Category: Corporate Services

Is there a Real Difference Nowadays?

At first appearance, private clients and institutional clients are like chalk and cheese. As a result, the Fiduciary sector has maintained different approaches to servicing these two sets of clients. However, at Dixcart Group, we feel that this is an oversight and have noticed that private clients and institutional clients have demands and requirements that are much more alike nowadays. This is perhaps because the pressures of transparency, governance, accountability and substance are affecting private and institutional clients in the same way.

Private Client Needs

Outside the normal company and day to day administration, and dependent on whether other advisers are already appointed, there can be a varying degree of involvement by the corporate service provider.  This can range from liaising with family members and advisers and reporting to meet specific individual needs, to advising on operational procedures and providing proactive advice on structures and structural changes.

Family members often want to become board members of the company, underlining the paramount importance of proper governance, decision making and domicile of the company.

Institutional and Corporate Needs

When considering the needs of institutional and corporate groups, there are generally very specific requirements.  This is because these groups usually have advisers (inhouse or external), who will have already specified a required structure’s needs and therefore service requirements.

Service considerations range from adopting consistent, group reporting and consolidation of information requirements and liaising with group functions and auditors around shareholder information and records, to involvement in group procedures and regulations to meet specific group company secretarial procedures and corporate governance requirements.

So, is there a Difference in the Approach to Administration, Secretarial and Compliance Services?

As detailed above, each client type may have differing needs (and often different asset classes), but does this effect what the underlying services are to be provided? 

The answer is, not really, as the underlying services required by each, will effectively be very similar i.e. ensuring that each corporate entity meets its regulatory and legal obligations. This is achieved through the delivery of a complete range of administration services to ensure that substance, tax and other related planning requirements are being met, whether it be a private or institutional client.

Key services include:

• Day to day administration and company secretarial services
• Director services
• Registered office and agent services
• Tax compliance services
• Accountancy services
• Dealing with transactions, including all aspects of acquisitions and disposals

Institutional client services may also include:

• Escrow services
• Securitization services
• Exchange listing services
• Employee Benefit Schemes

In all cases, where a complete suite of services, as detailed above, is provided, this can greatly assist in the setting up of bank accounts, particularly with the banks where a service provider, such as Dixcart, already enjoys a close working relationship.

What are Private Clients Learning from the Institutional Structures?

Private clients can have a vast variety of asset types within their structures, ranging from; routine investment portfolios, real estate and holding companies through to operating companies and alternative assets such as yachts, planes, cars, art and wine.  These differing asset classes often require a variety of corporate structures under a trust or foundation, with the most common and recognised being the use of a limited company i.e. the ‘Trust and Company’ structure.

However, the influence of the corporate world is seeing an increase in the use of such structures as; Private Trust Company (PTC), General Partner and Limited Partnership (GP/LP), Protected Cell Company (PCC), and Private Investment Fund (PIF).  This is because these alternative structures to the Trust and Company’ structure can offer increased flexibility in terms of client involvement and provide elevated levels of corporate governance.

As a result, the industry is seeing an alignment in the structure types now being adopted by private clients to those of Institutional and corporate groups where the traditional Trust/Foundation structure is not providing the required flexibility and corporate governance.

Lessons are also being learnt in the other direction as well.  Institutional and corporate groups and their respective service providers are seeing the benefits of building up the long-term trusted relationship with each other that is typically found with private clients and their service providers.

Conclusion

The private client and institutional worlds do have different needs, but the underlying services and structures required (outside of regulated and listed entities), are now often not that different, as the underlying services need to meet the same regulatory and legal obligations.

There is a trend towards private clients realising that there are advantages in using alternative corporate structures to the traditional trust or foundation structures, where corporate governance, transparency and flexibility of structure is of greater importance.

For institutional and corporate groups along with their respective service providers, they now see the benefits of building up a long-term trusted relationship with each other.

Final Thought – Global Corporate Administration and Company Secretarial Services

Dixcart are experienced in providing company administration, director and company secretarial services in multiple jurisdictions.  Where private clients, family offices, institutions or corporate groups have multi-jurisdictional entities to look after, these services could be consolidated through a single Dixcart office. 

This would have the following advantages:

• provides a single and consistent point of contact
• provides a consistent high level of service and reporting standards
• can be in a time zone that is most convenient to each client team

This can be achieved by working alongside our other Dixcart offices, and in the jurisdictions, we do not have a presence, alongside our network of contacts worldwide.  This global service is to aid family offices and/or corporate secretarial teams, by taking over the burden of dealing with many different service providers, in different time zones working to different corporate governance standards, so your teams can concentrate on running the core business and operations.

Additional Information

The type and complexity of corporate services required by private clients and institutions vary from case to case.  The most important factor for both client groups is to choose a service provider with sufficient experience and professionalism to coordinate a range of services that fully meet corporate governance, efficiency and corporate objectives. 

For further information regarding corporate services, please speak to Steve de Jersey in the Dixcart office in Guernsey: advice.guernsey@dixcart.com.  Alternatively, please speak to your usual Dixcart contact.

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

Guernsey registered company number: 6512.

Guernsey – an International Financial Centre

Guernsey is a premier international financial centre with an enviable reputation and excellent standards. The Island has developed as a base from which internationally mobile individuals can organise their worldwide affairs.

Guernsey is a popular jurisdiction in which to incorporate companies, which are regularly listed on the London Stock Exchange (Main Market and AIM Market), the New York Stock Exchange, The International Stock Exchange (previously the Channel Islands Securities Exchange) and many others.

The Law

The Companies (Guernsey) Law 2008, reflects Guernsey’s commitment to providing a modern statutory base and flexibility for companies using the jurisdiction of Guernsey. The Law also reflects the importance placed on corporate governance.

Types of Guernsey Company

A company may be formed as a standard company or as a cellular company. A cellular company may either be a protected cell company or an incorporated cell company.

The liability of all or any of the members of an incorporated Guernsey company can be:

• limited by shares;
• limited by guarantee;
• unlimited; or
• mixed liability.

Companies formed as one type of company, may convert into a different type of company at a later date.

Tax Status of Guernsey Companies

• Generally, the rate of corporation tax payable by a Guernsey company is 0%.

There are certain limited exceptions when a 10% or 20% rate of tax apply. Please contact the Dixcart office in Guernsey, for further details: advice.guernsey@dixcart.com.

In addition, there are no capital gains taxes, capital transfer taxes, inheritance taxes, gift duties or VAT payable by, or applicable to, a company in Guernsey. No stamp duty is payable in Guernsey on the issue, transfer or redemption of shares.

Guernsey resident companies may be subject to economic substance requirements, depending on their activities. Again, the Dixcart Guernsey office can provide full details.  

Additional Advantages Offered by Guernsey Companies

In addition to the zero tax rate benefit available to the majority of Guernsey companies, they are also popular corporate entities for a number of other reasons, including:

• Single member/director companies are allowed, as well as corporate directors and corporate shareholders.
• Incorporation is very quick (24 hours standard, 2 hours or 15 minutes using the fast-track route).
• ‘State of the art’ companies registry providing a range of full on-line services for incorporation, searches, filing, information management, document requests, dissolutions and changes to company particulars.
• Integration with other entities within wider structures, such as; trusts, foundations, limited partnerships and limited liability partnerships, is relatively easy.
• The Guernsey Company Registry is confidential with limited information available to the general public. Full information on all officers and shareholders is maintained, and is available to the relevant authorities

Additional Factors to Consider Regarding Guernsey

The jurisdiction of Guernsey has extensive experience in administering a wide variety of corporate structures and asset types.

It has a well-respected judicial system, political independence and high standards of compliance and transparency. It offers a pool of experienced professionals with the appropriate legal, accounting and company administration expertise.

Geographically it is close to the UK and to Europe and is in the same time zone as the former. 

New Guernsey residents who purchase ‘open market’ property, can enjoy a tax cap of £50,000 per annum on Guernsey source income in the year of arrival and the subsequent three years. This is provided that the Document Duty paid, in relation to the house purchase, is at least £50,000.

Additional Information

Should you require additional information regarding Guernsey companies please speak to Steven de Jersey or John Nelson: advice.guernsey@dixcart.com.

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

International Travel Restrictions

Legislation introduced in response to the Coronavirus pandemic, includes significant restrictions on the movement of people. This applies not only to international travel with the closure of borders and the suspension of flights and other forms of transport, but also in relation to travel within countries themselves.

Impact on Meetings and Specifically Board Meetings

The travel restrictions detailed above, coupled with individuals being requested to practice social distancing or in some cases isolation, are having an impact on the way in which corporate meetings are being held across the world.

For the day to day management of many companies, on-line forums are replacing physical meetings.

However, this does raise the question as to whether companies will be able to meet a number of the tests specified in economic substance legislation, introduced worldwide in the past eighteen months. In particular the ‘directed and managed’ test, which requires a certain number of board meetings with a quorum and a majority of those voting, being physically present in the particular jurisdiction.

The Current Situation?

Dixcart can provide guidance on the revised obligations in light of the current circumstances, across the jurisdictions where we have offices:

• Cyprus, Guernsey, Isle of Man, Malta, Portugal, Switzerland and the UK.

Guidance from Guernsey

The Guidance from Guernsey reflects the position taken by many other jurisdictions.

The Guernsey Revenue authorities have advised, that where a company has had to implement changes in the manner in which they conduct their business as a result of Covid-19, as far as economic substance requirements are concerned, provided that:

• the changes are as a result of the outbreak and to mitigate the threats from it, and
• are on a temporary basis,

these changes, will not in themselves, cause a company to fail the relevant economic substance test.

Companies should, however, maintain relevant records, showing both local regulations and their own internal policies, in respect of restrictions on travel for company officers, and the period of time for which these policies are in place.

This will ensure that companies can demonstrate that COVID-19 restriction measures prevented the company from holding an adequate number of board meetings on the island, ortemporarily required meetings to be held virtually, for example; conference calls, video conferencing, Skype or similar.

Normal protocols for such meetings should be observed, as far as possible.

Corporate Governance

Constitutional and other governance documents should be reviewed to ensure that they allow for meetings to be held remotely (for example, by telephone, video conferencing or other platforms), rather than there being a requirement for physical meetings to take place.

How Can Dixcart Help?

Please contact us if you need advice to help you to meet economic substance requirements during this challenging time. With offices in eight jurisdictions, Dixcart is ideally positioned to provide advice and assistance in relation to these matters.

Please speak to your usual Dixcart contact or email us at: advice@dixcart.com. Alternatively, please contact one of our managers in the Dixcart Guernsey office: advice.guernsey@dixcart.com.

Malta launched a Malta and Africa strategy for partnership 2020 – 2025, for public consultation, at the start of 2020. This strategic approach to Africa reflects the growing importance of this continent in relation to trade, development and diplomatic objectives.

The African Continent in the Modern World

The Maltese Government views Africa as a vital strategic partner for the future. It is an emerging economic force of more than fifty countries and Malta’s strategy focuses on trade, diplomacy, development, exchange of wealth and creating opportunities between Malta and the African continent. Building Malta’s strong relationships with Africa will help to create new investment and trade which will be mutually beneficial to both countries.

Malta’s Strategy

In the opening speech at the presentation of the Malta and Africa strategy. Ex-Minister for Foreign Affairs and Trade Promotion, Carmelo Abela, highlighted the message that Africa is an emerging economic force. He remarked that Malta’s national strategy serves as a guide for the development of Malta’s relations with Africa, ensuring that Malta is not simply a passive player in a changing world, but an active contributor to solutions, and a worthy proponent of policy and opportunities for growth.

As an EU Member State, Malta has an important role to play in the formulation of EU policy leading to job creation and improved livelihoods.

Planned Trade Delegations

As a part of the Africa strategy, in 2020 the Ministry responsible for Trade Promotion will be leading trade delegations to; Ghana, Ethiopia and Ivory Coast, as well as an exploratory visit to Rwanda. The opening of the first ‘Maltese Diplomatic Mission’ in Africa, in Ghana will also take place in 2020.

Additional Information

If you would like additional information regarding the Malta – Africa collaboration please contact Jonathan Vassallo at our office in Malta: advice.malta@dixcart.com or your usual Dixcart contact.

Why use a UK Company?

The UK Government has introduced many changes to make the UK tax system more competitive. This has led to the return of UK holding companies, the re-shoring of manufacturing and increased UK based research and development (R&D).

United Kingdom (UK) entities have a respectable international image and can be used tax efficiently for cross border trading and as international holding companies.

Examples of how UK entities can be used are detailed below:

UK Resident Companies

Since 1 April 2017 the corporation tax rate has been 19%.

There are generous allowances for investment in R&D by small and medium sized entities. The tax relief on allowable R&D is 230%. That means that for every £100 spent on R&D you can claim a tax deduction of £230.

Where a company makes a profit from exploiting potential inventions those profits may be taxed at 10% rather than at the normal corporate tax rate.

UK Controlled Foreign Company Laws have been reformed with the aim of making the UK tax system competitive for multinationals.

There are no withholding taxes on dividends paid from the UK by companies.

UK Holding Companies

The UK has a participation exemption for foreign income dividends. The conditions for this vary according to whether the company is small or large.

As a result of this exemption most foreign dividends will be exempt from UK taxation when received by UK-resident companies. Where the exemption regime does not apply, foreign dividends received by a UK resident company will be subject to UK corporation tax, but relief will be given for foreign taxation including underlying taxation where the UK company controls at least 10% of the overseas company.

No capital gains tax is payable on the disposal of a trading company by a member of a trading group, subject to minimum holding requirements. This relates to disposal of all or part of a substantial shareholding in another trading company, or the disposal of the holding company of a trading group or sub-group.

UK Limited Liability Partnerships (UK LLP)      

A UK limited liability partnership is a separate registered legal entity with an address in the United Kingdom. No personal liability falls on a member of an LLP for the contracts or debts of the LLP.

As long as the UK LLP operates in a commercially orientated manner, e.g. carries on a business with a view to generating profit, the members will be treated for tax purposes as if they are partners. A non-resident partner of a UK partnership is not liable to UK tax on non-UK source income.

Therefore if a UK LLP has non-UK partners and is involved in non-UK trading (carried out entirely outside the UK), there will be no UK taxation on its members.

Non-Resident Companies

A UK non-resident company is one that is incorporated within the UK but is deemed to be resident in another country. This occurs when the effective management and control of a company is carried out in another country which has a Double Tax Agreement (DTA) with the UK. The DTA needs to specify that the country of residence of the company is that in which the effective management and control takes place.

Valuable tax planning opportunities are presented where there are treaties with countries offering low corporate tax rates, such as Cyprus, The Netherlands, Portugal and Switzerland. Malta also provides similar opportunities due to the Maltese system of tax refunds.

UK companies which are able to obtain a Certificate of Residence from a competent authority in one of these countries are not liable to UK tax other than that due on UK sourced income.

The UK non-resident company, therefore, offers a respectable and reliable legal personality, together with low taxation, depending on the treaty country used.

Formation of Companies in the UK 

General information is detailed below, outlining the formation and regulation of UK companies, as embodied in the Companies Act 1985 and Companies Act 2006, where currently in force.

1. Incorporation

Incorporation normally takes five working days, although same day incorporation is possible for an additional fee.

2. Shares

Shares are registered and a shareholders’ register is maintained at the registered office.

3. Shareholders

A minimum of one shareholder is required for a private limited company.  There is no maximum number of shareholders.

4. Registered Office

A registered office is required in the UK and can be provided by Dixcart.

5. Meetings

There is no restriction as to the location of meetings.

6. Accounts

Annual accounts must be prepared and filed with Companies House. A company may qualify for an audit exemption if it fulfils at least two of the following criteria:

• An annual turnover of no more than £2million.
• Assets worth no more than £5.1
• 50 or fewer employees on average.

An Annual Return must be filed each year.

7. Company Name

Any name may be chosen, provided that it is not the same as, or too similar to, any other company name currently in use.  Certain words, however, such as ‘Group’ and ‘International’ require special permission.

8. Taxation

The “main rate” of corporation tax is shown in the table below.

	MAIN RATE
Financial Year to 31 March 2020	19%

If you would like additional information regarding the formation of companies in the UK and the fees charged by Dixcart, please contact advice.uk@dixcart.com

Please also see our Corporate Support Services page for further information.

Updated: November 2019

Why Use the Isle of Man?

Isle of Man companies benefit from a zero rate of tax on trading and investment income.  They are also able to register for VAT, and businesses in the Isle of Man are treated by the rest of the EU for VAT purposes as if they are in the UK.

Isle of Man companies are therefore particularly useful for:

• Holding investment portfolios and participations in other companies. This is due to the zero rate of tax on such activities and the lack of withholding taxes on dividend income from such companies.

• Moody’s Investment – London 16 November 2019 – the Isle of Man’s credit rating is Aa2 negative , the same as the United Kingdom. The negative outlook on the IoM’s ratings reflects Moody’s view that the UK’s sovereign credit trend continues to have a significant impact on the IoM’s credit profile, due to the close and material institutional, economic and financial linkages between the two jurisdictions. Moody’s noted the IoM’s credit strength is the island’s very strong public finances. Very high wealth levels provide a significant buffer against shocks, and the IoM has a long track record of strong GDP growth, with very low volatility. Fiscal policies are forward-looking and prudent, exemplified by the large fiscal buffers accumulated over many years.

• Trading within the EU. Due to the zero rate of tax on trading income and the ability to quote an EU accepted VAT number.

• Holding UK commercial property. For VAT purposes the UK and the Isle of Man are treated in the same manner.

• Isle of Man companies wishing to borrow money from banks benefit from being in a well-regulated jurisdiction with a public register of mortgages and other charges.

• The Isle of Man is a signatory to the Paris Convention on Patents and Trademarks, and therefore many intellectual property companies base themselves in the Isle of Man.

The key points above outline some of the most frequent reasons for the use of Isle of Man companies. Please note it is not a definitive list of reasons for using such companies.

Formation of Companies in the Isle of Man 

Isle of Man companies can currently be formed and regulated under two separate Acts.

This Jurisdiction Note outlines the formation and regulation of companies as embodied in the Isle of Man Companies Act of 2006 (“the Act”).  A second Jurisdiction Note is available which details companies governed by the Isle of Man Companies Act of 1931 (as amended). Please request this second note if you wish to consider both types of Isle of Man company.

1. Incorporation

Standard incorporation of a Company occurs within 48 hours of receipt of the relevant documents to the Isle of Man Registry, however for an additional fee companies can be incorporated in 2 hours or “while you wait”.

2. Company Name

The proposed name must be approved by the Companies Registry. The Company can have its name ending in any of the following:

• Corporation
• Corp
• Incorporated
• Inc
• Limited
• Ltd
• Public Limited Company
• PLC

3. Capitalisation

A company may be incorporated with a single share, which can have a par value of zero.  Therefore no thin capitalisation applies.

4. Shareholders

Companies can be incorporated with only one shareholder. Shareholders need to be recorded at the registered agent of the company.  

       5. Nominee Shareholders

These are permitted and can be provided by Dixcart.

6. Minimum Number of Directors

The minimum number of directors is one. Directors do not need to be resident in the Isle of Man. Corporate Directors are permitted. In addition a single natural person can act as a Director of a 2006 company. 

7. Secretary

There is no requirement for a company secretary.

8. Registered Agent

A registered agent is required and can be an Isle of Man licensed corporate service provider.

9. Annual Return

There is a requirement to file an annual return.

10. Annual General Meeting

There is no requirement to hold an annual general meeting. 

11. Accounts

There is a requirement to “keep reliable accounting records” which:

• correctly explain the transactions of the company; and
• enable the financial position of the company to be determined with reasonable accuracy at any time; and
• allow financial statements to be prepared.

The accounting records are to be kept at the office of the registered agent of the company or at such other place as the directors of the company think fit.  Where records are not kept at the office of the registered agent, the company must provide the registered agent with a written record of the physical address of the place where the records are kept and copies of the records at intervals not exceeding 12 months.

There is no requirement to prepare financial statements however any member or director of the company may at any time demand that financial statements be prepared where the company has not prepared statements for a continuous period of 18 months.  Any such statements prepared, should relate to the period following the end of the financial period to which the preceding financial statements relate, or if no such previous financial statements exist, since the incorporation of the company.  Originals of statements prepared must be kept at the office of the registered agent of the company.

12. Audit

A company is free to appoint an auditor however where the company’s securities are listed or admitted to trade on a securities market or exchange, the company must appoint an auditor.  Any auditor appointed must be appropriately qualified in accordance with the Act.

13. Taxation

A tax return must be prepared and filed at the Isle of Man Treasury.

All Isle of Man companies are now treated as resident companies.  Resident companies are taxed at a rate of 0% on their trading and investment income.  Income derived from land and property situated in the Isle of Man is taxed at a rate of 10% and banks are taxed on their banking business at a rate of 10%.

14. VAT

The Isle of Man has a Customs and Excise agreement with the UK. This means that for VAT, Customs, and most Excise duties, the two territories are treated as one.

For VAT purposes, trading within the EU will be subject to the same rates as the UK.

15. Beneficial Ownership Register and Nominated Officer

The Isle of Man operates a non-public Beneficial Ownership Register and a nominated officer is required for each entity, a service which can be provided by Dixcart. The register is only accessible by Isle of Man regulatory bodies and/or law enforcement agencies for a permitted purpose. It is not available to the public.

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

Updated 24.01.2020

It is possible for a company to be incorporated in one jurisdiction and to be resident in another. In certain circumstances this can generate tax efficiencies.

It is very important to always ensure that the company is properly managed and controlled from the jurisdiction in which it is resident.

The jurisdictions of Cyprus, Malta and the UK present a number of low tax trading opportunities, as detailed below.

Advantages Available to a Cyprus Company Resident in Malta

Foreign companies seeking to establish certain entities in Europe, for example a company set up 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.

A company resident in Cyprus is taxed on its worldwide income. In order for a company to be resident in Cyprus it must be managed and controlled from Cyprus. If a company is not resident in Cyprus, Cyprus will only tax it on its Cyprus source income.

A company is considered resident in Malta if it is incorporated in Malta, or, in the case of a foreign company, if it is managed and controlled from Malta.

Generally foreign companies in Malta are only taxed on their Malta source income and income remitted to Malta. The exception is income arising from trading activities, which is always considered to be income arising in Malta.

• 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.

Advantages Available to a UK Company Resident in Cyprus

A number of foreign companies wishing to establish a trading company in Europe are attracted to the UK, for a number of reasons.  In April 2017, the UK’s corporation tax rate was reduced to 19%.

To enjoy an even lower tax rate might be an objective.

If it is not essential to manage and control a company from the UK, the tax rate can be reduced to 12.5% by managing and controlling the UK company from Cyprus.

Whilst a UK company is resident in the UK by virtue of its incorporation, the UK-Cyprus Double Tax Treaty specifies that when a person, other than an individual, is a resident of both contracting states, the entity will be resident in the contracting state in which its place of effective management is situated.

• A UK company with its place of effective management in Cyprus will therefore only be subject to UK tax on its UK source income. It will be subject to Cyprus corporation tax on its worldwide income, with the Cyprus rate of corporation tax currently being 12.5%.

Effective Place of Management and Control

The two structures detailed above rely on the location of the effective management and control being established in a jurisdiction other than the jurisdiction of incorporation.

To establish an effective location for management and control, a company must almost always:

• Have a majority of directors in that jurisdiction
• Hold all board meetings in that jurisdiction
• Implement decisions in that jurisdiction
• Exercise management and control from that jurisdiction

If the place of effective management and control is challenged, a court is likely to take into account the records that have been maintained. It is very important that these records do not suggest that the real decisions are being conceived and executed elsewhere. It is essential that management and control take place in the correct jurisdiction.

How Can Dixcart Help?

Dixcart can provide the following services:

• Company incorporation in Cyprus, Malta and the UK.
• Provision of professional directors who are suitably qualified to understand the business of each entity and to manage it appropriately.
• Provision of serviced offices with full accounting, legal and IT support.

Additional Information

If you would like additional information please contact Robert Homem: advice.cyprus@dixcart.com, Peter Robertson: advice.uk@dixcart.com or your usual Dixcart contact.

Please also see our Corporate Services page for further information.

Updated October 2018

On 30 October 2019, the Ukraine ratified changes to two Double Tax Treaties (DTAs), the treaty with Cyprus and the treaty with the UK, respectively.

Once the appropriate formalities have taken place in the reciprocal countries, these treaties are expected to come into force at the start of January 2020.

Ukraine: Cyprus Treaty 

The key changes are:

• A reduction in the withholding tax for dividends from 15% to 10% (if the paying company does not qualify for a lower rate).

• To enjoy a reduced withholding tax rate of 5% on dividends the following two conditions must now be met (previously it was only one of the two conditions):
• The company paying withholding tax holds a minimum 20% of the capital in the company distributing the dividends; AND
• The value of the investment held (directly or indirectly) is a minimum €100,000.

Ukraine: UK Treaty 

The key changes are:

• An increase from 10% to 15% on the withholding tax rate payable for dividends;
• A reduced withholding tax rate of 5% on dividends, where the company paying withholding tax holds a minimum 20% of the capital in the company distributing the dividends;
• An increase from 0% to 5% on the withholding tax rate payable for royalty payments;
• Measures to increase the exchange of tax information between the two countries.

Additional Information

If you would like additional information regarding Ukraine’s Double Tax Treaties and the opportunities that they might provide, please speak to the Dixcart office in Cyprus, the UK office or the Malta office on advice.malta@dixcart.com.

The Malta Financial Services Authority (MFSA) has published its Annual Report and Financial Statement for the year 2018. It presents an overview of the activities and work carried out by the MFSA, together with details about the industry’s performance and explains the Authority’s vision for the coming years.

Despite a challenging and highly competitive environment, in 2018, the Maltese financial services sector continued to register significant growth rates, with a growth of 9.5% over the previous year.

Financial Services in Numbers

The MFSA registered an additional 144 new entities, as an increased number of businesses decided to make Malta their jurisdiction of choice, bringing the number of entities licensed by the MFSA up to over 2,300.

The financial services industry in Malta is a key pillar of the Maltese economy, contributing around 6% of Gross Value Added (GVA) in 2018, as shown in Chart 1.

At the end of 2018, the sector employed more than 12,000 people, 1,000 of which were new jobs created during that year. This brings the share of local employment within the financial services sector to 5.3%, almost double that recorded as the average for other member states of the European Union, which stands at 2.9%.

Deposits within domestic banks grew by 6.1%. These were mainly concentrated in current account deposits, with the share of such deposits amounting to around 70.3%. The amount of bank loans and advances grew for domestic banks: 6.3% for core and 18.0% for non-core.

The total assets of the securities and investment services sector in Malta grew by 8.3%, amounting to €11.7 billion in 2018. Corporate bond trading reached €93.7 million in 2018, up 22.5% from 2017.

The aggregate net asset value of Funds Domiciled in Malta totalled €11.7 billion, up 8% from 2017 and the locally managed assets of non-Malta domiciled funds grew by 9.1%, to €24 billion.

MFSA Vision for the Future

During 2018 MFSA published over 600 regulatory notifications to guide regulated entities and to safeguard the consumers of financial services.

The Virtual Financial Assets (VFA) Act came into force in November 2018, making  Malta a pioneer in the world of distributed ledger technologies and digital asset legislation.

The MFSA also signed a Memorandum of Understanding (MoU) with the Maltese Financial Intelligence Analysis Unit (FIAU) to enhance collaboration and improve the thoroughness of ‘Anti-money Laundering’ and ‘Customer Facing Staff’ on-site reviews and inspections.

Additional Information

If you would like further information on this subject, please contact the Dixcart office in Malta: advice.malta@dixcart.com or your usual Dixcart contact.

Malta is an attractive and progressive jurisdiction for company incorporations. Located within the EU, it is introducing new laws and regimes, on an on-going basis, to consolidate this position. New laws include ‘New Consolidated Group Rules,’  introduced in May 2019, and new ‘Patent Box Regime Rules,’ implemented in August 2019.

NEW CONSOLIDATED GROUP RULES

Malta Full Imputation Tax Regime

Malta’s competitive tax regime is based on a full imputation system. Tax on the profit paid, by the company distributing dividends, is made available to shareholder as a tax credit.

A non-Malta resident shareholder receiving profit dividends, can request a tax refund.

New Consolidated Group Rules – Cash Flow Benefits

Malta published new ‘Consolidated Group Rules’ on 31 May 2019. These come into  effect for tax year 2020, relating to relevant organisations with accounting periods in calendar year 2019.

• One of the advantages of the new consolidation regime is that cash flow benefits can be enjoyed by eliminating the time lapse for the receipt of applicable tax refunds, once relevant tax returns have been filed.

Further details can be found in Article: IN609 Malta Introduces Consolidated New Group Rules – Offering Cash Flow Advantages.

NEW PATENT BOX REGIME

Malta’s New Patent Box Regime

Malta published new Patent Box Regime (Deduction) Rules in August 2019 and the Patent Box Regime deduction is calculated using the following formula:

The resultant figure is the amount that can be deducted from the gross income of the company, that created and developed the IP in Malta, thereby reducing the income that is taxable.

Further details can be found in Article: IN610: Malta’s New Patent Box Regime.

   Additional Information

If you would like further information regarding The New Consolidated Group Rules or the New Patent Box Regime in Malta, please contact the Dixcart office in Malta: advice.malta@dixcart.com or your usual Dixcart contact.