposes by the Management Board.

Flexibility of Form – the most innovative and beneficial characteristic of setting up a Foundation in Nevis is that it can choose to take a number of different forms including; a trust foundation, company foundation, partnership foundation or a traditional foundation.

Its malleable nature means that it can also swap between forms over its life. This flexibility allows a Founder a broad scope in which to establish their structure and tailor it to suit their needs as they evolve over time.

Creditor Action – As withthe protection provided againsta creditor pursuing any frivolous action against trust property held in a Nevis International Exempt Trust, there is similar protection afforded to a Nevis Multiform Foundation.

Before bringing any action or proceeding against any Nevis Multiform Foundation, a Creditor must first deposit a bond to the amount of: USD50,000, with the Minister of Finance.

Foreign Judgements – a judgement made in another jurisdiction is not recognised or enforceable in Nevis.

Validity – no multiform foundation, governed by the laws of Nevis, and no subscription of property to a multiform foundation which is valid under the laws of Nevis, shall be void, voidable or liable to be set aside or defective in any manner, by reference to the law of a foreign jurisdiction

Parties

A typical Nevis Foundation consists of the following parties:

Practical Uses

Family Business Succession Planning

By placing the ownership of a Family Business under a Multiform Foundation, continuity can be afforded to the business and the purpose can be clearly defined. Family members and descendants can also be members of the management board and therefore actively involved with the direction and management of the underlying enterprise.

Educational Foundation

There comes a point where junior members of a family must leave the security and protection of their family for the first time and enter the wider world for education or career purposes. This may mean that they are moving to a larger city or different country but are not yet ready to have full financial independence. A multiform foundation is a good solution in this situation by providing financial assistance to such a member of the family without giving them complete access to a lump sum.

Charitable Foundation

A Multiform Foundation can be established with a specific or multiple charitable purposes. Such purposes could include the relief of poverty, the advancement of education, the advancement of religion, the protection of the environment, the advancement of human rights or any other purpose which is beneficial to the community.

Corporate Stability

Defining the specific purpose for an overlying multiform foundation can ensure that the long term strategic plans of the underlying assets / company are followed and maintained in a consistent manner.

Overcome Forced Heirship

Should the Founder be resident in a country where forced heirship provisions are in force, he/she may wish to establish a Multiform Foundation in Nevis where there are no forced heirship rules and the assets would be distributed in line with the purpose of the Foundation.

Tax Planning

As part of a tax planning strategy, many individuals may utilise a corporate vehicle in a jurisdiction which they do not reside. However, in the jurisdiction of their tax residence they may well be required to report their ownership and interests in this company under controlled foreign corporation reporting requirements.

Instead of holding shares directly, an individual might establish a Multiform Foundation  affording anonymity and privacy for the subscriber.

Additional Information

If you require any additional information or wish to discuss your structuring needs further, please contact Beth Le Cheminant at advice@nevis.com.

Whilst this note is intended to provide information regarding Nevis Multiform Foundation structures and examples of how these can be used, it is not intended to form any sort of legal or tax advice. We strongly recommend that any individual considering setting up a wealth planning structure seek independent legal and tax advice before doing so.

The Continued Relevance of Trusts for Personal Wealth Planning and the Benefits of Increased Regulation in the Finance Sector

Background

The original trust concept is widely believed to have originated under Common Law in the 12th century when the English knights were leaving for the crusades and needed the ability to confer the authority to act on their behalf in respect of their assets whilst separating the legal ownership of those assets.

The concept can in fact be traced back even earlier to Roman Civil law with the concepts of fideicommissum and fiducia both of which effectively conferred title to an individual’s assets to a third party in return for obligations on the third party as to how those assets were to be applied.

The trust concept in its various forms continued as a means of passing value across the generations until the late 20th century when use of the Common Law form of trust started to branch away from pure estate-planning and the ‘trust’ became more of a tax-planning tool for (relatively) short-term gains for both corporates as well as individuals.

This particular modus operandi was embraced by certain aspects of the legal profession and the newly nascent offshore / international finance centres and the industry blossomed throughout the 70’s, 80’s and 90’s attracting the interest of the various revenue services who could see their flow of funds being diverted.

Increasing International Regulation and Exchange of Information

This in turn has led over the past twenty years to the introduction of a plethora of international tax, regulatory and automatic exchange of information (AEOI) measures. These cover base erosion and profit shifting (BEPS), common reporting standards (CRS), foreign account tax compliance act (FATCA), and mandatory disclosure rules for tax information exchange agreements and economic substance. With the most recent iteration of associated legislation being the Group of Seven’s (G7) consideration of a global corporate minimum tax as the latest of these initiatives specifically designed to ensure that multinational businesses are paying tax in the jurisdictions where their economic activity is carried out.

Guernsey – Rising to the Occasion

Throughout the introduction of these new measures Guernsey has managed through early compliance to maintain its position as one of the most well-respected and regulated of the offshore centres successfully navigating the international currents driving these initiatives, positioning itself as one of the first adopters of CRS and FATCA.

Guernsey’s willingness to proactively implement the necessary changes, coupled with its world leading financial services industry, means that the provision of fiduciary services from the Island is flourishing.

The use of a trust for financial planning is evolving once again and reverting in the main to its original concept as a means of wealth and estate-planning across generations rather than short term tax planning.

The net result of the above has been that rather than being put out of business by the increasing regulation to which international financial centres are subject, Guernsey has thrived and continues its position as a leading jurisdiction through which international families can structure their affairs.

Guernsey as a Trust Location

The increased regulation to which Guernsey (like other international financial centres) has been subject, is in fact attracting more clients to base their structures through Guernsey. They have greater confidence that their affairs will be professionally managed and that they will not face criticism for structuring through the Island.

An example of this is the increasing number of family offices based in Guernsey proactively seeking out regulation as a means of demonstrating to tax authorities, regulators, and the public, that they have nothing to hide and are fulfilling their role as good corporate citizens.

Additional Information

For more information on Guernsey and the opportunities presented please contact John Nelson at the Dixcart Guernsey office advice.guernsey@dixcart.com and visit our website www.dixcart.com

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

Malta Nomad Residence: An Opportunity to Live and Work from a Sunny Mediterranean Island

Digital Nomads – the Background

Digital nomads are remote workers who travel to different locations regularly. They use modern technology to work from coffee shops, hotels, co-working spaces, or libraries with a Wi-Fi-connected laptop or smartphone from anywhere in the world.

Digital nomads tend to be freelancers or entrepreneurs who are self-employed, working for themselves or for companies as independent contractors.

In the past it has been difficult for entrepreneurs and freelancers to apply for traditional visas as either a contract with a local entity was required, or a letter of invitation. A tourist visa, for example, is not suitable as the individual might want to stay for a more extended period.

The Malta Nomad Residence Permit

The Malta Nomad Residence Permit can easily be obtained by; remote workers, digital nomads, and freelancers and it grants the holder a legal right to reside in Malta and travel visa free throughout the Schengen Member States.

About Malta

Malta has long been famous for its expat-friendly environment, which is well illustrated by the large expat community in Malta. Thanks to its favourable legislative system and tax benefits, the island is home to many foreign companies.

It is a small country in size but has a cosmopolitan soul. There are many cafes, bars, restaurants, and co-working spaces that make life easier for digital nomads. In addition, it is now one of the very few countries in the world with 5G nationwide coverage.

Along with its digital nomad-friendly environment, it also has everything an ideal island would have; beaches, 300 sunny days a year, a relaxed way of life, excellent seafood, and a lot of fun. Malta has it all and is a perfect base for remote working.

Eligibility Criteria for Malta Nomad Residence Permit

There is a specific set of rules for the program.

Applicants must:

  • Be a third-country national (non-EU)
  • Have a monthly income of €2,700 (gross of tax) for a single applicant
  • Have a work contract for an employer that is registered in a country other than Malta, OR
  • Be a partner/shareholder in a company that is registered in a country other than Malta, OR
  • Offer freelance services to clients whose permanent establishments are in  countries other than Malta, and with whom the applicant has a contract(s)
  • Have a valid travel document
  • Have health insurance covering Malta
  • Present a property rental or property purchase agreement

Cost of Application and Timeframe for Malta Nomad Residence Permit

The government fee for the main applicant is €328, with an additional €328 fee payable for each family applicant.

Applicants who intend to spend up to 180 days in Malta will be issued with a National Visa, while those who plan to spend up to 365 days or more will be issued with a Residence Permit.

Processing applications takes approximately 30 days, from receipt of all the required documentation and application forms.

Which Family Members can be Included?

The main applicant can include dependent family members. It is possible to add a spouse and minor children, as well as adults who are financially dependent on the main applicant.

Malta recognizes same-sex unions. A same-sex partner in a committed relationship for a defined period, can be included in an application.

Applicable Taxes

Nomad residence permit holders are not subject to personal income tax as they are  expected to pay tax in their country of origin. However, nomad residence permit holders will be subject to consumption tax (VAT) in the same manner as all Malta residents. 

How Can Dixcart Assist?

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

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

Malta

How are the Malta Permanent Residence Programme and the Global Residence Programme Different? 

There are several residence programmes available in Malta aimed at non-EU/EEA nationals to obtain residence status in Malta. The various programmes range from those intended to obtain a permanent residence status to programmes giving a special tax and temporary residence status.

In Malta the two most popular residency routes are the Malta Permanent Residence Programme (MPRP) and the Malta Global Residence Programme (GRP).

Malta Permanent Residence Programme (MPRP)

The MPRP is open to all third-country, non-EEA and non-Swiss nationals, with a stable income from outside Malta sufficient to maintain themselves and their dependants with adequate financial resources. 

Once applicants have successfully completed the application process with Malta Residence Agency who run the programme, they receive an e-Residence card that entitles them to live in Malta and travel visa-free throughout the Schengen Member States. More information about the MPRP program can be found here: Malta Permanent Residence Programme.

Malta Global Residence Programme (GRP) 

GRP is available to non-EU passport holders. The Global Residence Programme entitles non-EU nationals to obtain a Maltese residence permit, renewable annually, through a minimum investment in property in Malta and by paying a minimum annual tax. Individuals who are EU/EEA/Swiss nationals please see: Malta Global Residence Programme which operate on the same basis as the GRP.

The Main Difference

The main difference between the Global Residence Programme (GRP) and Malta Permanent Residence Programme (MPRP), is that the GRP does not offer permanent residence rights. A special tax status leads to an annual residency permit, whilst the MPRP offers permanent residence in Malta. 

Residence Status Explained

Residence status obtained under the MPRP is valid for life (provided that the requirements of the programme are still being met), whilst the residence status obtained under the GRP is renewed annually subject to paying an annual tax.

Annual Tax:

  • Under the GRP, a beneficiary must pay a minimum annual tax of €15,000.
  • Under the MPRP, there is a minimum annual tax of €5,000 if the person is ordinarily resident in Malta, or zero tax if the person is not ordinarily  resident in Malta. In both cases the tax rate on income remitted to Malta is a flat 35%.

Comparison of Programs: GRP and MRVP 

ConditionsGlobal Residence ProgrammeMalta Permanent Residence Programme
Financial requirements Not specifically defined, but an individual should have sufficient resources to sustain himself and his dependants, without any recourse to social assistance in Malta.No less than €500,000 in all assets (€150,000 of which should be in financial assets – for the first 5 years).
I. Option. Purchase a property with a minimum value ofCentral/North Malta: €275,000 South Malta/Gozo: €220,000Central/North Malta: €350,000 South Malta/Gozo: €300,000
II. Option. Rent a property with a minimum value Central/North Malta: €9,600 South Malta/Gozo: €8,750Central/North Malta: €12,000 South Malta/Gozo: €10,000
Minimum annual tax€15,000 per yearFrom €5,000 per year, if ordinarily resident **
 Tax rate15%: Foreign Source Income remitted to Malta 35%: Local Source IncomeIf ordinarily resident: 0% – 35%**
Registration procedureApplication Fee + Property + Annual TaxApplication Fee + Contribution + Property + Charity
Application process3-6 months4-6 months
Official application fee€6,0001. Application Fee: €10,000 due within one month of submission 2. Letter of Approval: €30,000 due within two months of submission 3. 8 months to conclude the due diligence and a contribution of: €28,000 or €58,000 needs to be paid
DependantsSpouse, Children up to 18 or adult children between 18 and 25 years old, including adopted children, provided that such children are not economically active and are financially dependent on the main applicant. Financially dependent parents.Allowing 4 generations to be included in one application: spouse, children – regardless of age can be included in the application if they are unmarried and financially dependent, parents and grandparents if they are principally and financially dependent on the main applicant.
Donation to a Non-Government OrganisationNot applicable€2,000
Additional CriteriaApplicant must not spend more than 183 days in any other jurisdiction in any single calendar year.An additional €7,500 payment per person is required for each adult dependant included in the application.
Duration of status in MaltaOne calendar year. Need to re-submit on an annual basis.Permanent Status: a Malta residence card is issued for all family members for 5 years, then renewed without any additional contribution, if the requirements of the programme continue to be met.
Schengen Access (26 European countries)Right to travel within the Schengen Area for 90 days in any 180 days.Right to travel within the Schengen Area for 90 days in any 180 days.

** Annual minimum tax under the Permanent Residence Programme is Zero if you are not ordinarily resident in Malta. If you select to be ordinarily resident in Malta, then the annual minimum tax is €5,000.

How Can Dixcart Help?

Any individual interested in applying for one of these programmes is required to do so through a registered approved agent.

Dixcart is an authorised agent and offers a bespoke service. We will be by your side throughout the process from completing the required documents to meetings with the various Maltese Authorities.  We can support you in choosing the best residential programme in Malta for you and your family.

Additional Information

If you would like further information regarding MPRP or GRP in Malta, please speak to Jonathan Vassallo or Henno Kotzeadvice.malta@dixcart.com, at the Dixcart office in Malta or to your usual Dixcart contact.

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