Category: Corporate Services

WHY USE MALTA?

The Republic of Malta is an archipelago consisting of the three inhabited islands of Malta, Gozo and Comino. The Maltese islands are situated in the middle of the Mediterranean Sea, about 100 km south of Italy.

Factors contributing to and enhancing the status of the jurisdiction include:

• Malta is a member of the EU and therefore has access to European Union Conventions.
• It is a Sovereign Independent State, enjoying political, economic and social stability.
• Malta has friendly relations with the majority of countries across the world through its policy of non-alignment.
• Companies operating in Malta are subject to a corporate tax rate of 35%. However, non-resident shareholders enjoy low effective rates of Maltese tax as Malta’s full imputation system of taxation allows generous unilateral relief and tax refunds:

• • Active income – in most instances non-resident shareholders can apply for a tax refund of 6/7ths of the tax paid by the company on the active profits used to pay a dividend. This results in an effective Maltese tax rate of 5% on active income.
  • Passive income – in the case of passive interest and royalties, non-resident shareholders can apply for a tax refund of 5/7ths of the tax paid by the company on the passive income used to pay a dividend. This results in an effective Maltese tax rate of 10% on passive income.

• Holding companies – the dividends and capital gains derived from participating holdings are not subject to corporate tax in Malta.
• There is no withholding tax payable on dividends.
• Malta has an extensive network of Double Taxation Treaties (approximately 70 treaties).
• Advance tax rulings can be obtained. These relate to legislation currently in force in Malta. Advance tax rulings guarantee that if the basic legislation upon which the ruling was based changes adversely for the taxpayer, the terms of the ruling will survive for a further two years after the change in legislation. Advance tax rulings are given for a period of five years, renewable for a further five years.
• Malta offers an aircraft register and a combined ship and yacht register. Substantial tax saving opportunities are available.

FORMATION OF A MALTA PRIVATE LIMITED COMPANY

General information is detailed below, outlining the formation and regulation of Malta companies as embodied in the Companies Act 1995.

1. Incorporation

Incorporation normally takes between twenty four and forty eight hours from the time that the necessary documentation is presented to the Maltese Business Registry. Shelf companies are not available.

2. Authorised Share Capital

The minimum authorised share capital is €1,200.  A minimum of 20% of the authorised share capital must be paid up.  The share capital can be denominated in any currency.

3. Shares and Shareholders

Shares must be registered.  The minimum number of shareholders for public and private companies in Malta is two, but a private limited liability company in Malta may also be formed as a single-member company. The sole shareholder and sole director of the Maltese Company cannot be corporate entities, and the objects clause is restricted to one main activity.

4. Fiduciary Shareholders (previously known as Nominee Shareholders)

These are permitted but must be authorised. Dixcart can provide fiduciary shareholders.

5. Registered Office

A registered office is required in Malta.

6. Directors

The minimum number of directors is one. Directors may be of any nationality and do not have to be resident in Malta. Companies wishing to take advantage of Malta’s Double Taxation Treaties need to ensure that the company is managed and controlled from Malta.

7. Company Secretary

Every company must have a company secretary. The company secretary has to be an individual and cannot be a corporate entity.

8. Accounts and Year End

All companies have a year end of 31st December unless they elect for another date.  Audited accounts must be presented to the members within ten months of the year end and filed with the Registrar forty two days after presentation to the members.

9. Taxation

Maltese companies pay tax at a rate of 35%.  However, when a dividend is paid the non-resident shareholder is able to claim a refund.  This refund equals 6/7ths of the Maltese tax paid on active profits from which the dividend distribution was made.  Where profits emanate from passive income, this refund is reduced to 5/7ths.  It is reduced further to 2/3rds where the dividend is distributed out of foreign source income and where the Maltese company paying the dividend has claimed double taxation relief.

The tax refund is increased to 100% where the profits from which the relevant dividend is distributed are derived by the Maltese company from a participating holding.

This means that the effective rate of tax in respect of dividends received from a participating holding is 0%, for dividends received from active income it is 5%, and for dividends emanating from passive income it is 10%.

10. Continuation of Companies

Maltese law allows companies to change their domicile in and out of Malta. Companies moving their domicile to Malta must come from a jurisdiction which allows this. This option enables companies to freely move from one jurisdiction to another without the need to go through a liquidation process. Companies wanting to move their domicile to Malta must submit certain documentation to the Registry of Companies. The Maltese Registrar then issues a provisional certificate and the certificate is converted into a ‘Certificate of Continuation’ on the presentation of evidence that the company has ceased to exist in the previous jurisdiction.

If you would like additional information regarding the formation of companies in Malta and the fees that Dixcart charge, please contact advice.malta@dixcart.com

 

Updated: January 2020

As a member of the EU, Malta has implemented the EU Anti-Tax Avoidance Directive (ATAD) and has incorporated it into domestic legislation.

Malta incorporated the ATAD measures into its domestic legislation at the beginning of December 2018 through implementation of Legal Notice 411, which includes the following:

• an interest limitation rule;
• general anti-abuse rules (GAAR);
• controlled foreign company rules (CFC);
• an exit tax.

These measures came into force as from 1^st of January 2019, with the exception of the exit tax, which will be introduced as from 1^st of January 2020.

Interest Limitation Rule

This regulation limits the deductibility of borrowing costs for a taxpayer. If borrowing costs exceed interest receivable, the maximum allowable tax deduction from the excess costs (referred to as “exceeding borrowing costs”), during a specific tax year, will be 30% of EBIDTA (the taxpayer’s earnings before interest, depreciation, tax and amortisation).

The unutilised exceeding borrowing costs can be carried forward, subject to further limitations and criteria. In addition, no capping applies for borrowing costs less than €3 million.

The “interest capacity” that a taxpayer has in a tax year can also be carried forward for up to 5 years.

These rules do not apply to financial institutions such as banks, funds, insurance companies, etc. and also to companies which do not form part of a group or have no permanent establishments or associated companies.

There is also an exception to the general rule, whereby it is possible to enjoy full deductibility of the exceeding borrowing costs. This is subject to the taxpayer proving that the ratio of equity over total assets is equal to, or higher than, the equivalent ratio of the group.

GAAR

General anti-abuse rules have been included, for a considerable length of time, in the Malta Income Tax Act and the EU directive re-iterates the importance of these rules.

CFC Rules

An entity or permanent establishment, whose profits are not subject to tax or are exempt from tax, will be treated as a controlled foreign company in the following circumstances:

• an entity (the ‘taxpayer’ and/or associated enterprises), holds a direct or indirect participation of more than 50% of the voting rights, or owns directly or indirectly more than 50% of the capital, or is entitled to receive more than 50% of the profit of that entity; and
• the corporate tax paid by the entity or permanent establishment is lower than the difference between the tax that would have been liable under the Malta Income Tax Act plus any foreign corporate tax paid.

The CFC rule does not apply to an entity or permanent establishment:

• with accounting profits not exceeding €750,000 and non-trading income of not more than €75,000; or
• where the accounting profit is less than 10% of operating costs in the relevant tax year.

Exit Tax

A taxpayer will be subject to tax on unrealised capital gains where assets owned by the taxpayer are moved or transferred outside of Malta.

The capital gain is calculated as the market value of the transferred assets, at the time of exit, less their value for tax purposes, and is applicable in any one of the following circumstances: 

• a taxpayer transfers assets from its head office in Malta to its permanent establishment in another EU Member State or other country;
• a taxpayer transfers assets from its permanent establishment in Malta to its head office or another permanent establishment in another EU Member State or other country;
• a taxpayer transfers tax residence from Malta to another EU Member State or other country (excluding assets which remain effectively connected with a permanent establishment in Malta);
• a taxpayer transfers the business conducted by its permanent establishment in Malta to another EU Member State or other country.

Additional Information

The Dixcart office in Malta has extensive experience in establishing and managing tax-efficient companies in Malta, can assist with all relevant compliance matters, and related corporate and residence issues. For further assistance please contact us on advice.malta@dixcart.com or speak to your usual Dixcart contact.

The Isle of Man Treasury has published a draft of the proposed Income Tax (Substance Requirements) Order 2018. This draft Order will, once final, and if approved by Tynwald (in December 2018), have effect in respect of accounting periods commencing on or after 1 January 2019.

This means that from January 2019, companies engaging in “relevant activities” will have to demonstrate that they meet specific substance requirements, to avoid sanctions.

This Order is in response to a comprehensive review that was carried out by the EU Code of Conduct Group on Business Taxation (COCG) in order to assess over 90 jurisdictions, including the Isle of Man (IOM) against standards of:

– Tax transparency;

– Fair taxation;

– Compliance with anti-BEPS (base-erosion profit shifting)

The review process took place in 2017 and although the COCG were satisfied that the IOM met the standards for tax transparency and compliance with anti-BEPS measures, the COGC raised concerns that the IOM, and other Crown Dependencies did not have:

“A legal substance requirement for entities doing business in or through the jurisdiction.”

High Level Principles

The purpose of the proposed legislation is to address the concerns that companies in the IOM (and other Crown Dependencies) could be used to attract profits that are not commensurate with economic activities and substantial economic presence in the IOM.

The proposed legislation therefore requires relevant sector companies to demonstrate they have substance in the Island by:

• Being directed and managed in the Island; and
• Conducting Core Income Generating Activities (CIGA) in the Island; and
• Having adequate people, premises and expenditure in the

Each of these requirements is discussed in further detail below.

The IOM’s Response

In late 2017, along with many other jurisdictions facing potential blacklisting, the IOM committed to address these concerns by the end of December 2018.

Due to identical concerns being raised in Guernsey and Jersey, the governments of the IOM, Guernsey and Jersey have been working closely together to develop proposals to meet their commitments.

As a result of the work published in Guernsey and Jersey, the IOM has published its legislation and limited guidance, in draft. Please note further guidance will be forthcoming in due course.

The legislation is similar across the three jurisdictions.

The remainder of this article focuses specifically on the IOM draft legislation.

The Income Tax (Substance Requirements) Order 2018

This Order will be made by the Treasury and is an amendment to the Income Tax Act 1970.

This new legislation sets out to address EU Commission and COCG concerns by way of a three-stage process:

1. To identify companies carrying out “relevant activities”; and
2. To impose substance requirements on companies undertaking relevant activities; and
3. To enforce the substance

Each of these stages and their ramifications are discussed below.

Stage 1: To identify companies carrying out “relevant activities”

The Order will apply to IOM tax resident companies engaged in relevant sectors. The relevant sectors are as follows:

a. banking

b. insurance

c. shipping

d. fund management (this does not include companies that are Collective Investment Vehicles)

e. financing and leasing

f. headquartering

g. operation of a holding company

h. holding intellectual property (IP)

i. distribution and service centres

These are the sectors identified as a result of the work, by the Organisation for Economic Cooperation and Development’s (OECD) Forum on Harmful Tax Practices (FHTP), on preferential regimes. This list represents the categories of geographically mobile income i.e. these are the sectors which are at risk of operating and deriving their income from jurisdictions other than those in which they are registered.

There is no de minimus in terms of income, the legislation will apply to all companies carrying on relevant activities where any level of income is received.

A key determinant is tax residence and the Assessor has indicated that existing practice will prevail, i.e. the rules set out in PN 144/07. Therefore where non-IOM incorporated companies are engaged in relevant sectors they will only be brought within the scope of the Order if they are IOM tax resident. This is clearly an important consideration: if resident elsewhere the rules relevant to that country of residence are likely to be the binding rules.

Stage 2: To impose substance requirements on companies undertaking relevant activities

The specific substance requirements vary by relevant sector. Broadly speaking, for a relevant sector company (other than a pure equity holding company) to have adequate substance it must ensure that:

a. It is directed and managedin the island.

The Order specifies that the company is directed and managed* in the Island. Regular board meetings should take place on the Island, there must be a quorum of directors physically present at the meeting, strategic decisions must be made at the meetings, the minutes of the board meetings must be kept on Island and the directors present at these meetings must have the necessary knowledge and expertise ensure that the board can discharge its’ duties.

* Note that the test for “directed and managed” is a separate test to the “management and control” test which is used to determine the tax residence of a company. The aim of the directed and managed test is to ensure that there are an adequate number of Board meetings held and attended in the Island. Not all Board meetings need to be held on Island, we discuss the meaning of “adequate” later in this article.

b. There is an adequate number of qualified employees in the Island.

This stipulation appears to be rather vague as the legislation specifically states that the employees do not need to be employed by the company, this condition focuses on there being an adequate number of skilled workers present on Island, whether or not they are employed elsewhere does not matter.

In addition, what is meant by ‘adequate’ in terms of numbers is very subjective and for the purpose of this proposed legislation, ‘adequate’ will take its ordinary meaning, as discussed below.

c. It has adequate expenditure, proportionate to the level of activity carried on inthe Island.

Again, another subjective measure. It would, however, be unrealistic to apply a specific formula across all businesses, as each business is unique in its own right and it is the responsibility of the Board of Directors to ensure that such conditions are met.

d. It has adequate physical presence in the Island.

Although not defined, this is likely to include owning or leasing an office, having ‘adequate’ number of staff, both administrative and specialist or qualified staff working in the office, computers, telephone and internet connection etc.

e. It conducts core income-generating activity in the Island

The Order attempts to specify what is meant by ‘core income-generating    activity’ (CIGA) for each of the relevant sectors, the list of activities are intended as a guide, not all companies will carry out all of the activities specified, but they must carry out some in order to comply.

If an activity is not part of the CIGA, for example, back office IT functions, the company may outsource all or part of this activity without there being an effect upon the company’s ability to comply with the substance requirement. Likewise, the company may seek expert professional advice or engage specialists in other jurisdictions without effecting its compliance with the substance requirements.

In essence, CIGA ensures that the main operations of the business, i.e. the operations which produce the bulk of the income are carried out in the Island.

Outsourcing

Further to that mentioned above, a company may outsource, i.e. contract or delegate to a third party or group company, some or all of its activities. Outsourcing is only a potential issue if it relates to CIGA. If some, or all, of the CIGA are outsourced, the company must be able to demonstrate that there is adequate supervision of the outsourced activity and that the outsourcing is to an IOM businesses (which themselves have adequate resources to perform such duties). Precise details of the outsourced activity, including, for example, timesheets must be kept by the contracting company.

The key here is the value that the activities outsourced generate, if CIGA.  In some instances, for example, outsourcing coding activities, very little might be generated in terms of value, but it could be design, marketing and other activities carried out locally that are integral to value creation. Companies will need to look closely at where the value comes from, ie who generates it to assess whether outsourced activities are an issue.

“Adequate”

The term ‘adequate’ is intended to take its dictionary definition:

“Enough or satisfactory for a particular purpose.”

The Assessor has advised that:

“What is adequate for each company will be dependent upon the particular facts of the company and its business activity.”

This will vary for each relevant sector entity and the onus is on the relevant company to ensure that it maintains and retains sufficient records which demonstrate that it has adequate resources in the Island.

Stage 3: To enforce the substance requirements

The Order provides the Assessor with the power to request any information required to satisfy her that a relevant sector company meets the substance requirements. Where the Assessor is not satisfied that the substance requirements have been met for a particular period, sanctions will apply.

Verification of Substance Requirements

The draft legislation provides the Assessor with the power to request further information from a relevant sector company in order to satisfy herself that the substance requirements have been met.

Failure to comply with the request can result in a fine not exceeding £10,000. Where the Assessor is not satisfied that the substance requirements have been met, sanctions will apply.

High-risk IP Companies

Generally speaking, the designation ‘high-risk IP companies’ refers to companies holding IP where (a) the IP has been transferred into the Island post-development and/ or the main utilisation of the IP is off-Island or (b) where IP is held on Island but the CIGA are carried out off-island.

As the risks of profit shifting are considered to be greater, the legislation has taken a rather hard approach to high risk IP companies, it takes the position of ‘guilty unless proven otherwise’.

High-risk IP companies will have to prove for each period that the adequate substance requirements in respect of conducting core income-generating activity have been met in the Island. For each high risk IP company, the tax authorities of the IOM will exchange all of the information provided by the company with the relevant EU Member State authority where the immediate and/or ultimate parent and beneficial owner is/are resident. This will be in accordance with the existing international tax exchange agreements.

“To rebut the presumption and not incur further sanctions, the high risk IP company will have to provide evidence explaining how the DEMPE (development, enhancement, maintenance, protection and exploitation) functions have been under its control and this had involved people who are highly skilled and perform their core activities in the Island”.

The high evidential threshold includes detailed business plans, concrete evidence that decision making occurs in the Island and detailed information regarding their IOM employees.

Sanctions

In line with the tougher approach taken towards IP companies detailed above, sanctions are somewhat harsher for such companies.

Whether or not the substance requirements have been met, in accordance with international arrangement, the Assessor will disclose to a relevant EU tax official any relevant information concerning a high-risk IP company.

If a high-risk IP company is unable to rebut the presumption that it has failed to meet the substance requirements, the sanctions are as follows, (stated by the number of consecutive years of non-compliance):

– 1st year, a civil penalty of £50,000

– 2nd year, a civil penalty of £100,000 and may be struck off the company register

– 3rd year, strike the company off the company register

If the high-risk IP company is unable to provide the Assessor with any additional information requested, the company will be fined a maximum £10,000.

For all other companies engaged in relevant sectors (other than high risk IP), the sanctions are as follows, (stated by the number of consecutive years of non-compliance):

– 1st year, a civil penalty of £10,000

– 2nd year, a civil penalty of £50,000

– 3rd year, a civil penalty of £100,000 and may be struck off the company register

– 4th year, strike the company off the company register

For any year of non-compliance of a company operating in a relevant sector, the Assessor will disclose to an EU tax official any relevant information which relates to the company, this could represent a serious reputational risk to the company.

Anti-avoidance

If the Assessor finds that in any accounting period a company has avoided or attempted to avoid the application of this Order, the Assessor may:

– Disclose information to a foreign tax official

– Issue to the company a civil penalty of £10,000

A person (note that “a person” is not defined within this legislation) who has fraudulently avoided or seeks to avoid the application is liable to:

– On conviction: custody for a maximum of 7 years, a fine or both

– On summary conviction: custody for a maximum of 6 months, a fine not exceeding £10,000,or both

– Disclosure of information to a foreign tax official

Any appeals will be heard by the Commissioners who may confirm, vary or reverse the Assessor’s decision.

Conclusion

Companies operating in relevant sector industries are now under pressure to ensure that they comply with the new legislation which will commence at the start of 2019.

This will have a significant affect upon many IOM businesses who have only a short amount of time to demonstrate to the authorities that they are compliant. The potential penalties of non-compliance may cause detrimental reputational risk, fines of up to £100,000 and could even cause a company to eventually be struck off, after potentially, as little as two years of continuous non-compliance for high risk IP companies and three years of non-compliance for other relevant sector companies.

Where does this leave us?

All companies must consider whether they fall within the relevant sectors, if not then there are no obligations falling upon them by this Order. However, if they are in a relevant sector then they will need to assess their position.

Many companies will be easily able to identify whether or not they fall within a relevant sector and companies managed by CSPs may need to assess whether they have the necessary substance.

What might change?

We are on the brink of Brexit and, to date, much of the discussions have taken place with the EU commission and the draft legislation has been reviewed by them; however, the COCG will only meet to discuss such matters as blacklisting in February 2019.

It therefore remains to be seen whether the COCG agree that the proposals go far enough. What is clear, is that this legislation is here to stay in some shape or form and therefore companies need to consider their position as soon as possible.

Reporting

The earliest reporting date would be accounting period ended 31 December 2019 and therefore reporting by 1 January 2020.

Corporate tax returns will be amended to include sections which will gather the information in relation to the substance requirements for companies operating within relevant sector industries.

How can we help?

If you think that your business may be affected by the new legislation, it is important that you begin assessing and taking appropriate action now. Please contact the Dixcart office in the Isle of Man to discuss substance requirements in more detail: advice.iom@dixcart.com.

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

The level of regulation within the e-gaming industry is constantly being reviewed to increase protection for users. Many of the less well regulated jurisdictions are beginning to find themselves less attractive to the major e-gaming organisations.

Agreement between the Isle of Man and Malta

The Isle of Man Gambling Supervision Commission and the Malta Lotteries and Gaming Authority entered into an agreement in September 2012, which established a formal basis for cooperation and information sharing between the Isle of Man and Malta gambling authorities.

The objective of this agreement was to improve the regulatory standards with the ultimate aim of protecting consumers.

This Article provides an overview of the jurisdictions of the Isle of Man and Malta and why they are favourable locations for e-gaming.

The Isle of Man

The Isle of Man was the first jurisdiction to introduce legislation designed to regulate e-gaming and gambling firms, whilst, at the same time, providing statutory protection to online customers.

The Isle of Man is white-listed by the UK Gambling Commission, allowing Isle of Man licensees to advertise in the UK. The island has a AA+ Standard & Poor’s rating and the legal system and legislative practice are based on UK principles. The island also offers political stability and an experienced workforce.

Why is the Isle of Man a Favourable Location for E-Gaming?

The attractive tax regime available in the Isle of Man makes it an attractive location for e-gaming operations to establish themselves.

There are a number of additional advantages in establishing an online gaming operation in the Isle of Man:

• Simple and quick application process.
• World-class infrastructure.
• A diverse economy.
• A general “pro-business” environment.

Taxation

The Isle of Man has a favourable tax system with the following features:

• Zero rate corporation tax .
• No capital gains tax.
• Taxation of individuals – 10% lower rate, 20% higher rate, which is capped at a maximum of £125,000 per annum.
• No inheritance tax.

E-gaming Fees

E-gaming duty charges in the Isle of Man are competitive. The duty payable on retained gross profits is:

• 1.5% for gross gaming yield not exceeding £20m per annum.
• 0.5% for gross gaming yield between £20m and £40m per annum.
• 0.1% for gross gaming yield exceeding £40m per annum.

The exception to the above is pool betting which carries a flat duty of 15%.

Regulation and Fund Separation

The online gaming sector is regulated by the Gambling Supervision Commission (GSC).

Player funds are maintained separately from the operators’ funds to ensure that the players’ monies are protected.

IT Infrastructure and Support Services

The Isle of Man has an advanced telecommunications infrastructure. The island has a very substantial bandwidth capacity and an extremely stable platform, supported by “self healing” SDH loop technology. The Isle of Man also benefits from five “state of the art” data-hosting centres and has a high calibre of IT and marketing support service providers with experience in the e-gaming industry.

What is Required to Secure an Isle of Man E-gaming Licence?

There are a number of obligations, including:

• The business is required to have a minimum of two company directors resident in the Isle of Man.
• The business must be conducted by an Isle of Man incorporated company.
• The servers, where the bets are placed, must be hosted in the Isle of Man.
• Players must be registered on Isle of Man servers.
• Relevant banking must be carried out in the Isle of Man.

Malta

Malta has become one of the leading jurisdictions for online gaming with over four hundred licences having been issued, representing approximately 10% of the global online gaming market.

The online gaming sector in Malta is regulated by the Lotteries and Gaming Authority (LGA).

Why is the Jurisdiction of Malta a Favourable Location for E-gaming?

Malta offers a number of advantages for online gaming operations establishing themselves in this jurisdiction. Specifically in relation to taxes:

• Low levels of gaming tax payable.
• If structured correctly, corporate tax can be as low as 5%.

In addition Malta offers:

• A wide network of double taxation agreements.
• A sound legal and financial system.
• Solid IT and telecommunication infrastructures.

Gaming Tax

Each licensee is subject to gaming tax, which is currently capped at €466,000 per licence per annum. This is calculated depending on the class of licence held:

• Class 1: €4,660 per month for the first six months and €7,000 per month thereafter.
• Class 2: 0.5% of the gross amount of bets accepted.
• Class 3: 5% of “real income” (revenue from rake, less bonus, commissions and payment processing fees).
• Class 4: No tax for the first six months, €2,330 per month for the next six months and €4,660 per month thereafter.

(See below for further details regarding the classes of e-gaming licence in Malta).

Corporate Taxation

Companies operating in Malta are subject to a corporate tax rate of 35%. However, shareholders enjoy low effective rates of Maltese tax as Malta’s full imputation system of taxation allows generous unilateral relief and tax refunds.

In certain circumstances it may be beneficial to interpose a Maltese holding company between the shareholders and the company. The dividends and capital gains derived from participating holdings are not subject to corporate tax in Malta.

Additional Potential Tax Advantages for Online Gaming Companies in Malta

An e-gaming company may be able to take advantage of Malta’s extensive double tax treaty network, as well as other forms of double taxation relief.

In addition Malta companies are exempt from transfer duties, exchange control restrictions and capital gains on the transfer of shares, in most cases.

Classes of E-gaming Licence in Malta

Every remote gaming operation must hold a licence issued by the Lotteries and Gaming Authority.

There are four classes of licence, with each class being subject to different rules. The four classes are as follows:

• Class 1: Risk taking on repetitive games generated by random events – this includes casino style games, lotteries and machines.
• Class 2: Risk taking by creating a market and backing that market – this includes sports betting.
• Class 3: Promoting and/or abetting games from Malta – this includes P2P, betting exchanges, skins, tournaments and bingo operations.
• Class 4: Provision of remote gaming systems to other licensees – this includes software vendors who take commissions on bets.

Licensing Requirements

To qualify for a licence in Malta, the applicant must:

• Be a limited liability company registered in Malta.
• Be fit and proper.
• Demonstrate adequate business and technical ability to conduct such activities.
• Demonstrate that the operation is covered by sufficient reserves or securities and be able to ensure payment of player winnings and deposit returns.

How Can Dixcart Help?

Dixcart has offices in both the Isle of Man and in Malta and can assist with:

• Licence applications.
• Advice regarding compliance.
• Advice regarding the tax issues to consider.
• Administrative and accounting support.
• Management and regulatory reporting assistance.

Dixcart can also provide initial office accommodation, if required, via its managed office facilities in the Isle of Man and Malta.

Additional Information

If you would like additional information regarding e-gaming, please speak to Paul Harvey at the Dixcart office in the Isle of Man: advice.iom@dixcart.com or Sean Dowden at the Dixcart office in Malta. Alternatively please speak to your usual Dixcart contact.

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

Updated 28/5/15

Malta introduced the Notional Interest Deduction Regime (NID) on 1 January 2018. On 8 August 2018, the Guidelines in relation to NID were updated, in particular the treatment of NID between related companies.

What is NID?

NID is an innovative way in which companies can, in the correct circumstances, reduce their tax liabilities. This option is of greatest interest to companies with large equity balances.

NID allows companies to deduct a notional interest amount based on the ‘risk’ capital of a company. Such companies will be able to claim a deduction against chargeable income for NID deemed to be incurred on their equity capital. Previously in Malta debt interest had been tax deductible, whilst dividends were not.

‘Risk’ capital is defined as: share capital, share premiums, retained earnings, interest free debt and any other equity.

Ability to Choose Between NID and the Maltese Tax Refund System

From the start of the 2018 tax year, Maltese companies, including permanent establishments of foreign companies in Malta and partnerships, can elect to use either the Notional Interest Deduction Regime OR the tax refund system (6/7^ths or 5/7^ths).

Tax Refund System – the Alternative to NID

Malta operates a full imputation system of taxation which allows for generous tax refunds. In most instances, shareholders not resident in Malta can apply for a tax refund of 6/7ths of the tax paid on active income used to pay a dividend. With a corporate tax rate of 35%, this results in an effective tax rate of 5%. In the case of passive income such as interest and royalties, non-resident shareholders can apply for a tax refund of 5/7ths of the tax paid on passive income used to pay a dividend. With a corporate tax rate of 35%, this results in an effective tax rate of 10%.

NID in More Detail

Notional Interest Deduction is calculated by multiplying the notional interest rate* by the company’s total equity at its financial year end.

*Notional interest rate is defined as the ‘risk free rate’; the current yield to maturity of Malta Government stocks, with a remaining term of approximately 20 years (this was 3.940% in Quarter 1 of 2024), plus a 5% premium.

Additional Features of NID

• NID claimed in any one year cannot exceed 90% of the company’s taxable income. Any excess can be carried forward indefinitely, to be deducted against taxable income in future years. Remaining income is taxed at the standard rate of 35%.
• No tax refund is paid to shareholders under the Notional Interest Deduction Regime and this therefore removes the relevance and need to put a double tier company structure in place.

Notional Interest Income in Relation to Shareholders

• For Maltese tax purposes, when NID is claimed, the shareholder (or partner) will be considered to have received that amount of notional interest as income.

• However, if the shareholder is not resident in Malta, the deemed interest income will be exempt from tax in Malta, providing that certain criteria have been met.

Timing Implications

Taxpayers are able to claim NID, for the first time, on profits relating to the 2017 tax year, as these profits are assessable for income tax in 2018.

Additional Information

If you have any questions or require any further information please contact the Dixcart office in Malta: advice.malta@dixcart.com  or speak to your usual Dixcart contact.

Características ventajosas para la ubicación de una empresa “holding” internacional

La ubicación de una empresa “holding” es una consideración importante en cualquier estructura internacional, donde uno de los objetivos es minimizar el impuesto aplicado sobre el flujo de ingresos.

Lo ideal sería que la empresa “holding” sea residente en una jurisdicción que:

• Tienga una buena red de tratados de doble tributación, lo que minimiza la retención de impuestos sobre los dividendos recibidos
• Exima los ingresos de dividendos de impuestos
• Exima a las ganancias de capital por la venta de subsidiarias de impuestos
• No imponga retenciones sobre las distribuciones de la sociedad “holding” a su matriz o a sus accionistas
• No imponga impuestos sobre las ganancias de capital derivadas de la venta de acciones en la sociedad “holding” por parte de accionistas no residentes
• Exima la transferencia de acciones de impuestos
• Asegure estabilidad en la aplicacion de leyes y reglamentos tributarios

Las empresas “holding” de Malta pueden beneficiarse de todo lo anterior.

Ventajas disponibles a las empresas “holding” de Malta

Red de Tratados Tributarios

Malta beneficia de una red de más de 70 tratados de doble imposición.

En la mayoría de las situaciones en que una empresa de Malta posee más del 10% del capital social emitido de una subsidiaria extranjera, la tasa de retención de impuestos sobre los dividendos que reciba de un socio ubicado en un pais con lo cual Malta tenga un tratado se reduce al 5%.

Como Malta es parte de la UE, también se beneficia de la Directiva de la UE sobre matrices y filiales, lo que reduce la retención fiscal a cero en los dividendos de muchos países de la UE.

Ventajas tributarias disponibles a las empresas “holding” de Malta

• Exención de participación y exención del impuesto sobre ganancias de capital

Los dividendos elegibles y las ganancias de capital derivadas de una “tenencia participante” están (a elección del contribuyente) exentas del impuesto de Malta.

Diríjase a nuestra oficina de Dixcart en Malta: advice.malta@dixcart.com para obtener definiciones sobre lo que constituye una “tenencia participante”.

• Venta de acciones en empresas “holding”

Malta no aplica impuestos a las ganancias de capital sobre la venta de acciones en empresas de Malta.

• Retención de impuestos

Malta no impone retenciones en la distribución de dividendos a los accionistas o empresas “holding”.

La retención a cuenta cero es aplicable independientemente de en qué parte del mundo resida el accionista.

• Impuesto sobre capital

En Malta no existe un impuesto sobre las aportaciones al capital social y no existe un impuesto de timbre en las transferencias posteriores.

• Otros ingresos

Los ingresos que no sean dividendos o ganancias de capital están sujetos a impuestos a la tasa normal de Malta del 35%. Sin embargo, al pagar un dividendo de este “otro ingreso”, se paga al accionista un reembolso de impuestos entre 6/7 y 5/7 del impuesto pagado por la sociedad de Malta, lo que resulta en una tasa impositiva neta en Malta de entre 5% y 10%.

Cuando dichos ingresos se hayan beneficiado de la desgravación fiscal doble o del crédito fiscal de tasa fija de Malta, se aplica un reembolso de 2/3.

Estabilidad en la aplicacion de leyes y reglamentos tributarios

Es posible obtener decisiones tributarias formales en Malta. Las decisiones proporcionan certeza sobre la aplicación de la ley a una transacción específica, y vinculan la Fiscalia de Malta durante cinco años.

También hay un sistema de orientación informal de la Fiscalia. Esto toma la forma de una carta de orientación a las autoridades fiscales. Dichas cartas no están expresamente reguladas en la ley, pero crean una expectativa legítima en la que un contribuyente puede confiar. La Fiscalia de Malta considera tales cartas como vinculantes para si misma.

Conclusión

Una empresa “holding” de Malta es una opción atractiva para los grupos comerciales internacionales.

Las ventajas potenciales incluyen:

• La amplia red de tratados de doble tributación de Malta
• Exención de impuestos de los dividendos
• Exención del impuesto de las ganancias de capital sobre la disposición de “tenencias participantes”
• Exención de impuesto de las ganancias de capital sobre la venta de acciones en una empresa “holding” por parte de accionistas extranjeros
• La ausencia de retención de impuestos

¿Cómo puede ayudar Dixcart?

Dixcart tiene una oficina en Malta y puede ayudar con:

• Incorporación de empresas “holding”
• Servicios de oficinas registradas
• Provisión de despachos gestionados
• Servicios de “compliance” tributario
• Servicios de contabilidad
• Servicios de directoria
• Consultoria en todos los aspectos de adquisiciones y disposiciones de acciones

Información Adicional

El Apéndice 1 proporciona un ejemplo de cómo se puede utilizar una sociedad “holding” de Malta como parte de una estructura fiscalmente eficiente.

Contacto

Si desea obtener más información sobre este tema, contáctese con Jonathan Vassallo en la oficina de Dixcart en Malta – advice.malta@dixcart.com.

Vantagens para a localização de uma sociedade “holding” internacional

A localização de uma sociedade “holding” é uma consideração importante em qualquer estrutura internacional, onde um dos objetivos é optimizar o imposto cobrado sobre o fluxo de rendimentos.

Idealmente, a sociedade “holding” deve estar localizada numa jurisdição que:

• Beneficie de uma boa rede de tratados de dupla tributação, minimizando assim a retenção na fonte sobre os dividendos recebidos.
• Isente de impostos o pagamento de dividendos.
• Isente de impostos as mais-valias na alienação de subsidiárias.
• Não imponha retenção na fonte sobre as distribuições da sociedade “holding” às suas controladoras ou aos seus accionistas.
• Isente de imposto sobre mais-valias sobre lucros decorrentes da venda de ações na sociedade “holding” por acionistas não residentes.
• Isente de imposto de selo a transferência de acções.
• Beneficie de previsibilidade no conteúdo e aplicação de leis e regulamentos fiscais

As sociedades “holding” de Malta beneficiam de todos os pontos ilustrados supra.

Benefícios disponíveis para sociedades “holding” de Malta

Rede de Tratados de Dupla Tributação

Malta tem uma rede de mais de 70 tratados de dupla tributação.

Na maioria das situações em que uma sociedade de Malta possua mais de 10% do capital social de uma subsidiária no estrangeiro, a taxa de retenção na fonte sobre os dividendos recebidos pela sociedade de Malta de uma sociedade registada num pais com o qual Malta tenha celebrado um tratado de dupla tributação é reduzida para 5%.

Como Malta faz parte da UE, também beneficia da Directiva Mães e Filhas, reduzindo assim a retenção na fonte a zero sobre os dividendos recebidos da maioria dos países da UE.

Vantagens fiscais disponíveis para as sociedades “holding” de Malta

• Isenção para participações em capital social e isenção para mais-valias

Os dividendos qualificados e mais-valias derivados de uma “sociedade holding participativa” são (caso assim o escolha o contribuinte) isentos de imposto em Malta.

Se deseja mais informacoes sobre o que constitui uma “sociedade holding participativa” diriga-se ao nosso escritório Dixcart em Malta: advice.malta@dixcart.com.

• Venda de Ações na Sociedade “Holding”

Malta isenta de imposto as mais-valias na venda de acções de sociedades sediadas em Malta.

• Retenção na Fonte

Malta não retem na fonte imposto sobre o rendimento na distribuição de dividendos aos accionistas ou a sociedades “holding”.

A não-retenção é aplicável independentemente de onde o acionista seja residente.

• Imposto de Selo

Em Malta não há imposto de selo quer na emissão de capital social quer em transferências subsequentes.

• Outros Rendimentos

Os rendimentos, excluindo dividendos e mais-valias, estão sujeitos a imposto à taxa normal de de 35% em Malta. No entanto, o pagamento de um dividendo financiado por rendimentos que não dividendos e mais-valias pode dar origem ao reembolso de ente 6/7 a 5/7 do total do imposto pago pela sociedade em Malta ao acionista, o que resulta numa taxa efectiva de imposto entre 5% e 10%.

Nos casos em que os supra-referidos rendimentos tenham beneficiado de um tratado de dupla tributação ou do imposto de taxa fixa de Malta o reembolso não pode exceeder 2/3 do montante total.

Previsibilidade do conteúdo e aplicação de leis e regulamentos fiscais

A legislação em Malta preve a emissão de decisões administrativas fiscais. As decisões fornecem certeza sobre a aplicação da lei a uma transação específica, e vinculam as autoridades fiscais de Malta por um periodo de cinco anos.

Preve-se ainda a emissão de orientações informais pelas autoridades tributárias sob a forma de “cartas de orientação”. Essas cartas não são expressamente reguladas pela lei, mas criam uma expectativa legítima em que o contribuinte pode confiar. As autoridades tributárias de Malta consideram as “cartas de orientação” como sendo vinculativas.

Conclusão

As sociedades “holding” de Malta constituem uma opção atraente para grupos económicos internacionais.

As potenciais vantagens incluem:

• A extensa rede de tratados de dupla tributação de Malta
• Isenção de tributação de dividendos
• Isenção de imposto sobre mais-valias na alienação de acções em “sociedades holding participativas”
• Isenção de imposto sobre mais-valias na alienação de acções de uma sociedade “holding” por acionistas estrangeiros
• A ausência de retenção na fonte

Como pode a Dixcart ajudar?

A Dixcart tem um escritório em Malta e pode assistir:

• na incorporação de sociedades “holding”
• na prestação de serviços de sede social
• na prestação de serviços de consultoria
• no cumprimento de obrigações declarativas de natureza fiscal
• na prestação de serviços de contabilidade
• na prestação de serviços de diretoria
• na assessoria de todos os aspectos de aquisições e alienações de participações sociais

Informação Adicional

O Anexo 1 contem um exemplo de como uma sociedade “holding” de Malta pode ser usada como parte de uma estrutura fiscalmente eficiente.

 Contacto

Se gostaria de obter mais informações sobre este tema pode entrar em contato com Jonathan Vassallo no escritório da Dixcart em Malta – advice.malta@dixcart.com.

The Island of Guernsey offers Private Clients confidence in relation to the preservation, protection and growth of their wealth.

Guernsey is a well regulated jurisdiction situated in Europe, between the United Kingdom and France, with excellent travel links to both countries.  It is a tax neutral, politically stable jurisdiction with an excellent reputation and a network of multi-jurisdictional accounting and law firms.

The Island has a long history of providing financial services to the private client sector.  Dixcart Trust Corporation Limited has maintained a presence on the Island since 1972, with experienced staff who understand the requirements of modern families and international private clients.

Guidance is repeatedly sought by international clients to assist in planning for the future, protection of assets from probate, mitigation or deferral of tax, and/or the consolidation of asset management and protection.

• International clients can benefit from the tax neutrality of Guernsey, along with freedom from any local capital gains or inheritance taxes.

Guernsey Trusts

The Guernsey trust industry has evolved over many years. The most recent update to trust law in Guernsey took place in 2007.

• The Trusts (Guernsey) Law 2007 is now one of the most modern trust laws available, whereby trusts can be maintained indefinitely and can be created for charitable and for non-charitable purposes.

Guernsey Foundations

Guernsey introduced foundation legislation in January 2013, learning from popular civil law jurisdictions with well-established laws, to provide a positive and flexible approach.

With legal roots in Norman customary law, Guernsey is in a prime position to offer expertise in both common and civil law situations.  For those clients domiciled in civil law jurisdictions a foundation is an attractive structure where a trust may not be suitable.  A Guernsey foundation is a registered entity with a separate legal personality, which can be used for a purpose or to benefit beneficiaries. Foundations can be migrated to Guernsey from other jurisdictions.

Guernsey Company

An amendment to the Guernsey Companies Law in 2008 resulted in modernisation of the legislation.  The Guernsey Registry launched online registration and a database the same year, enabling time efficient incorporations and filings.

A Guernsey company can waive the requirement to hold annual general meetings and the requirement to have its accounts audited on an annual basis.  A Guernsey company can be cellular or non-cellular and the law does not distinguish between public and private companies.

• With a basic corporate income tax rate of 0% in Guernsey, Guernsey companies can form an important role in private client structuring.

Guernsey Limited Partnerships

Guernsey Limited Partnerships do not impose a rigid structure in the same manner that a cellular or non-cellular company might, but they do enjoy the benefit of limited liability and are therefore popular with International investors seeking limited liability and confidentiality.

The relevant Guernsey law is The Limited Partnerships (Guernsey) Law, 1995 and all Guernsey Limited Partnerships must be registered in Guernsey with the Registrar to retain Limited Liability status.

Guernsey Limited Liability Partnerships (LLPs)

The Limited Liability Partnerships (Guernsey) Law, 2012 was passed on 12 May 2014.

Although this legislation is relatively new, Guernsey LLPs are becoming increasingly popular for a number of different commercial scenarios, including real estate joint-ventures and family offices, due to their workable and flexible structure.

A Guernsey LLP has no statutory capital requirements and can be migrated from one jurisdiction to another.  Guernsey legislation is unique as it provides the ability to convert a general partnership into an LLP.

Dixcart Trust Corporation Limited

As part of a group, with 10 offices in 9 jurisdictions, Dixcart Trust Corporation Limited is distinct from other Corporate Service Providers as it is able to offer multi-jurisdictional full corporate and private client services.

These services include serviced office space within the Dixcart Business Centre, assistance with redomiciliation, captive insurance and full trust and corporate services.

The Dixcart network can be utilised to find a suitable multi-jurisdictional solution to meet our clients’ bespoke requirements, along with access to a wide range of resources from across the Group.

The Guernsey office has extensive knowledge and expertise to offer all clients, not only Guernsey registered structures, but for a wide range of trusts and companies based in other jurisdictions.

For further information please speak to John Nelson at the Dixcart office in Guernsey: advice.guernsey@dixcart.com or to your regular Dixcart contact.

At the start of July 2018 three new Double Tax Agreements (DTAs) were announced between the UK and the Crown Dependencies (Guernsey, Isle of Man, and Jersey). The three DTAs (from each of the islands) are identical, which was a key aim of the UK Government.

Each of the DTAs cover clauses relating to Base Erosion and Profit Shifting (’BEPS’) and they comply with new international tax standards, under the OECD’s Model Tax Convention.

The new DTAs will come into force once each of the territories has notified the others, in writing, of the completion of the process required under their local law.

Key Tax Related Clauses

• Full interest and royalty tax withholding reliefs will apply in a number of circumstances, including, in relation to individuals, pension schemes, banks and other lenders, companies that are 75% or more beneficially owned (directly or indirectly) by residents of the same jurisdiction, and also listed entities meeting certain requirements.

These tax reliefs are likely to significantly increase the attractiveness of Guernsey and the Isle of Man as jurisdictions from which to lend into the UK. The Double Tax Treaty Passport Scheme will be available to Crown Dependency lenders to make the process of claiming withholding tax relief administratively easier.

Additional Significant Clauses

• A residence tie breaker for individuals, which is clear and straightforward to apply.

• A residence tie breaker for companies to be determined by the mutual agreement of the two tax authorities having regard to where the company is effectively managed, incorporated and where the major decisions are made. This should make it easier to establish where the management and control is taking place and to therefore determine where the tax obligations arise.

• The inclusion of a non-discrimination clause.  This will prevent the application of a range of restrictive UK measures, such as the late paid interest rules and the application of transfer pricing for Small or Medium-Sized Enterprises (SMEs). At the same time benefits such as withholding tax exemptions for qualifying private placements and the dividend exemption for SMEs will be enjoyed.  This will place Guernsey and the Isle of Man on a much fairer and more equal footing with other jurisdictions.

Collection of Taxes for the UK Exchequer

Whilst the new DTAs confer a number of advantages, the Crown Dependencies will also now be required to assist in the collection of tax for the UK Exchequer.

Principal Purpose Test and Mutual Agreement Procedures

The DTAs include the ‘Principal Purpose Test’. This means that the benefits under each DTA may be denied where it is determined that the purpose, or one of the main purposes, of an arrangement was to secure those benefits. This test is derived from   BEPS treaty measures.

In addition, ‘Mutual Agreement Procedures’ will mean that where a taxpayer considers that the actions of one or both of the jurisdictions specified in the DTA gives rise to a tax outcome which is not in accordance with the DTA, the relevant tax authorities will try to resolve the matter through mutual agreement and consultation.  Where agreement is not reached, the taxpayer can request that the matter is submitted to arbitration, the outcome of which will be binding on both jurisdictions.

The Crown Dependencies – and Substance

In addition to the DTAs just announced, the commitment to substance, as defined in the ‘Council of the European Union – Code of Contact Group  (Tax) Report’ issued on 8 June 2018 is also likely to have a positive impact for the Crown Dependencies. In relation to international business, proving the existence of substance in the form of employment, investment, and infrastructure, will be key, to establish tax certainty and acceptability.

Additional Information

If you require further information regarding the new DTAs between the UK and the Crown Dependencies, please speak to your usual Dixcart contact or to the Dixcart office in Guernsey: advice.guernsey@dixcart.com or in the Isle of Man: advice.iom@dixcart.com.

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

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

Companies licensed to operate within the legal framework of the Free Trade Zone of Madeira are Portuguese companies. The double taxation agreements (DTAs) concluded between Portugal and its treaty partners generally apply to Portuguese companies registered in Madeira. Not only is access to most of the agreements available, but also access to EU Directives, for instance the Parent-Subsidiary Directive.

Certain agreements are particularly advantageous and when combined with the benefits enjoyed by a Portuguese company licensed in Madeira the advantages are further enhanced.

Portugal does not impose withholding tax on dividends if the conditions for the application of the domestic participation exemption regime are satisfied and dividends are paid to a country with which Portugal has a DTA.

Portuguese Double Taxation Agreements

The network of double taxation agreements entered into by Portugal continues to expand. Portugal has 79 double taxation agreements with the following countries: Algeria, Andorra, Austria, Bahrain, Barbados, Belgium, Brazil, Bulgaria, Canada, Cape Verde, Chile, China, Colombia, Croatia, Cuba, Cyprus, Czech Republic, Denmark, East-Timor, Estonia, Ethiopia, Finland, France, Germany, Georgia, Greece, Guinea Bissau, Hong Kong, Hungary, Iceland, India, Indonesia, Ireland, Israel, Italy, Ivory Coast, Japan, Kuwait, Latvia, Lithuania, Luxembourg, Macao, Malta, Mexico, Moldova, Montenegro, Morocco, Mozambique, Netherlands, Norway, Oman, Pakistan, Panama, Peru, Poland, Qatar,  Romania, Russia, San Marino, São Tomé e Principe, Saudi Arabia, Senegal, Singapore, Slovakia, Slovenia, South Africa, South Korea, Spain, Sweden, Switzerland, Tunisia, Turkey, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Venezuela and Vietnam.

Particularly Attractive Agreements

Detailed below is a brief review of the particularly attractive DTAs between Portugal and Cape Verde, China, Colombia, Mexico, Mozambique, Singapore, South Africa and Turkey.

• Double Taxation Agreement between Portugal and Cape Verde

Portugal is the only country with a signed agreement with Cape Verde. Foreign investors into Cape Verde, therefore, frequently use Portuguese companies licensed in Madeira to invest into Cape Verde.

• Double Taxation Agreement between Portugal and China

This agreement is unique with regard to the taxation of capital gains from the sale of shares. Taxation only occurs in the state where the seller is resident. This is contrary to other agreements signed by China. In the case of a Madeira licensed company, capital gains realised from the sale of shares in China would be taxed in Portugal. If the company was licensed in Madeira, this would be at the low tax rate (of 5%) available to Portuguese companies licensed in Madeira.

• Double Taxation Agreement between Portugal and Colombia

Portugal signed a double taxation agreement with Colombia in 2015. The agreement allows a withholding tax of 10% on dividends and also includes information exchange mechanisms to control tax evasion.

• Double Taxation Agreement between Portugal and Mexico

There is a 10% withholding tax on the distribution of dividends from and to Portugal.

• Double Taxation Agreement between Portugal and Mozambique

Portugal is one of only two countries with a signed agreement with Mozambique. Potential investors into Mozambique can therefore use Portugal, more particularly Portuguese companies licensed in Madeira, to invest into Mozambique.

• Double Taxation Agreement between Portugal and Singapore

Although there is a provision in the agreement if 10% of withholding tax on dividends distributed by Portugal to Singapore, Portugal does not impose withholding tax on dividends if the conditions for the application of the domestic participation exemption regime are satisfied and the dividends are paid to a treaty partner recipient.

• Double Taxation Agreement between Portugal and South Africa

The agreement provides for a 10% tax rate where dividends are paid to a company that directly holds at least 25% of the capital of the company paying the dividend for a minimum two-year period before the dividends are paid; otherwise the rate is 15%.

• Double Taxation Agreement between Portugal and Turkey

The agreement provides for a 5% tax rate where dividends are paid to a company (other than a partnership) that directly holds at least 25% of the capital of the company paying the dividends for a minimum two-year period before the dividends are paid; otherwise the rate is 15%.

A 10% tax rate applies to interest on loans where the duration of the loan is a minimum of two years; otherwise, the rate is 15%.

The Madeira International Business Centre: Additional Corporate Tax Details

Madeira companies are subject to a reduced corporate tax of 5% until the end of 2027. Corporate tax is applied in conjunction with ceilings relating to taxable income and is also dependent on the number of jobs created in Madeira. A low level of taxation is often more attractive than the use of a zero tax jurisdiction. The latter may invoke Controlled Foreign Company Rules and negate Double Taxation Agreements.

Additional tax benefits applicable to Portuguese companies registered in Madeira include:

• exemption from withholding taxes on the distribution of dividends, royalty and interest payments to EU countries;
• exemption from capital duty, notary and registration fees;
• capital gains are not taxed separately from the company’s overall income. This means that capital gains realised by companies registered in the Madeira International Business Centre also benefit from the low corporate tax rate.

Additional Information

If you require additional information regarding Portuguese holding companies or registering a company in the International Business Centre of Madeira, please speak to your usual Dixcart contact, or contact the Dixcart office in Portugal: advice.portugal@dixcart.com.