Malta funds

Setting up a Company in the EU – Malta Funding Solutions

If you are in the process of setting up a company in the EU and require funding solutions – Malta can assist.

The Maltese Government has launched an attractive loan scheme to support the manufacturing and service industries, investing in projects that will help them further expand their business.  

  • The measures are designed to support companies which plan to; establish innovative products, enter unexplored geographic markets, address environmental concerns, or aim to digitalise various business processes. Projects can be funded through a variety of loan offerings, up to a total of €800,000.

Companies which are based in Malta have access to national and EU funding.

Dixcart Malta can help with the application to the Malta Enterprise, the Government agency which offers support measures to Maltese companies at different stages of their lifecycle. There are attractive funding options that are available for companies in the following sectors; Hi-Tech Sector, Artificial Intelligence, Advanced Manufacturing, Life Sciences Sector, Education and Training, Digital Innovation and Data Science.

Eligibility Requirements

Companies registered as a limited liability company with the Malta Business Registry and engaged in the business of producing goods or services in Malta are eligible for funding.

Businesses must also:

  • have no tax liabilities relating to; VAT, income tax, or contribution payments;
  • not be engaged in activities expressly excluded under the de minimis regulation;
  • have at least one full-time employee registered on Job Plus and residing in Malta;
  • not be subject to collective insolvency proceedings.

Activities

Common examples of activities that may be supported through a soft or start-up loan include:

a) facilitate a development or expansion project, based on a business plan that is focused on developing a new product or entering a new geographic market;

b) address environmental issues such as water usage, water treatment, waste treatment, reduction and reuse;

c) optimise business processes through digitalisation and advanced technologies;

d) achieve a high level of sustainability.

Amount of Contribution

The loan may cover up to 75% of the costs associated with the proposed project, including asset purchases, salary costs, know-how, and other non-recurring costs.

The loan must be secured by a unique mortgage covering at least 50% of the loan amount.

The Soft Loan amount must not exceed:

  • €1 million (or €500 thousand for road freight companies), to be repaid over a period of five years,
  • €500 thousand (or €250 thousand for road haulage companies), to be repaid over a period of ten years.

The Start-up Loan amount must not exceed:

  • €800,000 for innovative projects, provided that all parties in the company structure, including corporate entities, are a maximum of 4 years old.

Artificial Intelligence (AI) Strategy and New Niches

The Maltese strategy and vision for AI aims to map the path for Malta to gain a strategic competitive advantage in the global economy as a leader in the AI field. Malta is becoming a home for technologies that will be shaping the future, such as: 

  1. Distributed Leger Technology (DLT), including blockchain; 
  2. MedTech, including bioinformatics and medical imaging;
  3. Artificial Intelligence, mainly with a focus on machine learning, natural language processing and speech;
  4. Internet of Things and 5G;
  5. Biometrics; 
  6. Virtual Reality and Augmented Reality. 

Malta as a Technology “Test Bed”

Malta is an ideal micro test bed enabling service providers to prove and develop their concepts and create solutions. Malta incentivises companies to introduce innovative technologies and to help build a new infrastructure for the future. The Government of Malta continues to invest in bringing the latest technologies to Malta and aspires to ensure continuous connectivity.

Malta – The Tech Hub in the Mediterranean 

Malta Enterprise is the Maltese Government economic development agency, responsible for attracting Foreign Direct Investment, whilst also assisting businesses to set-up, grow and continue to expand their operation.

This is achieved through various fiscal and financial incentives that are managed and administered by the agency. It is also worth noting that 25% of Malta’s population are expats living and working in Malta, demonstrating that it is very much an Island open to diversity and innovation.

Case Study

An entrepreneur based in Portugal contacted Dixcart to help with an application for the Malta Start-up Support Measure.

After a quick preliminary meeting with Malta Enterprise, it was identified that the product met the eligibility requirements for the Start-up Support programme and would qualify for the €800,000 loan, allocated to projects that are deemed innovative.

Dixcart started to work concertedly, for the next couple of months with the client, to prepare the business plan, the financial projections, and to then assist with the pitch to the Malta Enterprise Board.

A couple of weeks following the pitch, Malta Enterprise informed Dixcart and the client that the project had been successfully approved. Dixcart then helped the client establish the Maltese company, find suitable office space, and recruit staff.

Dixcart will also help the client apply for Research and Development (R&D) Grants, for any expenses that are not covered by the Start-up Loan. We will also provide ongoing management and support, including accounting and secretarial services, and comprehensive reporting and compliance services. 

Additional Information

If you require any further information regarding setting up a company in Malta and our “one-stop shop” corporate services, including support with an application for funding in Malta, please speak to Jonathan Vassallo at the Dixcart office in Malta: advice.malta@dixcart.com.

Swiss Accounting Regulations and Auditing Requirements

A number of clients and contacts ask for general details regarding Swiss accounting and audit requirements, and we have therefore provided the following summary.

All Swiss companies have to register with the Swiss Commercial Registry and have their accounting undertaken by a Swiss accountant or by a Swiss Certified Public Accountant.

Swiss Accounting Regulations and Chart of Accounts

A chart of accounts is a list of financial accounts set up, usually by an accountant, for an organisation, and available for use by the bookkeeper for recording transactions in the organisation’s general ledger.

There is no official chart of accounts in Switzerland. Certain industries nonetheless are governed by Swiss accounting regulations and Swiss GAAP.

Companies can refer to principles defined by:

  • Swiss Law
  • The Swiss Audit Manual
  • IAS
  • US-GAAP Standards

Company Obligations

The Board of Directors of a Swiss company is required to produce an annual report for each financial year, within six months of the end of the relevant financial year.

Every company has to keep physical or digital records of all its business transactions for a period of ten years.

Annual Reports

The annual report consists of the Swiss company’s financial statements in the form of, the balance sheet, profit and loss account, the corresponding notes, and a management report.

The annual report includes the turnover for the preceding financial year and must follow the Swiss accounting principles (see below).

The annual report, together with the corporate tax return, must be filed with the relevant cantonal tax authority by 30 November of the calendar year (at the latest), following the end of the financial year.

Publishing Results

In Switzerland, publication requirements are very limited. Only individual and consolidated financial statements of listed companies must be published.

Swiss Audit Requirements

The organisation’s size and economic importance of the Swiss company determine whether a company is subject to an ordinary or limited audit. Under certain conditions, smaller companies are not audited.

1. Ordinary Audit

This is required, if for two consecutive fiscal years, two of the threshold values, detailed below, are exceeded.

  1. Balance sheet of CHF 20 million or more,
  2. Turnover of CHF 40 million or more,
  3. 250 or more full-time employees.

A company must also undergo an ordinary audit; if it has an obligation to consolidate, or if a group of shareholders holding at least 10% of the company’s shares request such an audit to be performed.

An ordinary audit may be specified in the company’s articles of incorporation or voted on a general meeting.

2. Limited Audit

Most Swiss SMEs do not meet the above criteria and are therefore subject to a limited audit.

This requires a summary report to be sent to the members of the general meeting. The process includes an interview with the management, verification of details and an analytical audit.

3. No Audit

If the company employs less than 10 full-time employees and all of the shareholders unanimously consent, it is not necessary to carry out an audit (opting-out).

Swiss Holding Company: Consolidating Financial Statements

Every Swiss holding company must establish consolidated accounts according to the Swiss Code of Obligations.

Consolidation means aggregating annual reports from the different companies which make up the group to obtain a single annual report describing the situation of the group.

In terms of Swiss accounting law, two or more companies form a group, if they meet the following two conditions:

  1. If 50% of the company are held by the Group, holding company of the Group, or by another company within the Group.
  2. If they have similar objectives and purpose.

Small groups are exempt from consolidating their accounts and are so defined if they meet two of the three following criteria:

  • A total balance sheet less than CHF10 million,
  • Fewer than 200 employees,
  • A turnover of less than CHF20 million.

The company must also conform to the conditions detailed below:

  • The company must not have shares quoted on the stock market.
  • No shareholder, owning more than 10% of the capital has demanded consolidation.

Swiss Accounting Principles

  • Swiss Financial Reporting Principles

Financial reporting serves the purpose of presenting the economic situation of a company in such a way to enable third parties to make a reliable judgement.

Financial reporting is based on the assumption that the company will remain an “going concern” for the foreseeable future and is not in danger of insolvency.

  • Currency and Languages

Accounting in Switzerland is carried out in Swiss francs (CHF) or in any other currency required for business operations. If a foreign currency is used, values must also be shown in Swiss francs.

The foreign exchange rates used are those as published by the Swiss Federal Tax Administrator and must be disclosed in the notes.

Swiss accounting has to be undertaken in one of the official Swiss languages or in English. It may be carried out in writing, electronically, or in a comparable manner.

  • Swiss Accounting Principles

The Dixcart office in Switzerland can provide you with comprehensive details regarding Swiss Accounting Principles. If you would like further information, please contact: advice.switzerland@dixcart.com

Additional Information

Please do not hesitate to contact our office in Switzerland, if you have any further questions or would like a cost estimate for the services that we can provide: advice.switzerland@dixcart.com

Malta

Ten Reasons Why to Relocate your Business to Malta – A Malta Company 

Establishing a Malta Company

Malta is a beautiful Mediterranean island and is equipped with a high-tech infrastructure that those wishing to establish a commercial operation would expect to find in an international financial service centre.

Additional advantages include; the corporate tax regime, investment and immigration opportunities, fiscal and social benefits, a distinctive lifestyle and a stable economic ecosystem.

Here we examine ten key reasons why businesses look to relocate to Malta.

Reason 1: Opportunities in the stable financial services sector

Building on the success of its robust banking industry, Malta has taken the opportunity to style itself as a European financial service centre and the jurisdiction of choice, for funds in the Mediterranean.

Malta offers a great selection of innovative funds structures, including:

Malta is a member of the European Union and part of the Euro-zone, with the local economy being based on the Euro. This alleviates any foreign exchange issues for companies operating within the European Union.

Malta Enterprise sustains and assists newly formed enterprises and aspiring businesses to start operating profitably from day one. A series of beneficial incentives exist for foreign investors, small to medium-sized enterprises, and mega business set-ups. Some attractive support measures include; Micro Invest, Business Advisory Services, Development and Research Grant Schemes, Business START and more.

Reason 2: Tax and legal framework

Malta was one of the few European countries to adopt a complete imputation system, which is one of the main advantages of Malta’s tax system, along with the fact that Malta has an extensive network of double taxation agreements and a refundable tax credit scheme. Malta does not withhold tax on dividends paid to shareholders.

A Company established in Malta would have to account for tax on worldwide income and is typically taxed at the standard corporate tax rate of 35%. However, upon distributing dividends to a non-Maltese resident shareholder, such a shareholder becomes eligible to a tax refund on the Malta tax paid at the company level. The final tax leakage, after the refund is between 5% and 10%.

In addition to the traditional Limited Liability Company, Malta can offer Partnerships – an alternative vehicle to set up a business.

Reason 3: Simple re-domiciliation of companies

A company formed and incorporated or registered under the laws of an approved foreign country, which is similar in nature to a company as recognised under the laws of Malta, may make a request to the Malta Business Registry of Companies to be registered as ‘continued’ in Malta, provided the laws of the foreign country allow this, and provided the company is authorised to do so by its constitutive documents. 

The request to the Malta Business Registry of Companies must be accompanied by a specific pack of documents.

Reason 4: Business support services

Outsourcing any support required to ensure that all business needs are met, can prove to be a valuable cost-saving exercise. Malta boosts a number of professional service providers, such as Dixcart, that can efficiently handle all of the relevant corporate requirements in Malta.

Such services include; submission of annual returns to the Malta Business Registry, provision of director services, secretarial services, auditing and accounting, payroll, recruitmentemployment law, compliance and regulatory advice.

Malta is also well-known within EU as a fast developing  Eco-friendly Jurisdiction. Please let us know if you would like any further information regarding the initiatives being developed in Malta and how these might be of benefit: advice.malta@dixcart.com.

Reason 5: Labour force

The workforce in Malta is highly renowned for its qualified and multi-lingual population which consists of both local and foreign workers. In addition to Maltese, English is an official language in Malta, making communication easy within the business itself and also with the Government and clients worldwide.

Italian is also widely spoken and professionals with a good grasp of French, German, Spanish and other languages are common too.

Reason 6: A perfectly located island

Despite being an island, Malta is highly accessible via both sea and air transport links to main and subsidiary airports in mainland Europe, North Africa, Turkey & UAE. Regular and frequent flights to and from Malta are operated by numerous airlines that make use of Malta International Airport.

Malta has flights departing and arriving from key capital cities, ranging from Berlin to Milan to Algiers, Warsaw, Istanbul, and Dubai amongst others. Not only does Malta boast its own national airline, but its airport welcomes a host of major airlines including low-cost ones. For the last decade Malta has become known as a respected Aircraft Hub.

Reason 7: Biggest yacht registry in the EU

Currently, Malta has the largest shipping register in Europe and the sixth largest in the world. In addition, Malta has become a world leader in commercial yacht registration.

The Maltese authorities are approachable and flexible in their practices, while at the same time meticulously follow a rigid framework of guidelines and regulations. This has helped create the cutting edge, for which Malta is known in this sector.

Dixcart Malta is very experienced in and more than happy to help with Yacht Registration.

Reason 8: IT Infrastructure

Malta is relatively advanced when it comes to IT infrastructure.

Types of services include; co-location and hosting services, data centres, cloud services and internet services. Robust government information systems architecture combined with established service providers, ensures that anyone interested in doing business in Malta will have access to secure, affordable, efficient, and reliable systems.

The new residential programme for Digital Nomad in Malta is open to third-country citizens who would usually need a visa to travel to Malta. Funding is also available for IT and Fintech Business in Malta. Malta is also one of the first countries to have nationwide 5G Data coverage.

Reason 9: Immigration and investment incentives

Third Nationals Country nationals can relocate to Malta and get a work permit with an Employer in a transparent procedure through the online application system supported by the Employer. This process is available for applications when abroad and when the individual is already in the Malta. In addition, some programmes are designed for fast-track highly qualified people and can generate tax benefits, such as Highly Qualified Persons (HQP)and professionals in Key Employment.

Additionally, there are nine citizenship and residence programmes are available, allowing qualifying persons that satisfy a robust due diligence process to take up Citizenship or Permanent and Global Residency in Malta

Reason 10: Entrepreneurial climate and safety

Major credit rating agencies repeatedly rate Malta as a solid and stable economy, and many prominent economists, describe Malta’s economy as highly stable. This translates into a secure economic climate which is also protected by highly regularised industries, a robust anti-money laundering system and an extremely low probability of natural disasters.

Even during the COVID-19 pandemic, Malta’s economic size made it possible to get back on its feet after a shorter time than many larger economies. Malta’s population has one of the highest rates, of not only being fully vaccinated but already having received booster injections, in Europe.

Additional Information

If you are considering establishing a Malta company and would like further information regarding the support measures for research and development and the business opportunities available through Malta, please speak to Jonathan Vassallo: advice.malta@dixcart.com at the Dixcart office in Malta, or to 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

Assisting Businesses Moving to the UK – UK Resident Directors and Bank Accounts

Background

We, at Dixcart in the UK, are asked several times a week if we provide UK resident directors, in order that a UK company owned and sometimes controlled from overseas, can open a UK bank account.

The position is not so simple. Before a UK bank will open a bank account for a UK company that is owned from abroad, there are many compliance and commercial hoops to jump through. Appointing a UK resident director will not magic these away.

Bank Accounts

Banks will not be willing to open accounts where they do not see the opportunity to make a profit. If the proposed account will receive a dividend once or twice a year which is then paid on, leaving only enough to pay the costs of the company, the banks will conclude that the compliance cost of opening such an account will far exceed the money that can be made by providing that banking service. It is just common sense.

Incorporation of a UK Company Run from Outside the UK

Many overseas companies who want to ‘dip their toe’ into the UK market will often want to incorporate a UK company but run it from outside of the UK. They then find it difficult or impossible to open a UK bank account with the end result that we receive several requests every week to act as a director of a UK company owned from outside of the UK. 

UK Director Responsibilities and Associated Fees

Many might think that a professional at Dixcart would be willing to be named as a UK resident director, sign a bank application, and then occasionally sign things as and when requested. 

In reality, if you are a director, you have onerous responsibilities and really need to understand the business, take the key decisions for that business, and ensure that you manage and control that business. 

Clearly one would take the advice of clients, but at the end of the day the ‘buck stops’ with the director. That is why the cost of this service normal carries a risk fee of £5,000 per annum plus a charge for the director’s time costs. In addition, Dixcart would only be willing to accept the position if Dixcart UK did all of the; accounting, company secretarial and tax compliance services for the company. For a relatively quiet holding company the total annual cost is likely to be a minimum £20,000 per annum plus VAT at 20%.  For a trading company the cost is likely to be greater.

The First Year of Operation

In the first year the costs would be higher because you would also have set up fees including; company formation, VAT registration, ICO registration and dealing with commercial contracts and shareholders agreements. The time spent dealing with the potential bank is also likely to be significant, without the guarantee of successfully opening an account.

What are the Banks Looking For?

The banks will typically want to see a business plan that clearly sets out the business opportunity and has budgets and cash flows. They will expect to know who the likely customers and suppliers will be and the size and frequency of deals. They often want to meet the people behind the business and understand how their business is to be done and be confident that there are sufficient human resources to run the business from the UK. Clients are more likely to be successful if they try and open the account with a UK correspondent of the home country bankers.

There are some industries and geographic locations that most banks just will not do business with. Any structure that looks like its prime purpose is tax planning, they will not be keen on either.

Tax Residency Needs to be Considered

The question of tax can be problematic, where the company is in effect being run from outside the UK, as it is likely to mean that, even if you have UK resident directors, the company may be tax resident in the jurisdiction of the individuals managing the day-to-day activity of the company. 

UK companies are tax resident in the UK by virtue of the place of their incorporation. The exception to the rule is where a double tax treaty deems them to be resident in another country. This would typically happen where there is a tie breaker clause in the double tax treaty with the UK, and management and control are not in the UK.

Re-domiciliation of Companies to the UK

The UK is keen to attract genuine businesses to the UK. As well as attracting new businesses the UK is interested in attracting existing businesses to move to the UK. The UK has recently carried out consultation on the introduction of legislation to permit the re-domiciliation of foreign companies into the UK.

Normally when an overseas business wants to set up in the UK, they will want to send people from their own organisation to get things going. There are various visas that can be applied for, and the UK company will need to apply for a sponsor licence. Our Dixcart immigration lawyers can assist with advice regarding visas and guide you through the application process.

What can Dixcart do to Help?

For genuine businesses, with a well thought out business proposal Dixcart can definitely be of help. 

We are a team of Accountants, Lawyers, Taxation, and Immigration advisors who work together to assist new businesses successfully establish themselves in UK. We also operate a business centre with high quality fully furnished offices of varying sizes.

If you wish to discuss setting up a business in the UK, please contact Laurence Binge at the Dixcart office in the UK: advice.uk@dixcart.com.

Reasons to Consider Relocating a Business to Cyprus

As an EU member state, Cyprus offers a pleasant climate, adequate infrastructure and a convenient geographical location. There are two main airports which provide frequent flights to most European cities as well as several international destinations. Cyprus has positioned itself well as a country of choice for both individuals and corporations, through the various tax incentives and benefits.

The numerous tax incentives offered has seen a steady flow of EU and non-EU nationals establishing their business operations in Cyprus. In addition, individuals find Cyprus a tax efficient location to structure their personal tax positions by taking advantage of flexible tax resident rules and the Non-domicile tax regime.

Cyprus is a common law jurisdiction and its justice system is based on the adversarial model. Cypriot law has been modelled on English common law.

Cyprus also has access to all EU directives as well as an extensive network of double tax treaties.

Corporate Tax Benefits

EU and non-EU nationals have the option to either establish a new company in Cyprus or migrate an existing business to Cyprus. English is widely spoken in Cyprus and staff can be easily sourced on the island. Most professionals have obtained their degrees from a UK university.

Once a company is established it can then access the tax incentives that are available.

The corporate tax rate in Cyprus is currently 12.5%, which is one of the lowest corporate tax rates in Europe. In addition, companies can apply the Notional Interest Deduction (NID) which can further reduce the overall corporate tax rate. NID was introduced in 2015, to reduce discrepancies in the tax treatment of equity financing compared to debt financing, and to promote an incentive for capital investment in Cyprus. NID is deductible, in the same manner as interest expenses, but it does not trigger any accounting entries as it is a ‘notional’ deduction.

Companies can also distribute dividends free of withholding tax. Dividends are, however, subject to contributions to the General Health System (GHS) at the rate of 2.65%, although there is a maximum cap of €180,000.  

 Summary of Corporate Tax in Cyprus

The following sources of income are exempt from corporate income tax:

  • Dividend income;
  • Interest income, excluding income arising in the ordinary course of business, which is subject to corporation tax;
  • Foreign exchange gains (FX), with the exception of FX gains arising from trading in foreign currencies and related derivatives;
  • Gains arising from the disposal of securities.

Personal Taxation

  • Tax Residence in 183 days

If an individual becomes tax resident in Cyprus by spending more than 183 days in Cyprus in any one calendar year, they will be taxed on income arising in Cyprus and also on foreign source income. Any foreign taxes paid can be credited against the personal income tax liability in Cyprus.

  • Tax Residence under the 60 Day Tax Rule

An additional scheme has been implemented whereby individuals can become tax resident in Cyprus by spending a minimum of 60 days in Cyprus, provided that certain criteria are met.

  • Non-Domicile Tax Regime

Individuals who were not previously tax resident can also apply for non-domicile status. Individuals who qualify under the non-Domicile Regime are exempt from tax on; interest*, dividends*, capital gains* (apart from capital gains derived from the sale of immovable property in Cyprus), and capital sums received from pension, provident and insurance funds. In addition, there is no wealth and no inheritance tax in Cyprus.

*subject to contributions to the General Health System at the rate of 2.65%.

Salary Income in Cyprus

On the 26th of July 2022 the long-anticipated tax incentives for individuals have been implemented. As per the new provisions of the income tax legislation, a 50% exemption for income in relation to first employment in Cyprus is now available for individuals with annual remuneration in excess of EUR 55.000 (previous threshold EUR 100.000). This exemption will be available for a period of 17 years.

Additional Information

If you would like additional information about Cyprus residency and business relocation to Cyprus, please contact: Robert Homem at the Dixcart office in Cyprus: advice.cyprus@dixcart.com.

Europe’s New Favourite Business Gateway

2022 offers a spectrum of business opportunities for the world ahead and Madeira offers great potential – even more so for a small archipelago island in the Atlantic Ocean.

Putting Madeira on the map for ambitious entrepreneurs has never been as exciting as now – as the world moves to an environment where substance is of importance coupled with a minimum global tax rate, Madeira stands out as a winner.

Why does Madeira Benefit from a 5% Tax Rate Compared to the Rest of the World?

Madeira has been able to benefit from a taxation rate of 5%, with the approval of the European Commission, and is included in the OECD whitelist, as the purpose is to provide for the development and diversification of this small island economy. The International Centre of Madeira (IBC of Madeira), the jurisdiction which regulates Madeiran companies, has been formally approved by the European Commission as a State Aid Regime and thus is allowed to benefit from the low tax rate.

The 5% is particularly attractive since the rate is applicable until the end of the year 2027.

What sort of Companies Can Operate in MIBC in 2022?

2022 is adjusting quickly to new realities, with the tide turned against the pandemic, new themes and trends are quickly arising, providing new possibilities for business opportunities.  We provide below some examples of business ventures that may be undertaken in the island of Madeira, through the IBC:

  • Technology

Unlimited potential lies with the sort of companies that may be created in the technology space through the IBC of Madeira. Selling hardware and software products to international markets is of great interest.

Granular examples of these include; technology for the tracking of overseas shipments, cybersecurity products and/or services, technology for direct air capture which may be sold after development, the selling of 3D printed bone implants, selling of virtual influences, among other possibilities, plus the endless possibilities of housing services in an IBC for the metaverse.

In terms of future technology, the Madeiran IBC may be used; by companies developing  drones that will be used to monitor crops or perform delivery of foods, medicines, books and other items. It is worth pointing out that Madeira has a Technology college with young graduates which makes it convenient to employ a local workforce. This may be more cost effective for start-up operations sensitive to prices, due to the low costs of living in Madeira.

  • Trademarks

The underlying potential of earning income from a trademark is  never ending and varies widely – whether it is a word, phrase, symbol, design or a combination of things that identifies your brand, trademarks are a great way to earn income in a tax efficient way in the IBC of Madeira.

Companies may set up group structures whereby the operational and trading activities occur in the respective jurisdictions and these companies make a payment to the Madeiran company who owns the trademark. The income from the use of the trademark is then subject to the beneficial tax rate of 5%.

  • Telecoms

With a young population of educated Madeiran locals, setting up a call centre in the tropical island may be of interest. International companies, hotel, insurance or bank groups, among others, who require call centres, may set up their operations in the island and benefit from the lower tax rate for the income earned by the company for telecoms communication.

What makes this option very attractive is the fact that there are many young people in Madeira who are highly educated and able to speak more than two languages – English being one of them! Further to this, and as mentioned already, Madeira has a low basic salary (one of the lowest in Europe) – making it a feasible financial option for businesses. Lastly, Madeira shares the same time zone as London, one of the world’s most important financial districts – and it is therefore easier, from an operational point of view, to do business with the same time zone.

  • Media

Companies are rushing to win back customers post the pandemic. As more ads become digital, the benefit of having a Madeira IBC company to sell such digital advertisements may be very favourable. Other examples of companies that may be created in the IBC to earn income include; digital installations to generate data that may help companies hone their marketing, generating mobile ads and earning royalty income from photographs taken.

  • Entertainment

More drama is expected in the entertainment industry in 2022, as films are being released simultaneously on streaming services and cinemas – viewers are looking for entertainment post the pandemic. Creating production in Madeira is a great way of making use of the island’s natural beauty, not even mentioning the stunning ‘levadas’ – whether you are a TikTok influencer earning income from advertising roles or a producer wishing to provide services from Madeira or creating content in Madeira, the 5% income tax regime may be deemed highly beneficial.

As the gaming industry continues to experience tailwind, with talk around the Metaverse becoming more and more of interest, netizens can work, shop and play. The creation and sale of gaming products through the right to explore may be done through an IBC company of Madeira, and may be of particular interest with a high number of qualified graduates from the Madeira Technology University.

  • Retail

Trading is one of the most popular options for a Madeira IBC. Typical structures include the exporting of goods from one place and importing to the next place, with the trading operations occurring in an IBC of Madeira. With online businesses on the rise, this form of trading is proving to be more and more popular.

  • Food and Farming

As the world expands rapidly with a growing population and a shortage of food, the Madeira IBC may be used to recycle food. It is known that millions of tonnes of food is wasted a year. Start-ups are racing to rectify this issue by creating upcycled food by using bits of food that fall through the cracks of the food system in order to create something new. Using a Madeira company to sell such systems may be of particular interest and may be seen as a gateway into the European market to achieve this objective.

What Substance is Required to Incorporate an IBC company in Madeira?

Please refer to the article: Three Types of Portuguese Company Advantages and Criteria for more details of the related substance criteria to establish a company in the island of Madeira.

How May Dixcart Help?

Operating in Madeira since the late 1980s, Dixcart was one of the first company service providers on the island, to assist businesses to establish within the IBC. We continue to have an office in Madeira and have subsequently also opened an office on the Portuguese mainland, in Lisbon.

Please reach out to our specialists to find out more should you have any questions: advice.portugal@dixcart.com

The Benefits of Applying the Notional Interest Deduction in a Cyprus Company

Background: Cyprus Companies

The reputation of Cyprus as an international financial centre has grown significantly over recent years. Cyprus is an attractive jurisdiction for trading and holding companies and offers a number of tax incentives.

The corporate tax rate in Cyprus 12.5%, which is amongst the lowest in Europe.  Another feature is that Cyprus companies are not subject to Capital Gains Tax. In addition, Cyprus has over 60 double tax treaties to assist with international tax structuring, finally, as a member of the EU, Cyprus has access to all European Union Directives.

Tax Residency

A company that is managed and controlled from Cyprus is considered to be tax resident in Cyprus.

What is Notional Interest Deduction and When Does it Apply?

Cyprus tax resident companies and Cyprus permanent establishments (PEs), of non-Cyprus tax resident companies, are entitled to a Notional Interest Deduction (NID), on the injection of new equity used to generate taxable income.

NID was introduced by Cyprus in 2015, to reduce discrepancies in the tax treatment of equity financing compared to debt financing, and to promote an incentive for capital investment in Cyprus. NID is deductible, in the same manner as interest expenses, but it does not trigger any accounting entries as it is a ‘notional’ deduction.

What Tax Advantages are Available Through the Use of Notional Interest Deduction?

NID is deducted from taxable income.

It cannot exceed 80% of the taxable income, as calculated prior to Notional Interest Deduction, arising from the new equity.

  • A company could therefore achieve an effective tax rate as low as 2.50% (income tax rate 12.50% x 20%).

Initially, the NID rate was defined as; the 10 year government bond yield, as at 31 December of the year preceding the tax year the NID is claimed, of the country in which the new equity was employed, plus a 3% premium. This was subject to a minimum rate equal to the yield of the 10 year Cyprus government bond plus a 3% premium.

  • Since January 1, 2020 the NID rate has been defined as; the interest rate of the 10 year government bond yield of the country in which the new equity is invested, as published annually, plus a 5% premium. The interest rate of the Cyprus 10 year government bond will no longer be used as a general minimum rate. It is only deemed to be relevant, when the country in which the new equity is invested has not issued any government bonds, as of 31 December the year preceding the tax year the NID is claimed.

Additional Information Regarding the Taxation of Companies in Cyprus

The following sources of income are exempt from corporate income tax:

  • Dividend income
  • Interest income, excluding income arising in the ordinary course of business, which is subject to corporation tax
  • Foreign exchange gains (FX), with the exception of FX gains arising from trading in foreign currencies and related derivatives
  • Gains arising from the disposal of securities.

Deductible Expenses

All expenses incurred wholly and exclusively in the production of income are deductible when calculating taxable income.

Additional Information

If you would like additional information about the notional interest deduction and the advantages it can offer, please contact: Robert Homem at the Dixcart office in Cyprus: advice.cyprus@dixcart.com.

Listed and Private Company Secretarial Services Provided by Dixcart in Guernsey

Background

Dixcart Trust Corporation Limited provides a suite of outsourced professional company secretarial services for listed companies which trade on worldwide stock exchanges. This includes the provision of a professional company secretary who will also advise on current governance matters.

What Services Can Dixcart Offer?

  • Provision of a chartered governance professional (ACG) (Chartered Secretary) with 22 years of listed company experience with clients trading on stock exchanges in the UK, Canada, USA, and Australia.
  • Management of Board and Committee meetings: pre-meeting discussion with Chairs; draft agendas; circulate meeting materials; attend and act as recording secretary; prepare initial ‘To Do’ list from the meeting and provide minutes.
  • Assistance with ongoing regulatory compliance for the listed company.
  • Assistance in preparing AGM meeting materials.
  • Provide advice on corporate governance practices, including the preparation of a full suite of corporate mandates / charters / policies.
  • Monitor corporate governance compliance to ensure best practices are being maintained.
  • Undertake annual Board assessments and tabulate results in a confidential manner.
  • Administer compensation plans.
  • Function as warrant agent for the listed company.
  • Function as the liaison for the listed company with the registrar, professional advisors and corporate stakeholders.
  • Minute Book custody in both hard copy and electronic format.
  • Provision of an administrative substance expected of operating companies.

Private Companies

Many private companies require their internal governance to be at the same level as that of a listed company, especially where the shareholders have invested significant financial capital.

Dixcart can work with management and the Board of these companies to determine and implement an appropriate level of corporate governance policies and processes. This is particularly of interest to a private company that is seeking an exchange listing as part of its short to medium-term corporate strategy.

Attendance at Meetings

Many Board and Committee meetings are held by video conferencing platforms. However, the Dixcart Guernsey office is only a short thirty-five-minute flight to London by air and has excellent transport links to other key UK airports, which enables easy access to European and international connections, attendance in person for Board and Committee meetings is easily facilitated.

What Advantages Does Dixcart Offer?

Dixcart provides effective and efficient solutions to listed company clients, using experience gained over 22 years.

The cost effective solution for a listed company is to outsource the company secretary role until there is a requirement to engage a full time in-house person. Dixcart is well positioned in this market to provide an experienced company secretary, whether as an officer position or in an advisory role.

Further Information

For further information on this topic please contact your usual Dixcart adviser or speak to Shaun Drake in the Guernsey officeadvice.guernsey@dixcart.com.

Three Types of Portuguese Company – Advantages and Criteria

Background

There are three types of company that can be incorporated in Portugal and it is important to understand the differences, as the relevant corporate income tax rates and substance criteria vary widely substantially.

The Three Types of Portuguese Company

The three types of company that can be incorporated are; through the Portugal mainland, or the island of Madeira, or the International Business Centre of Madeira (also based on the island of Madeira).

What Corporate Income Tax Rates are Applicable for these Types of Company?

The corporate income tax rates, vary significantly and are detailed below for the three types of company:

 Portuguese Mainland CompanyMadeira CompanyInternational Business Centre of Madeira Company (for international activity)
First €25,000 of taxable income17%11.9%5%
Taxable income above €25,00021%14.7%5%

As you can see the corporate tax rate for companies incorporated in the International Business Centre of Madeira are very attractive but very specific substance requirements need to be met, as detailed below.

What Substance Criteria are Applicable for Companies Registered in Mainland Portugal and in Madeira ?

Portugal and Madeira do not have specific substance requirements that need to be met. However, to be able take advantage of Portugal’s double taxation treaty network,  substance does need to be maintained.

How this can be achieved, is detailed below:

  • Maintaining an open and active bank account in Portugal;
  • A registered office address and/or premises for the exclusive use of the company in Portugal;
  • A qualified director and/or permanent employee, resident in Portugal;
  • Making important business decisions in Portugal and evidencing these through minutes of board meetings;
  • Ensuring sufficient commercial activity occurs in Portugal.

A Summary of the Advantages Available to Companies Registered in Portugal

Portuguese companies can offer a number of advantages. An important positive is the extensive network of Portuguese double taxation treaties with numerous jurisdictions around the world, with more than 70 agreements in place. This enables cooperation regarding taxation between respective jurisdictions and the smooth enforcement of respective tax laws.

Portugal is also part of the European Union and therefore has free access to the European market.

Please see below a Dixcart Article that summaries the advantages that are available: the-advantages-of-portuguese-companies-including-portuguese-holding-companies

What Substance Criteria are Applicable for Companies Registered in the Madeira International Business Centre of Madeira?

Specific substance criteria are required to be met for companies operating in the International Business Centre of Madeira (IBCM).

This criteria includes:

  1. Following the incorporation of a company:
    1. Within the first 6 months of activity, the IBCM company must hire at least, one worker, and undertake a minimum investment of €75,000 in fixed assets, within the first 2 years of activity. OR;
    1. If it hires six employees, during the first 6 months of activity, it will be exempt from undertaking the minimum investment of €75,000.
  2. On an ongoing basis, the company must have at least one full time employee on its payroll, paying Portuguese personal income tax and social security. This employee can be the Director or a Board Member of the IBCM company.

A Summary of the Advantages Available to Companies Registered in the International Business Centre of Madeira

Please see the following Dixcart Article, which explains the benefits available to companies registered in the International Business Centre of Madeira in more detail and also explains the capping of benefits that is applicable:

a-madeira-portugal-company-an-attractive-way-to-establish-a-company-in-the-eu

Additional Information and Assistance from Dixcart

Dixcart has extensive experience in the incorporation of each of the three types of company detailed above. Dixcart Portugal also has expertise in advising how substance may be established and maintained, as well as having an in-depth knowledge regarding Portuguese double taxation agreements.

Please contact us at Dixcart Portugal, if you require additional information or have any questions: advice.portugal@dixcart.com.