Malta’s New Start-up Residence Programme

Malta has introduced a New Start-up Residence Programme

At the 2-day “Start-In-Malta Festival” in October 2022, Malta Residence Agency announced a new residence programme: the Malta Start-Up Residence Programme.

  • This new visa will allow non-European nationals to relocate and live in Malta, by establishing an innovative start-up.

The programme allows founders/co-founders to apply for a 3-year residency permit, together with their immediate family, and the company to apply for 4 additional permits for Key Employees.  

The Hon. Miriam Dalli (Minister for the Environment, Energy and Enterprise) stated “we want to be at the forefront of cutting edge technology innovation, research & development“.

Highlights of the new Start-Up Residence Visa

  • Fast and efficient application process
  • Founders/Co Founders receive a 3-year permit that can be potentially renewed for another 5 years (it is possible to include immediate family members in the application)
  • Founders/Co Founders may apply for permanent residency after residing in Malta for 5 years
  • The Start-up company can also apply for residence permits for up to 4 Key employees (of which they will need to satisfy the requirements of the KEI)
  • Key Employees receive a 3-year residence permit that can be renewed for another 3 years (it is possible to include immediate family members in the application)
  • Key Employees may apply for long term residency after completing 5 years in Malta

Salient Points:

  • It is expected that the successful applicants will reside in Malta and make Malta their permanent residence and therefore there is a minimum stay requirement of 183 days per year

Additional Information

For further information on the new Start-up Visa, please do not hesitate to contact Henno Kotze: advice.malta@dixcart.com at the Dixcart office, in Malta or your usual Dixcart contact.

Importance of having a will

UK Research and Development (R&D) Tax Relief is Changing – What do You Need to Consider?

Additional amendments to UK R&D tax relief were included in the 2022 Autumn Statement. Further details can be found here: Autumn Statement 2022 – Dixcart

From 1 April 2023, a number of changes are expected to the UK Research and Development (R&D) Tax Relief scheme. This Article summarises the key points arising from the July 2022 HMRC draft legislation for R&D tax relief changes, originally announced in the 2021 UK Autumn Budget.

These changes will take effect for accounting periods beginning on or after 1 April 2023. The changes will impact companies claiming under either of the two schemes (SME or RDEC).

The UK Government has a target to raise investment in R&D to 2.4% of UK GDP by 2027 and R&D tax relief forms part of that goal, by reducing the cost of innovation for UK companies.

UK R&D Tax Relief

UK Research and Development (R&D) tax relief can prove an extremely valuable tax relief and, for companies carrying out significant qualifying R&D projects, it may mean not having to pay any corporation tax for many years or even claiming a repayment from HMRC.

For small to medium sized enterprises (SMEs), a deduction of 230% of the amount spent on R&D can be made from taxable profits, reducing the corporation tax due. For loss making companies, the scheme allows relief upfront as a cash payment of 14.5% of the ‘surrenderable loss.’

For further information regarding the benefits available and the process that needs to be followed, please contact: advice.uk@dixcart.com

What are the Key Changes?

Here are some of the key changes:

Extending Qualifying Expenditure

The good news is that R&D expenditure categories will be extended to include the costs of datasets and cloud computing – however, these costs need to clearly align with direct R&D and cannot be included in R&D claims where these costs only relate to indirect supporting activities.

In addition to this, R&D in pure mathematics will now qualify for relief and can form part of the qualifying R&D activities of the claimant.

Refocusing the Reliefs Towards Innovation Undertaken in the UK

One of the most fundamental changes in the Autumn Budget was to refocus the relief provided to activities performed in the UK or qualifying overseas expenditure.

  • UK Expenditure

Relevant research and development must be undertaken in the United Kingdom. As such, subcontracted R&D work, and the cost of externally provided workers (EPWs), will be limited to work undertaken in the UK.

  • Qualifying Overseas Expenditure

The exemption to the above, is where work undertaken outside the UK is necessary due to geographical, environmental, or social conditions not present or replicable in the UK.

The cost of the work, and availability of workers, are specifically excluded as factors. This list is not exhaustive and, in the short term, is likely to create greater uncertainty as to what might be seen as meeting these criteria.

It is worth noting that, to date, there is nothing in the draft legislation that specifically addresses claims for the cost of staff working on projects in an overseas branch of a UK entity – it is hoped this will be clarified as the Bill goes through the Parliamentary process.

Tackling Abuse

In order to support HMRC’s fight against abuse of the R&D schemes, new due diligence and filing processes will be required through a digital system.

The changes to be introduced to the R&D claims submission process include:

  1. claims be made digitally;
  2. the categories of qualifying expenditure incurred need to be disclosed, and brief details provided of the R&D activities;
  3. claims need to be endorsed by a named senior company officer;
  4. the company must inform HMRC in advance of its intention to make a claim within six months of the end of the period to which the claim relates, unless the company has claimed in one of the preceding three accounting periods; and
  5. the details of any agent who has advised the company in making the claim needs to be provided.

The most significant change is point 4. The effect of this is that new claimants will now only have a six month window in order to identify that they will make a claim, as opposed to the current two year window of opportunity.

What can your Business do to Help Maintain their R&D Tax Relief Benefits?

On the back of the above proposed changes, businesses that maintain all, or part, of their R&D activities overseas will need to re-evaluate their potential R&D claims. If your business falls into this category, you will need to consider the practical, commercial, and cost implications of maintaining your current structure versus onshoring to the UK. 

We have identified the pros and cons of each scenario below.

Scenario 1: Keeping your R&D Activities Overseas

Benefits of keeping your R&D activities abroad:

  • commercial needs,
  • expertise,
  • most cost-effective option,
  • changing something that is not broken. You have the right people, infrastructure and processes in place so why change it?

With the introduction of the new rules, the obvious loss is that qualifying overseas expenditure will be disqualified from 1 April 2023.

However, the impact of this depends on the type of business you are. For example, if you have an R&D intensive business with the majority of costs arising from overseas activities, you should expect to see a substantial reduction in your R&D tax relief claims as opposed to one that is not R&D intensive.  

Scenario 2: Relocating your R&D Activities to the UK

As discussed above, the notable advantages and sacrifices of keeping your R&D activities overseas are in turn, for the short-term anyway, the opposite if you were to relocate the activities to the UK. This will of course depend on each business.

The main benefit of relocating your R&D activities to the UK is inevitably that it will qualify for R&D relief.

However, the change will effectively be like starting new again. The downsides are; the potential difficulty in finding new suppliers and skilled workers, keeping within the budget, costs of relocating/restructuring, training, legal and tax considerations for both company and any employees relocating, etc.

Again, this largely depends on the business as, for some, this may simply be a matter of finding new suppliers within the UK.

Get in Touch

If you would like to discuss the UK R&D tax relief changes featured in the July 2022 draft legislation, or if you would like professional advice regarding strategies to help maintain UK R&D tax relief benefits, please get in touch with Paul Webb in the Dixcart office in the UK or email: advice.uk@dixcart.com

Trusts and Foundations: Current Perspectives from Dixcart Isle of Man

Background: Isle of Man Trusts and Foundations

The Isle of Man is a jurisdiction well known for the establishment and management of both Isle of Man Trusts and Foundations. We have recently drafted a series of three comprehensive Articles in relation to Offshore Trusts, as well as a video. Similarly you can find three Articles, featured on our website, on the topic of Isle of Man Foundations.  

This Article is more of a discussion piece, with the case study demonstrating how Trusts and Foundations can be used in combination, to achieve specific objectives. It also explores forthcoming changes to Isle of Man Trust Law.

Are Trusts and Foundations the Best Structures for Asset Preservation and Succession Planning?  

Recent changes in the global landscape, both in terms of taxation, but also public opinion, mean that HNW families need to look at a range of solutions to achieve their aims.

Where individual circumstances allow, Trusts and Foundations, however, continue to play an important role in HNW family estate planning. The public generally still have the perception that tax mitigation is the sole purpose of establishing a Trust or Foundation structure, when in fact they have a much wider purpose, especially in relation to succession planning.    

The characteristics offered by Trusts and Foundations include:

  • The ability for families to set out how they would like assets to be held and distributed in the long-term.
  • Oversight in relation to family assets, with appropriate ‘checks and balances’ regarding trustees or foundation board members, who take on the responsibility to look after things in a way that meets the needs of the specific family.
  • A structure that ensures that the intentions of a deceased or disabled wealth owner regarding how assets should be administered and distributed, are fully taken into account.

What Should Multi-jurisdictional Families Consider When Setting up a Trust or Foundation?

Each client must consider their individual circumstances, followed closely by what they are looking to achieve.

Once these two points have been identified, the next step should always be to seek tax advice specific to the circumstances.

Case Study

The Dixcart office in the Isle of Man, recently assisted a client who was looking to put in place asset protection and succession planning for their family business. 

The principal was a UK resident non-dom, whilst the wider family were based in various Civil Law jurisdictions.

On first examination, given the connection to Civil Law jurisdictions, a Foundation seemed likely to be the best fit, however, given the UK’s treatment of Foundations as a corporate vehicle, at least at the time, this could have been disadvantageous to the principal, who would have received greater certainty via a Trust structure. 

Conversely there was a concern that as the majority of the family were located in Civil Law jurisdictions, their local tax authorities may not recognise a Trust structure. 

  • Ultimately, and of course subject to specialist advice at the time, we put in place a Trust/Foundation Hybrid structure which provided protection to the family as a whole. An Isle of Man foundation was created, with the sole purpose of acting as Trustee of an Isle of Man trust.

As such, from a Common Law perspective, the structure was recognised as a trust structure, however should the structure be challenged within a Civil Law jurisdiction, the courts would recognise the legal status of the Foundation, thus preserving its asset protection characteristics.

Is Anything About to Change in the Isle of Man Relating to Trusts?

The last major review of Trust Legislation in the Isle of Man was the Trustee Act 2001, so a revisit was definitely overdue.

The Trusts and Trustees Bill 2022 received its first reading in Tynwald, the Isle of Man Parliament, in June 2022.  The draft bill aims to further modernize the Islands Trust Legislation and proposes several amendments to the current legislation.   

Two of the amendments which are of particular interest are:

1. Duty to Disclose Trust Information

Trust ‘information’ is defined as information or documentation relating to a Trust, including the Trust accounts.  The Bill sets out provisions that the Trust Instrument may confer and/or indeed restrict who has the right to receive Trust Information.

It also proposes to confer the right to certain parties, specifically the beneficiaries and Protector(s) of a non-charitable Trust and Protectors, to request information. 

2. Power to Declare Exercise of a Power Voidable

This provision allows the court to set aside the exercise of a power by a trustee(s), where the Trustees exercised their powers validly, but failed to take into account relevant considerations, and if they had done so, would not have carried out the action that had been taken.

Additional Information

If you require further information regarding trusts and foundations and how we can assist, please feel free to get in touch with Paul Harvey at the Dixcart office in the Isle of Man.

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

Multi-Jurisdictional

Residence and Citizenship Programmes (Comparison Table)

Please note that as a general principle EEA citizens are free to move to other EEA countries. Switzerland is in the Schengen Area and as such EEA citizens can move there and vice versa.

The residence schemes detailed for: Cyprus, Malta, Portugal, and Switzerland are applicable to non-EEA individuals.

Guernsey, the Isle of Man, St Kitts & Nevis, and the UK are not in the EEA and therefore their schemes apply to EEA and non-EEA individuals.

Please note, however, that where freedom of movement is not the prime motivator, a number of the programmes may be of interest to other EEA citizens and are open to them.

Details for some residence and citizenship programmes will be changing as of the start of 2023. Please contact Dixcart if you would like further information.

Services Provided by Dixcart

  • Staff resident in Cyprus, Guernsey, Isle of Man, Malta, Portugal (Lisbon and Madeira), St Kitts & Nevis, Switzerland and the UK
  • Expertise regarding each jurisdiction: lifestyle, tax regime etc.
  • Organising visits if required
  • Coordination of the application process
  • Undertaking/coordinating requisite legal work
  • Wealth management
  • Assistance with relocation
  • Provision of personal and corporate professional services once relocation has taken place

PLEASE NOTE: In addition to the Financial Criteria detailed in the pdf, Government Fees are payable which vary considerably depending on the particular Residence Scheme. Information is available on request.

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

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

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

Swiss companies

Swiss Corporations: Stability In A Volatile World

Recent events around the world, including the covid pandemic and major wars, mean that stability, security and reputational issues have become even more important. This applies to corporate structures as well as to many other areas of international life.

Swiss companies offer stability, as well as a number of potential tax efficiencies.

Advantages

Switzerland offers a number of advantages as a location for international companies:

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

A Favourable Tax Environment for Companies and Foreign Investors

The Swiss tax regime for companies is attractive as summarised below:

  • Swiss trading companies are taxed at between 12% and 14%.
  • NO corporate tax on dividends received from qualified participations and no capital gains.
  • NO tax on dividend distributions to shareholders based in Switzerland and/or a country in the EU.

Swiss Company Taxation

The Swiss federal tax rate is consistent across Switzerland, but corporate tax rates (federal tax, plus cantonal tax) vary across different Swiss cantons, depending on the specific approved cantonal tax rate.

Since January 2020, the corporate tax rate (combined federal and cantonal tax) for trading companies in Geneva, has been 13.99%.

Swiss Holding Companies benefit from a participation exemption and do not pay income tax on profits or capital gains arising from qualifying participations. This means that a pure Holding Company is exempt from Swiss tax.

Swiss Withholding Tax (WHT)

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

Switzerland is not in the EU, but is in ‘Schengen’.

Double Tax Treaties

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

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

Patent Box

Net profit from domestic and foreign patents are taxed separately with a maximum reduction of 90% (precise rate depending on the specific canton). This Patent Box Regime meets the OECD2 standard.

Before the Patent Box is applied for the first time, the R&D expenditures, that are to enjoy tax relief, must have been identified and taxed.

Additional Information

If you require additional information relating to Swiss companies and the advantages they can offer for Swiss corporations, please speak to Christine Breitler at the Dixcart office in Switzerland: advice.switzerland@dixcart.com.

Portugal 1

What Does Portugal Offer as a Family Office Location?

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

Portugal Family Office

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

General Reasons 

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

Tax Reasons 

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

The Non-Habitual Tax Regime (NHR)

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

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

A Good Double Tax Treaty Network 

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

An Attractive Participation Exemption Tax Regime 

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

Trust Structures and the Portuguese Tax System 

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

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

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

Summary and Additional Information

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

We strongly recommend that professional advice should be taken. 

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

Please speak to your usual contact or Lionel de Freitas in Portugal: advice.portugal@dixcart.com.

St Kitts & Nevis

Second Citizenship Made Simple – St Kitts & Nevis Economic Citizenship

Further to our previous article “St Kitts & Nevis Economic Citizenship: How and Why?” we shall explore the process of applying for second citizenship in St Kitts & Nevis

As the world we live in changes, people are changing the way they think about citizenship, how they can use their citizenship in their everyday lives, as well as planning for the future, theirs and for their offspring.

The Application Process and What Help is Available

The citizenship application process can appear quite daunting, when you look at the forms requiring completion and the supporting documents needed to provide evidence of the applicant’s identity and their suitability to be a St Kitts & Nevis Citizen.

We at Dixcart Management Nevis Limited (DMNL), aim to make applying as simple as possible. We use our years of experience to ensure that the application pack to be presented to the Citizenship by Investment Unit (CIU), is the best it can be and provides everything they require.

The Four Stages of the Application Process

The application process, can be broken down into four stages and these are as follows:

Stage 1. Initial Engagement

As part of the process, DMNL will provide a personalised proposal including supporting costings, based upon the structure of the family/individual applying and whether they wish to apply via the donation route or through Real Estate.

Once the potential applicant has had the chance to review the proposal, we recommend an introductory video meeting, where we can get to know one another, answer any questions and they can decide if they wish to move forward with an application.

Stage 2. Completing the Application Paperwork

Once the engagement has been completed, the preparation and consultation phase starts. 

  • We ask the client to review the required documents list provided.
    • Complete the required application forms (C1, C2, C3 and C4).
    • Collect the supporting documents.
  • During this phase, we encourage the client to ask as many questions as are necessary, as we are here to help you.

We also offer the option for video calls, to work through the forms together and to clarify any points relating to the detail being requested.

  • As the client completes the forms and obtains the required evidence documents, we request that scanned copies be sent to us, this allows us to start the review process, ensuring everything meets the Citizenship by Investment Unit’s (CIU) standards. We will provide feedback and guidance, if we feel anything can be improved or explained in a better manner.
  • Once we and the applicant are both happy with the forms and supporting documents, the originals can then be couriered to our office and one further, final review will be carried out.  Once the final application pack is complete, we will upload the pack to the Government website and officially submit the application.

This completes Stage 2.

Stage 3. Accepting the Application

The CIU will carry out an initial review of all forms and documents.

  • Any amendments or omissions will be communicated to us for correction and we will keep the applicant informed.
  • Once CIU are happy with all the forms and documents provided, they will give confirmation that the application pack has been accepted and their formal review process will commence.
  • The CIU will not accept enquiries about an application, until 3 months (Standard) or 45 days (Fast Track), have passed.  However, DMNL have a very good relationship with the CIU and will be able to talk through any possible issues and solutions with them during processing.

Stage 4. Application Approval

Post approval in principle

  • Once the approval in principle has been granted, we will receive an official letter confirming that the application has been successful and detailing the donation required to be paid.
  • Following the transfer of funds from the applicant to the CIU, we are able collect the Certificate(s) of Registration (COR) from the Government and supply scanned copies for review.
  • Once the applicant confirms the detail on the COR is correct, we request completed passport applications. When received, we can obtain a local police clearance certificate and submit passports applications, which are normally processed in 5 days.
  • Upon receipt of the St Kitts & Nevis passport, we courier in two separate couriers, 1) your COR, 2) your passport.

When we receive confirmation of receipt, that completes the application process.

Additional Information

If you have found this article of interest and wish to explore the option of second citizenship, please contact the Dixcart office in Nevis: advice.nevis@dixcart.com We will be delighted to assist you.