Swiss Companies have an unrivalled reputation. It is important to understand the obligations of being a director of a Swiss company. It is these duties on which the foundation of the integrity of Swiss companies is based.
Amidst the global landscape of corporate governance, Swiss companies adhere to a standard model where the Board of Directors plays a central role. However, specific Swiss legislation dictates that a company must be represented by at least one individual domiciled in Switzerland, authorised to sign on its behalf.
Alternatively, this requirement can be fulfilled by two Swiss residents with joint signatory powers. While companies themselves cannot be appointed as directors in Switzerland, understanding the precise duties and liabilities of these appointed individuals remains critical.
The role of the director is to represent the company and to make all legal acts that may arise within the corporation’s purpose, but what are his/her duties and liabilities?
The Duties of Swiss Directors
Duties of Care
The board collectively and the directors individually are obliged to conduct their responsibilities with the prudence and diligence of a judicious businessperson, considering the company’s interests and leveraging the skills expected for their role.
Duty of Loyalty
Directors must prioritise the company’s best interests over their own or others, refraining from personal gain through corporate opportunities and promptly disclosing any conflicts of interest to the board.
Duty of Confidentiality and Transparency
Maintaining confidentiality is paramount, especially concerning sensitive company information. Directors are obligated to provide shareholders with all vital company information and reports on the financial standing and business operations.
Equal Treatment of Shareholders
Directors must afford the shareholders equal treatment in like circumstances.
General Management
Directors hold the responsibility of steering the company, establishing policies, and devising strategies to achieve the company’s objectives. They are also in charge of ensuring regulatory compliance, managing records, preparing annual reports, and maintaining relations with authorities.
Financial Management and Compliance with Statutory Obligations
Directors are accountable for the company’s financial management, entailing budget preparation, overseeing accounts, and making pertinent financial decisions. They must adhere to legal obligations concerning the company’s creditors, including the timely initiation of shareholders’ meetings, and proposing restructuring measures as needed, with requisite reporting to the court in cases of over-indebtedness.
The directors of a Swiss limited company owe their duties to the company as well as to the shareholders and to the creditors.
The Liabilities of Swiss Directors
The members of the board of directors, any delegates of the board and any persons engaged in the management of the company (including shadow directors), are personally liable to the company, its shareholders and creditors for any damage caused by intentional or negligent violation of their duties.
In addition to civil liability, the Swiss Penal Code provides for criminal liability of directors in the event of, amongst others; false statements, artificial reduction of assets to the prejudice of creditors, disclosing commercial secrets, mismanagement, and the failure to comply with accounting regulations.
Directors may be held responsible for decisions made or actions taken by the company and be exposed to financial and legal risks.
Financial risks: directors may be liable for financial losses suffered by the company due to their negligence or misconduct. They may also be liable for the company’s tax, social security, and trade debts.
Legal risks: directors may be liable for illegal acts committed by the company, such as violations of company law, competition law or environmental legislation and for non-compliance with labour and employment laws and regulations.
Tax and social security risks: directors may be liable for the payment of taxes and social security contributions due by the company and for errors in the reporting of taxes and social security contributions.
Summary
In the complex landscape of corporate governance, the adherence of directors to their designated duties is paramount. By conscientiously upholding ethical standards and fulfilling their roles diligently, directors can steer clear of potential liabilities while safeguarding the integrity and stability of their respective companies. Staying abreast of the latest legal developments and seeking professional legal advice are pivotal for directors to effectively discharge their obligations. For further information and expert guidance, reach out to Dixcart Switzerland at advice.switzerland@dixcart
LISTED COMPANY SERVICES PROVIDED BY DIXCART IN GUERNSEY
Background
Dixcart Trust Corporation Limited (‘Dixcart’) provides a suite of outsourced professional company secretarial services for listed companies that trade on worldwide stock exchanges. This includes the provision of a professional company secretary who will also advise on current governance matters.
What Services Can Dixcart Offer?
Provision of a chartered governance professional (ACG) (Chartered Secretary) with 20+ years of listed company experience with clients trading on stock exchanges in the UK, Canada, USA and Australia.
Management of Board & Committee meetings: pre-meeting discussion with Chairs; draft agendas; circulate meeting materials; attend and act as recording secretary; prepare initial ‘Matters Arising’ list from the meeting; and prepare minutes.
Assistance with ongoing regulatory compliance for the listed company.
Assistance in preparing AGM meeting materials.
Monitor corporate governance policies to ensure best practices are being maintained.
Undertake annual Board assessments and tabulate results in a confidential manner.
Administer compensation plans.
Function as warrant agent for the listed company.
Function as the liaison for the listed company with the registrar and professional advisors.
Minute Book custody in both hard copy and electronic format.
Provision of an administrative substance expected of operating companies.
Private Companies
Many private companies require their internal governance to be at the same level as that of a listed company, especially where the shareholders have invested significant financial capital. Dixcart can work with management and the Board of these companies to determine and implement an appropriate level of corporate governance policies and processes. This is particularly of interest to a private company that is seeking an exchange listing as part of its short to medium-term corporate strategy.
Attendance at Meetings
Many Board and Committee meetings are held by video conferencing platforms. However, as the Guernsey office is only a short flight to London and has excellent transport links to other key UK airports, this enables easy access to European and international connections, therefore attendance in person for Board and Committee meetings is easily facilitated.
What Advantages Does Dixcart Offer?
Dixcart provides effective and efficient solutions to listed company clients, using experience gained over 20+ years.
The cost-effective solution for a listed company is to outsource the company secretary role until there is a requirement to engage a full-time in-house person. Dixcart is well positioned in this market to provide an experienced company secretary, whether as an officer position or in an advisory role.
Further Information
For further information on this topic please contact your usual Dixcart adviser or speak to Shaun Drake in the Guernsey office: advice.guernsey@dixcart.com.
The Madeira International Business Centre (MIBC) offers several benefits to companies that are registered there, including a low corporate tax rate of 5%.
However, to qualify for these benefits, and reflecting the modern international tax planning landscape, companies must meet certain substance requirements. One of these requirements is that companies must make a minimum investment of €75,000 in fixed assets, tangible or intangible.
What Type of Investment can be used to Meet the €75,000 Substance Requirement for a MIBC?
There are many different investments that can be used to meet the €75,000 substance requirement. Some examples include:
Investments in tangible assets: This includes investments in land, building, and equipment. Please see exclusions below, regarding land and real estate.
Investments in intangible assets: This includes investments in intellectual property, such as copyright, patents and trademarks.
The specific investments that are most appropriate for a particular company will depend on the company’s business activities. However, the examples above provide a reference point for companies considering registering in the MIBC.
Financial investments and/or financial portfolios are excluded from the scope of the minimum investment criteria for MIBC companies.
Substance Over Form: The Importance of Associating Business Activity with the Type of Substance a Company Holds
An association between business activity and the type of substance is required to ensure compliance with the law – any inconsistencies may raise questions regarding the company’s tax liability, by the tax authorities.
The investment, which needs to be identifiable in nature, must be controlled and generate future economic benefits for the company. In addition, the investment must be productive or active, rather than passive in nature.
Can you Invest More than €75,000?
Yes, it is possible to invest more than the €75,000 minimum investment level. The investment must always be made at market-related terms.
Does Real Estate Fall Within the Scope of the Minimum Investment Criteria?
Only real estate, purchased in Madeira, falls within the definition (real estate, located outside Madeira, does not qualify for the MIBC minimum investment criteria).
However, investment, in property in Madeira (such as short-term accommodation), that is not used for the purpose of the specified business activity qualified under the scope of the MIBC, will not meet the investment requirement.
In addition, land in Madeira, will only qualify if the purpose is to build an office or other related business activity structure for the company.
When Does the Investment Need to be Made?
The investment, in fixed tangible or intangible assets, must be made in the first two years of activity. The investment should be made within the first two calendar years of activity (rather than the first 24 months of activity).
Although substance needs to be maintained during the operation of the company, only the gross amount of the investment is relevant. Subsequent depreciation, after initial acquisition, does not require new investment. Thus, the €75,000 is not a threshold that is required to be maintained annually.
Additional Tips Regarding Meeting the Investment Criteria
Here are some additional tips for meeting the €75,000 substance requirement:
Make sure that your investments are related to your company’s business activities. A link between the investment and the business activity needs to exist.
Keep good records of your investments.
Be prepared to provide evidence of your investments to the MIBC and to the Portuguese Tax Authorities.
By following these tips, you can increase your chances of meeting the €75,000 substance requirement and qualifying for the tax benefits offered by the MIBC.
To Conclude and Contact Information
If you are considering registering a company in the MIBC, it is important to speak to a qualified professional who can help you assess your specific needs and requirements.
Dixcart Portugal would be delighted to assist you with more information regarding MIBCs and substance. Please contact us on: advice.portugal@dixcart.com
New Swiss corporate law came into force on 1 January 2023.
The transition period for Swiss companies to adapt their articles of association and regulations to the new corporate law is two years from when the new law came into force.
This Article details the main amendments to a company’s articles of association to comply with the new legislation. This article covers non-listed corporations.
KEY CHANGES
Share Capital and Equity Distributions – Greater Flexibility
Foreign Currency
Share capital may be denominated in an approved foreign currency (EUR, USD, GBP or JPY). This was already permitted for disclosure in the financial statements and is particularly relevant for Swiss subsidiaries of foreign groups.
Nominal Value
The nominal value of shares can be any value greater than CHF 0, making unlimited splitting of shares possible.
Capital Band
The concept of a “capital band” is introduced. It allows the Board of Directors to increase or decrease up to 50% of the share capital, over a period of five years.
Interim Dividend Payments
The payment of dividends, from the profits for the current financial year, is explicitly permitted, when certain conditions are met.
Shareholders Meetings – Modernisation
Shareholder meetings can be held:
By electronic means (virtual meeting), as long as certain conditions are met;
Simultaneously in different locations;
Outside Switzerland;
In writing, by way of circular resolution, in ‘wet’ ink version or in electronic form.
Shareholders Rights – Strengthening
The threshold for placing items on the agenda and submitting motions is lowered to shareholders holding a minimum 5% of the shares.
Shareholders holding at least 10% of the shares or voting rights have the right to pose questions to the Board of Directors outside shareholder meetings and these questions must be answered within four months.
Shareholders holding at least 5% of the share capital or voting rights may inspect the company’s books, subject to the company’s legitimate confidentiality interests.
Board of Directors – Increasing Duties
The duties of the board of directors have been increased with regard to:
The holding of the general meetings of the shareholders.
The Board of Directors must ensure that meetings are properly conducted, when audiovisual means are used for Shareholder meetings:
The identity of the participants must be established;
Speeches, made at the general meetings must be broadcast live;
Technical problems, if any, must be mentioned in the Minutes of the General Meeting, while shareholders remain responsible for their own hardware/software;
The AGM Minutes and Notice have to include, in addition to the date and time, the form and place of the shareholder meeting.
Monitoring of the solvency of companies.
Swiss legislation uses three warning thresholds for the board of directors to monitor and manage the financial situation of the company:
Risk of insolvency;
Loss of capital;
Over-indebtedness.
An early warning system now requires the board of directors to closely monitor the solvency of the company and, if necessary, to act promptly.
In the situation of ‘loss of capital,’ a limited audit by a licensed auditor is required, even in the case of subordination of claims (at least at the stage of interpreting the seriousness of the claim).
Where there is well-founded concern about over-indebtedness, notification to the insolvency court can be deferred, if sufficient creditors agree to the subordination of their claims and if there is a reasonable prospect of restructuring within a short period (but no more than 90 days after the interim accounts have been audited), provided creditors’ claims are not jeopardized by any such a deferral.
A deferral of bankruptcy is no longer possible; hence, the restructuring moratorium is the only court-sanctioned restructuring procedure.
Conflict of interest disclosure and measures.
The law expressly provides, that members of the board of directors and the executive management, must inform the board of directors immediately and in full of any conflict of interest.
Additional Information
The Dixcart Office in Switzerland can provide a detailed understanding regarding Swiss corporations, their incorporation, management and administration. We can also detail the obligations that need to be met.
If you need further information and/or require guidance regarding completion of a Swiss corporate tax return, please get in touch: advice.switzerland@dixcart.com.
Switzerland is an attractive jurisdiction to start and operate a business, as a location for individuals and for family protection and safety.
Advantages include:
Located in the centre of Europe.
Economic and political stability.
High regard for personal privacy and confidentiality.
Most ‘innovative’ and “competitive” country in the world with various strong industries.
A well respected jurisdiction with an excellent reputation.
A high quality and multilingual local workforce.
Low rates of corporate tax for Swiss companies.
Premier destination for international investment and asset protection.
Major commodity trading centre in the world.
Hub for HNWIs, international families and a wide variety of professionals including: lawyers, family offices, bankers, accountants, insurance companies.
Swiss Company Taxation
Swiss companies have a zero-tax regime for capital gains and dividend income.
Trading companies have always attracted a local canton (region) tax rate.
Federal tax on net profit is at an effective rate of 7.83%.
There are no capital taxes at the federal level. Capital tax varies between 0% and 0.2% depending on the Swiss canton that the company is registered in. In Geneva, the capital, the tax rate is 0.0012%. However, in circumstances where there are ‘substantial’ profits, no capital tax will be due.
In addition to federal taxes, cantons operate their own tax systems. The effective cantonal and federal corporate income tax rates (CIT) are between 12% and 14%.
Swiss Holding Companies benefit from a participation exemption and do not pay income tax on profits or capital gains arising from qualifying participations. This means that a pure Holding Company is exempt from Swiss tax.
Swiss Withholding Tax (WHT)
There is no WHT on dividend distributions to shareholders based in Switzerland and/or in the EU (EU Parent/Subsidiary Directive).
If shareholders are domiciled outside Switzerland and outside the EU, and a double tax treaty applies, the final taxation on distributions will generally be between 5% and 15%.
Double Tax Treaties
Switzerland has an extensive double tax treaty network, with access to tax treaties with 100 countries.
About Swiss Companies
Share Capital
SA: Authorised share capital minimum: CHF 100,000
SARL: Authorised share capital minimum: CHF 20,000
Shares
SA: The identity of the shareholders is not publicly available.
SARL: Participations are registered. The identity of the shareholder is public.
Directors
There must be at least one director. Directors domiciled outside of Switzerland are permitted but, at least one manager signing individually on behalf of the company, must be Swiss domiciled. Corporate directors are not permitted.
The names and domiciles of the directors are public.
Incorporation
Approximately three weeks from receipt of all of the requisite information.
Shareholders Meetings
A meeting of the ordinary shareholders must be held once a year.
Accounting/Audit
Annual accounts are required. An annual audit may be required depending on the turnover of the company.
Annual Return
An annual return is required.
Advice and Additional Information
Dixcart has had an office in Switzerland for over twenty-five years and is well place to provide advice regarding the establishment of companies here. Please contact Christine Breitler at the Dixcart office in Switzerland: advice.switzerland@dixcart.com.
For many years the movement of a company’s jurisdiction of registration has been driven by the degree of success that International Finance Centres (IFCs) have achieved in implementing international standards. These standards are designed to combat money laundering, bribery and corruption and the financing of terrorism and are issued by the Financial Action Task Force (FATF).
The degree of success, the quality of legislation and the standard of on-going monitoring in an IFC affects how each jurisdiction is assessed by administrative authorities around the world.
The implementation of Economic Substance Requirements by IFCs and grey listings of jurisdictions has added further motivation to a growing trend for companies to consider relocating from their incorporated jurisdiction to jurisdictions which are higher ranked, as being fully compliant with international standards.
Why are Companies Migrating?
Economic Substance and Grey/Black Lists
Economic Substance Requirements (ESR) have now been adopted by most IFCs, in response to concerns raised by, amongst others, the European Union. These concerns relate to the possibility that IFCs might be used in structures designed to shift, then roll-up profits in a low or no-tax jurisdiction, where there is little true substance in relation to the operations supporting the core income generating activity.
Where an IFC has not satisfactorily implemented FATF and ESR, these jurisdictions are then at risk of being placed on one of the 450+ administrative lists around the world of ‘Grey’ or ‘Black’ ranked jurisdictions. The issue for structures in these jurisdictions is the impact on their ability to conduct financing and transaction activity, particularly banking, and their credibility in the global financial world.
Key practical difficulties in such jurisdictions include:
not being able to obtain banking and lending services;
missed investor opportunities or lack of investor interest and engagement; and
greater compliance scrutiny
each of which affect the ability of the structure to operate effectively, efficiently, and possibly even viably.
Considerations when choosing the IFC to Migrate to
There are three leading factors driving the choice of jurisdiction:
the tax harmonisation compliance track record of that IFC;
the practicality of operating from that IFC; and
the simplicity of the migration process itself.
Track record is often the first criteria assessed. It is important that the jurisdictions considered are white listed. Clients will also want certainty that the jurisdiction will remain white-listed, as the international standards mentioned previously, and global tax harmonisation rules continue to evolve.
Forums such as the Organisation for Economic Cooperation and Development (OECD) and assessment bodies such as MONEYVAL conduct periodic assessments to ensure that a jurisdiction has adhered to the highest level of standards, implementation and monitoring. These assessments provide key information when assessing corporate re-domiciliation.
Practical operation of the company from the chosen jurisdiction is the second consideration. Can the company and its activities be conducted in line with ESR, where appropriate and applicable, in an efficient and effective manner? Geographical location, time zone, access to markets, access to professionals, advisers and financial services, appropriately qualified directors and other personnel, as well as transport links are all important considerations.
Simplicity of corporate migration. The laws of the inbound jurisdiction need to permit corporate migration and the process should be simple and cost effective, to ensure that the process is commercially viable.
Guernsey offers these features.
Companies are migrating to jurisdictions where they can most readily comply with requirements such as substance. Corporate groups are consolidating multiple jurisdictional structures into single, or at least fewer, jurisdictions to create cost, compliance and substance efficiencies.
These considerations are not limited to the migration of existing structures, new structures are being established, which take into account the above trends and concerns.
Migration of Funds – Guernsey’s Fast Track Solution
It is not only corporations that are seeking to migrate to Guernsey, but also funds.
In recognition of the large number of expressions of interest from non-Guernsey domiciled fund managers seeking to relocate to Guernsey, the Guernsey Financial Services Commission has introduced a 10-day fast track application regime, to facilitate a simplified and speedy solution to migration.
Fund managers may wish to migrate to Guernsey for regulatory reasons, and /or to be geographically closer to UK/European operations, assets, and investors.
Guernsey’s Tax and Regulatory Standards Track Record
Guernsey’s tax policy is underpinned by strong general anti-avoidance rules and the adoption of a number of international tax standards. Some of the more relevant developments are detailed below;
December 2017 – EU Code of Conduct Group on Business Taxation for the EU Economic and Financial Affairs Council (COCG), confirmed Guernsey to be a co-operative jurisdiction which complied with the general principles of “fair taxation” and raised no concerns regarding Guernsey’s standards of transparency or implementation of measures to counter base erosion and profit shifting (BEPS).
During 2018, Guernsey worked closely with the COCG, EU Member States and the other Crown Dependencies to develop economic substance legislation, which was adopted in December 2018.
In 2019, the EU Council confirmed that Guernsey had met its commitment to introduce economic substance requirements and therefore removed Guernsey from the list of jurisdictions who had committed to make certain changes.
Guernsey has given its full support to the transparency principles central to the current G20, OECD and EU tax initiatives, and is working as part of the wider international community in the development and effective implementation of internationally agreed standards.
In 2004 Guernsey voluntarily entered into automatic information exchange and bilateral withholding arrangements respectively, with all EU Member States, under the European Union Savings Directive (2003/48/EC).
Guernsey committed in May 2013, to join the initiative of the G5 countries on establishing and piloting an international standard for automatic exchange of information between tax authorities.
In December 2013 Guernsey entered into an intergovernmental agreement with the United States of America in relation to the implementation of FATCA, which it implemented in June 2014.
In October 2013 Guernsey entered into an intergovernmental agreement with the United Kingdom in relation the United Kingdom’s own version of FATCA, which it also implemented in June 2014.
Guernsey joined in the joint statement on 19 March 2014 committing to the early adoption of the global CRS. On 29 October 2014 Guernsey was among over 50 jurisdictions to sign the OECD’s Multilateral Competent Authority Agreement in Berlin, as a further step towards implementation of the CRS.
Guernsey, along with over 50 jurisdictions, implemented the CRS into its domestic legislation with effect from 1 January 2016.
As a key member of the global community committed to transparency, Guernsey continues to implement developments in transparency and best practice, building upon its early adoption of FATCA and the CRS, and also being compliant with the BEPS minimum standards.
Data Protection
Guernsey is among a small group of third country jurisdictions that have been officially assessed as meeting current EU data protection standards and granted equivalence (“adequacy”), through individual Commission Decisions.
Next Steps
If any of the areas covered in this note are relevant to your or your clients, please get in contact to discuss the practical aspects, costs and timings of redomiciling structures to Guernsey. Please contact Steven de Jersey or John Nelson at advice.guernsey@dixcart.com
Madeira International Business Centre: A Business-Friendly Environment
The Madeira International Business Centre (MIBC) is a Portuguese government initiative that offers a number of benefits to companies that are registered with this body. These benefits include lower taxation, state-of-the-art infrastructure, and efficient local support services.
What Key Benefits Are Available Companies Registered in the MIBC?
One of the key benefits of registering a company in the MIBC is the lower taxation rate. Companies registered in the MIBC are subject to a rate of 5% corporate tax. This is significantly lower than the corporate tax rate in many other countries, making the MIBC an attractive option for businesses that are looking to optimise tax efficiencies.
The reason MIBCs enjoy a lower tax rate is because the regime is recognised as a form of state aid which has been approved by the EU Commission. The regime is compliant with the principles of the OECD, BEPS and the European Tax Directives.
In addition to low taxation, the MIBC also offers a number of other benefits to companies that are registered there. These benefits include:
State-of-the-art infrastructure: The MIBC is located in Madeira, which is a Portuguese island with a modern infrastructure, digital solutions, data storage, and a favourable business environment.
Efficient local support services: The MIBC has a number of support services available to companies, such as legal, accounting, human resources and tax advice.
Low operational costs: The cost of doing business in Madeira is relatively low, which can help to reduce companies’ overhead costs.
What Activities Can be Undertaken by Companies Registered in the MIBC?
The MIBC offers a wide range of business activities that can be conducted companies registered there. These activities include:
International services: This includes a wide range of activities, such as e-business and telecommunications, educational activities, technical and consultancy services.
International wholesale trading: This includes import and export of various goods such as trading of textiles, products and/or other items, including freight forwarding.
Ownership and maintenance of intellectual property: this may include acquiring, holding and managing IP rights (patents, trademarks, copyrights and other IP rights) and the commercialisation of intellectual property (licensing, franchising, sale of intellectual rights).
Industrial activities: This includes manufacturing, assembling, and warehousing activities within the MIBC’s industrial park.
Ship registration: The MIBC also offers a ship registration service, which allows you to register your commercial vessels and yachts in the Madeira International Shipping Register (MAR). Madeira has quickly grown to be the third largest shipping register in Europe.
It is important to note that financial services are excluded from the regime.
Why Choose the Madeira International Business Centre?
There are many reasons why you might choose to register a company in the Madeira International Business Centre. Here are just a few of the benefits:
Low taxation: Companies registered in the MIBC are subject to a corporate tax rate of 5%.
Exemption from withholding tax on dividend payments (to individuals not registered in Portugal or in a ‘tax haven’ jurisdiction).
Application of the participation exemption regime.
State-of-the-art infrastructure.
Efficient local support services.
Low operational costs.
Attractive location, Madeira is a beautiful island with a mild climate, making it a great place to live and work.
If you are looking for a business-friendly environment with low taxation and a favourable business climate, then the Madeira International Business Centre may be a great option to consider.
Reach out to Dixcart Portugal
If you are interested in learning more about the Madeira International Business Centre, please feel free to reach out to Dixcart Portugal for more information: advice.portugal@dixcart.com.
We would be happy to answer any questions you may have and help you get started.
There are three types of corporate income tax rate that may be applicable for a company incorporated in Portugal. It is important to understand the differences, as the relevant corporate income tax rates, substance criteria and activity requirements vary widely, and may have a significant impact on profitability.
The Three Types of Portuguese Corporate Income Tax Rate
The three types of tax rate are largely dependent on the physical location; Portugal mainland, the island of Madeira, or the International Business Centre of Madeira (also based on the island of Madeira, referred to as ‘MIBC’).
What Corporate Income Tax Rates are Applicable?
The corporate income tax rates vary significantly and are detailed below:
Portuguese Mainland Company
Madeira Company
International Business Centre of Madeira Company(for international activity)
First €50,000 of taxable income (small-medium enterprises)
17%
11.9%
5%
Taxable income above €50,000
21%
14.7%
5%
Which Corporate Income Tax will Apply to my Company?
The tax rate that applies to a company will depend on a number of factors, including; the company’s location, its business activities, and its size.
Companies with local Portuguese business activities, in Portugal mainland or the island of Madeira, may liable to tax rates up to 21% and 14.7% respectively. Please see below a Dixcart Article that summaries the advantages that are available: The Advantages of Portuguese Companies – Holding Companies
What Substance Criteria are Applicable for Companies Registered in Mainland Portugal and in Madeira?
Portugal and Madeira do not have specific substance requirements that need to be met (the exception to this are companies incorporated in the MIBC). However, to ensure compliance with tax regulations, including the ability to take advantage of Portugal’s double taxation treaty network, as a member of the OECD, substance does need to be maintained.
Examples of maintaining substance include:
Maintaining an open and active bank account in Portugal/Madeira respectively;
Having registered office address and/or premises for the use of the company in Portugal/Madeira respectively;
Having a qualified director and/or permanent employee, resident in Portugal/Madeira respectively;
Making important business decisions in Portugal/Madeira respectively and evidencing these through minutes of board meetings;
Maintaining board minutes, accounting and other records in Portugal/Madeira respectively;
Ensuring sufficient commercial activity occurs in Portugal/Madeira respectively.
The UK Government is demonstrating a desire to increase the diversity of investment in the UK.
The objective will be to increase investment in funds directed towards women and ethnic minorities and to also increase the diversity of regions, where the venture capital investment is taking place.
What is Happening?
In Jully 2023, the UK House of Commons Treasury Committee announced the release of a report on venture capital, and recommendations to address issues with venture capital tax relief. Such types of relief include; the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS), and Venture Capital Trusts (VCTs).
What is Venture Capital?
Venture capital is a form of investment in early-stage companies, typically in return for an equity share of the business. This type of financing can be risky and a proportion of firms that receive venture capital will fail.
It is an important type of investment for innovative companies with high growth potential.
What Reliefs are Available in the UK?
The UK venture capital sector receives state support in the form of three tax reliefs (targeted reductions in tax liability). These are the Enterprise Investment Scheme (EIS), the Seed Enterprise Investment Scheme (SEIS) and Venture Capital Trusts (VCTs). The sector also receives support via British Business Bank (BBB) funding schemes.
The EIS and VCTs have statutory ‘sunset clauses’ that will cause them to expire in April 2025. The UK Government has signalled an intention to extend the schemes but has not said when it will do so or for how long. This current uncertainty is a potential risk to investment in the UK.
An Opportunity
The renewal of the EIS and VCT schemes is an opportunity to improve them and to address current shortcomings. These chiefly comprise; diversity, regional inequality and scale-up capital.
Suggestions Regarding Increasing Diversity
Diversity in the sector is extremely poor, both in terms of the characteristics of the business founders that receive venture capital funding, and the people who make venture capital funding decisions.
Women and people from ethnic minorities are highly underrepresented in both groups.
There are three main suggestions:
The provision of statistics relating to diversity in staffing and funding decisions should be a condition of receiving tacit taxpayer support in the form of the EIS and VCT tax reliefs.
Venture capital firms to be required to comply with the industry standard Investing in Women Code or if not, needing to explain why.
The UK Government and BBB to consult on the creation of venture capital funds targeted towards women and ethnic minority individuals.
Suggestion Regarding Regional Inequality
Take positive measures to expand the areas of the UK receiving investment by addressing the concentration of the current majority of, venture capital investment in the so-called ‘Golden Triangle’; London, Oxford, and Cambridge.
Additional Information
If you would like to discuss this topic in more detail, please contact LaurenceBinge, at the Dixcart office in the UK: advice.uk@dixcart.com.
Today’s businesses are subject to the constantly shifting sands of tax, regulation and an ever evolving, increasingly globalised economy. Engaging a Trust & Corporate Services Provider to manage and administer your company can offer many benefits, particularly for entrepreneurs, family offices or organisations that operate in multiple jurisdictions.
Trust & Corporate Services Providers, often referred to TCSPs, are specialist firms that offer a range of professional services to businesses, helping them with administrative, legal, financial, and regulatory aspects of running a company, partnerships and more.
In this article we look at 7 of the leading reasons why utilising a properly licensed and regulated Isle of Man TCSP can save entrepreneurs and dynamic businesses precious resources:
For many entrepreneurs and growing businesses there simply isn’t the resource to devote to day-to-day company administration that does not add to the bottom line – but in today’s world, good governance is more important than ever. Further, there may not be the personnel and/or skills or expertise in-house to fill important appointments such as Directorships or Company Secretary etc.
Even for those more established businesses that operate internationally, or have a presence in multiple countries, having a single base of operation can deliver stability and certainty where taxation and the legal regime are concerned.
Utilising an Isle of Man TCSP can provide the business with such stability and reduce the administrative burden on you and your team, freeing you up to focus on core business activities and strategic planning in a neat “all-in-one” package.
In addition, the opening and ongoing maintenance of banking relations is integral to the running of any business. An established TCSP will have strong banking relations and be in a position to guide your business through onerous bank account on-boarding processes. Indeed, many high street clearing banks rely on introductions made by licensed and regulated TCSPs to entrepreneurs and small businesses. In most instances, said banks will insist on a local, resident Board of Directors that are provided by a TCSP.
TCSPs, such as Dixcart, are staffed with professionals who possess the experience, expertise and operational capabilities to handle your day-to-day company admin like bookkeeping, banking, secretarial tasks, and regulatory filings effectively and efficiently. Furthermore, best practices will inform all of the company’s underlying activity – giving you peace of mind that all regulatory, tax and legal requirements are being fulfilled.
2. Expertise and Specialist Knowledge?
A good quality TCSP will ordinarily employ qualified professionals from a number of disciplines. This typically includes persons from the accounting, legal, tax and fiduciary sectors such as trust and estate practitioners and chartered secretaries.
Having experts and their skillsets readily available can provide entrepreneurs and fledgling businesses with invaluable support for navigating their industry, avoiding potential liabilities or pitfalls. This is also of particular importance in the bearish post-pandemic skills market where recruiting has become so very difficult in almost every industry – in affect, your business would have a group of retained professionals on-hand.
At Dixcart, our professionals possess a deep understanding of corporate governance, laws, regulations, and maintain a good tax awareness along with any jurisdictional or global requirements.
TCSPs also often have extensive networks of legal, tax, financial, and business professionals that can provide additional support and services as needed. Over Dixcart’s 50+ years of trading, we have amassed a network of trusted experts, so that even where we do not know the answer, we know who will. This knowledge can be invaluable in the company’s decision-making and ensures compliance whilst avoiding potential liabilities.
3. Cost Efficiency
As the saying goes, ‘time is money’. This adage is of paramount importance to entrepreneurs and growing businesses, who are typically light on staff headcount and need to remain agile to have the best chance of succeeding in their given business activities.
The proper administration of a company can be time-consuming and require specialist knowledge. Activities such as completing annual filings, handling legal matters (such as contracts) or seeking counsel, dealing with tax advisers, maintaining proper accounts, holding board meetings and minuting decisions, banking etc. take precious working hours away from achieving the business’s objectives. The question is, would it be more efficient to hire employees rather than outsource?
Let’s take the UK as our working strawman, as they are our closest neighbour. Employing an administrator, who would carry out basic admin e.g. collating documentation, basic filing work, answering the phone etc. and (not items like accounting, dealing with third-party professional advisers, making tax and VAT filings etc.), generally commands an income of between £25,000 to £35,000, on average, within the UK. This does not include employers NI, lost hours due to statutory minimum holiday allowance, pension contributions, sick days, equipment, office space, bonuses, benefits etc. which, based on the lower of £25,000, represents a cost to the employer of circa £45,000+ per annum. This cost also represents a resource that is fairly limited in remit and capabilities, and potentially disproportionately expensive.
On the other hand, a company that undertakes a mid-high level of ongoing activity may incur TCSP fees of circa £25,000+ per annum in total. For this, the business is getting access to qualified accountants, corporate secretaries, professional trustees etc., a network of trusted and professional contacts around the globe, normally hundred(s) of years’ combined experience and, in a good TCSP, a direct line to the senior management team and a transparent fee structure that delivers cost certainty.
Dixcart delivers a full suite of services to its clients, many of whom are entrepreneurs and small to medium sized enterprises wishing to conduct ambitious projects or have growth targets to meet within a certain period of time. Not only does the Isle of Man company benefit from an efficient and effective team of qualified professionals, but the fees are always transparent and tailored to the business in question.
4. Risk Management, Governance and Compliance
Ok, I know that the heady subjects of risk management, governance and compliance (GRC) aren’t the most exciting benefit of utilising a TCSP but hear me out.
GRC management has become essential for the ongoing profitability and sustainability of any modern business, ensuring that the business operates in a lawful, ethical, and profitable manner. GRC is closely related to the core principles of the Environmental, Social, and Governance (ESG) phenomenon that has developed over the decades and accelerated in recent years – now being actively policed by financial regulators with regards to misconduct and adherence to public statements etc.
This is all very well to say, and sounds good, but what does GRC management really mean in practice?
Good corporate governance involves balancing the interests of a company’s many stakeholders, such as shareholders, angel investors, management, employees, customers, suppliers, financial/banking institutions, government agencies and local communities etc. Good governance helps to build trust and confidence among stakeholders, thus promoting sustainability and safeguarding growth.
Risk management is central to the identification, assessment and control of vulnerabilities and threats to the company and its stakeholders. These threats could come in many forms, including financial practices, legal liabilities, strategic decision making, management errors or cybersecurity issues. Good risk management aids a company in proactively eliminating, mitigating or identifying environmental factors that could lead to financial loss, reputational damage, criminal liability and more – therefore it enhances the company’s resilience and aims to futureproof the business.
For example, diversifying business operations across multiple jurisdictions enables an entrepreneur to spread their risk and reduce their exposure to changes in a single country’s economic, legal or tax environment.
Finally, compliance relates to the company’s adherence to applicable laws, regulations, standards, and ethical practices within the jurisdictions of trade. Failure to comply with these requirements can lead to financial penalties, legal liability and reputational damage. Businesses that carry out certain activities, such as investment management, medical services etc. must follow strict regulatory rules.
TCSPs stay updated on legal and regulatory changes, ensuring that the business remains compliant with all relevant laws and avoids potential penalties or legal issues. This is especially important for the business as it develops, whether the goal is a future sale or floating the company on an exchange, GRC is here to stay.
By engaging professionals such as Dixcart to handle critical business functions, such as GRC management, businesses can:
Enhance decision making via delivering regulatory, legal and tax awareness in a reliable and timely manner, thus improving the quality of strategic and operational decisions.
Improve efficiency by streamlining processes and procedures, saving time and resources.
Increase stakeholder trust, which can lead to increased investment, better working partnerships, and improved reputation.
Ensure sustainability by identifying, assessing and managing potential financial risks, legal liabilities and malicious threats.
Diversify the business’s operations across multiple jurisdictions, by spreading risk and reducing exposure to changes in a single jurisdiction’s economic, legal or tax environment.
5. Business Continuity and Expansion
As a business grows its needs evolve. A TCSP’s services can adapt to meet those changing needs by providing revised and scalable solutions that align with the business’s development and expansion plans. Privately owned TCSPs, such as Dixcart, can adjust their offerings quickly and evaluate your evolving requirements based on growth or fluctuations in demand, without disruption.
Workforce continuity is of paramount importance for the success of fledgling and growing businesses. In fact, one of the key issues experienced by businesses today is the reliable acquisition and retention of good quality staff. This is not an issue where a good quality TCSP is engaged.
Dixcart provides businesses with access to the skills and knowledge of consummate professionals for as long as needed. When choosing a TCSP you should ensure that there is a low churn rate of staff and/or a large proportion of long-serving senior team members, who you will have direct access to. In such instances, the same contacts can act as your dedicated touchpoints throughout the entire relationship, allowing them to gain significant insight into the business, your issues and objectives, and therefore deliver more effective and efficient services.
Moreover, for entrepreneurs and businesses with global aspirations, TCSPs can also assist with company formation and compliance in foreign jurisdictions – enabling a full global group structure to be created through one point of contact. This support can help navigate complex international regulations and cultural differences, making the expansion process smoother. Having a presence in multiple locations can also reduce risk by diversifying operations and protecting assets.
By collaborating with entrepreneurs, our various Dixcart Group TCSP offices around the world, or TCSPs of similar standing to Dixcart, we can create comprehensive business continuity plans to aid existing or expanding operations. These plans outline strategic procedures to follow during challenging times – emergencies, natural disasters, or other disruptions – ensuring the business is resilient and can continue functioning effectively, no matter what. In addition, an extra layer of ongoing financial stability and flexibility may be introduced by the diversification of banking and professional relationships, taking advantage of Dixcart’s already established list of reputable contacts.
6. Pre-planning For Future Sale
When entrepreneurs and businesses embark on new commercial ventures, such as entering a new market or undertaking a special project, the activity is often undertaken with a view to hitting certain growth or value targets before selling the subsidiary or business as a whole. Where this is the case, especially in instances of cross-border trade or multi-jurisdictional planning or ownership, engaging a good TCSP within a reputable jurisdiction can augment the journey to sale.
By delivering tailored solutions, a TCSP can help maximise the value of the business and ensure a smooth and efficient sales process. Working with advisers and clients to provide the optimal corporate structure can enhance the business’s attractiveness to potential buyers via maximising value and operational efficiency. This may involve creating a holding company or subsidiary structure that is more appealing to investors or simplifies the ownership and shareholding arrangements etc.
Very often we are approached by entrepreneurs and business owners, pre-incorporation, to establish and administer Isle of Man holding structures for the purpose of owning the equity in the various arms of the business. The Isle of Man holding company can also hold any other relevant assets, for example, Real Estate, Investments, or Intellectual Property. This can provide the Beneficial Owners with additional flexibility when it comes to onward sale of the business and the potential to optimise their sale proceeds and mitigate unnecessary tax liabilities.
A good TCSP can ensure the company’s financial records and reporting requirements are always up-to-date, well-organised, and comply with the relevant requirements, making the preparation for sale a more straightforward and efficient task. Engaging a TCSP, such as Dixcart, to assist with due diligence requirements, valuation, confidentiality measures and negotiations can not only give owners and investors peace of mind, but also instil confidence in potential buyers. In addition, post-sale, an experienced TCSP can ensure smooth transition and transfer of assets to the new owners and help the outgoing owners wind down operations as part of a post-sale planning strategy.
Proper planning and collaboration with experts at Dixcart can significantly enhance the likelihood of a successful and profitable business sale.
7. Everything Else
So, it is clear from the information above, that utilising an offshore TCSP can be advantageous in the running of an entrepreneur’s business, but what else can be offered?
Offshore jurisdictions often offer tax neutrality and efficiency compared to the entrepreneur’s home country. By structuring their businesses offshore, entrepreneurs may legally reduce their tax liabilities, retain more profits, and reinvest them in their businesses or personal portfolio.
Legitimate use of offshore trusts or entities can create a legal separation of ownership between personal and business assets, therefore helping to protect those assets from potential lawsuits, creditors, or other financial risks.
Where the legal separation of assets has occurred, a TCSP can facilitate estate and succession planning, ensuring that an entrepreneur’s wealth and business interests are managed and distributed to future generations according to their wishes, in a tax efficient manner. Further, the TCSP can assist entrepreneurs in designing and implementing various employee benefit plans such as share purchase schemes or Employee Ownership Trusts etc., incentivising their performance and loyalty.
Some entrepreneurs value privacy and may prefer to keep their financial affairs confidential. Offshore jurisdictions often have strict laws that protect the privacy of business owners and shareholders, offering a higher level of confidentiality.
Speak with a member of the Dixcart team to find out more about the various structuring options and services that may be available to you.
Why Choose an Isle of Man Trust & Corporate Service Provider?
There are many reasons to choose the Isle of Man, such as regulators who work in harmony with the private sector, political and economic stability, a comprehensive financial infrastructure, a strong banking sector, favourable taxation that encourages the creation and preservation of wealth and world class communications.
Ultimately, the Isle of Man is a competitively priced, reputable and well-regulated international financial centre, which can enhance the credibility of an entrepreneur’s business in the eyes of clients, partners, and investors alike.
Things to consider…
It is important to note that whilst TCSPs can be beneficial, often crucial, for businesses to thrive, they should be selected carefully. Research and due diligence are required to ensure the TCSP is reputable, compliant and can deliver the necessary support for the company’s specific requirements.
Additionally, it is important to ensure that the chosen offshore jurisdiction aligns with the company’s overall business strategy and goals.
Seeking professional advice from qualified accountants, tax, legal and financial advisors is essential to ensure that the chosen structures and arrangements are legal, ethical, and aligned with the entrepreneur’s specific needs and objectives.
With ten offices covering nine different jurisdictions worldwide, Dixcart are ideally placed to provide any entrepreneur with the support and expertise required to support a flourishing business.
Get in Touch
If you would like to discuss corporate services or estate and succession planning, please feel free to get in touch with the team at Dixcart: advice.iom@dixcart.com
