Category: Corporate Services

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

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

Swiss Accounting Regulations and Chart of Accounts

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

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

Companies can refer to principles defined by:

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

Company Obligations

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

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

Annual Reports

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

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

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

Publishing Results

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

Swiss Audit Requirements

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

1. Ordinary Audit

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

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

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

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

2. Limited Audit

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

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

3. No Audit

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

Swiss Holding Company: Consolidating Financial Statements

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

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

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

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

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

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

The company must also conform to the conditions detailed below:

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

Swiss Accounting Principles

• Swiss Financial Reporting Principles

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

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

• Currency and Languages

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

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

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

• Swiss Accounting Principles

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

Additional Information

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

Establishing a Malta Company

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

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

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

Reason 1: Opportunities in the stable financial services sector

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

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

• The Professional Investor Funds, commonly referred to as PIFs, are the Maltese hedge fund that does not fall under the AIFMD.
• Alternative Investment Funds (AIFs).
• UCITS (retail funds).
• Private Funds.

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

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

Reason 2: Tax and legal framework

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

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

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

Reason 3: Simple re-domiciliation of companies

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

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

Reason 4: Business support services

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

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

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

Reason 5: Labour force

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

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

Reason 6: A perfectly located island

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

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

Reason 7: Biggest yacht registry in the EU

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

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

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

Reason 8: IT Infrastructure

Malta is relatively advanced when it comes to IT infrastructure.

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

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

Reason 9: Immigration and investment incentives

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

Additionally, there are a variety of residency routes available, allowing qualifying persons that satisfy a robust due diligence process to apply for Permanent and Global Residency in Malta. 

Reason 10: Entrepreneurial climate and safety

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

Additional Information

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

Background

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

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

Bank Accounts

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

Incorporation of a UK Company Run from Outside the UK

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

The First Year of Operation

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

What are the Banks Looking For?

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

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

Tax Residency Needs to be Considered

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

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

Re-domiciliation of Companies to the UK

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

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

What can Dixcart do to Help?

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

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

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

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

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

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

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

Corporate Tax Benefits

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

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

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

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

 Summary of Corporate Tax in Cyprus

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

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

Personal Taxation

• Tax Residence in 183 days

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

• Tax Residence under the 60 Day Tax Rule

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

• Non-Domicile Tax Regime

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

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

Salary Income in Cyprus

On the 26^th of July 2022 the long-anticipated tax incentives for individuals have been implemented. As per the new provisions of the income tax legislation, a 50% exemption for income in relation to first employment in Cyprus is now available for individuals with annual remuneration in excess of €55,000 (previous threshold €100,000). This exemption will be available for a period of 17 years.

Additional Information

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

Background

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

What Services Can Dixcart Offer?

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

Private Companies

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

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

Attendance at Meetings

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

What Advantages Does Dixcart Offer?

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

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

Further Information

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

Malta is a popular choice for companies and new businesses as it is a reputable EU jurisdiction and ‘sunshine’ island, with an ‘outdoor’ lifestyle in a clean and safe ecological environment.

The sustainability movement exemplifies the positive impact that individuals can have on their environment. Dixcart aim to contribute to this cause by supporting the island’s foremost organisations which are working towards preserving our environment.

In this article, we consider eco-friendly projects and the opportunities that are available in Malta. 

1. Corporate Social Responsibility (CSR) projects

If you are looking for a way to enhance your company’s CSR profile, we can provide an opportunity for your team to make a positive change that will last much longer than their trip to Malta. Set up a company in Malta, with Dixcart’s assistance, and drive research and development to focus on eco-friendly projects.

Specific financial support is available to reduce single-use plastic usage at events taking place in Malta. Over the past few years, businesses in Malta have done much to reduce the amount of single-use plastic at events. Biodegradable alternatives to plastic cutlery, plates, and straws, for outdoor events, is in demand. 

Currently there is a financial aid scheme, that offers shops in Malta up to €20,000 to transition to retailing plastic-free and reusable packaging alternatives. 

This eco-friendly retail investment grant will cover up to 50% of the expenses incurred in moving away from single-use packaging to a more sustainable method of consumption.

At the beginning of 2022, the Maltese Government stopped the importation of plastic cotton bud sticks, cutlery, plates, straws, beverage stirrers, balloon sticks, and polystyrene containers and cups.

The project also aims to incorporate innovative and sustainable technology, such as solar paving, smart benches, and smart solar bins.

• Encourage enterprises to invest in sustainable and digitalised operations

The demand for greener travel will continue to increase in the future, and so will the expectations of ‘green’ travellers, who will demand more than the traditional water and energy-saving measures. These developments will put destinations and travel companies under increased scrutiny by discerning holidaymakers, and destinations and service providers who demonstrate a tangible commitment to the natural environment will become even more attractive.

To further encourage enterprises to invest, businesses in Malta can benefit from up to €70,000 to implement projects which lead to more sustainable and digital processes.

The ‘Smart & Sustainable Scheme’, managed by Malta Enterprise, incentivises more competitiveness and better use of resources, enhancing the economic activity of these businesses.

Through the Smart & Sustainable Scheme, businesses are entitled to receive 50% of the total eligible costs, up to a maximum €50,000 for each relevant project.

Businesses fulfilling the criteria for this scheme may also benefit from a tax credit of up to €20,000 for each product which satisfies at least two of the three conditions, as detailed below:

1. New investment or an expansion in Gozo.
2. A project that an enterprise will implement in a start-up phase.
3. A reduction in carbon usage by the enterprise, as determined through an independent auditor.

If a project satisfies one of the above criterion, the tax credit will be a maximum €10,000.

        3. Water quality and Blue Flags awarded local beaches

The quality of water is also an essential aspect of the sustainability of tourism. Following the investment in the purification process of sewage water at various outfall treatment centres, the quality of sea water around the Maltese Islands has improved. It is now considered one of the best in Europe. This is also being reinforced by the increase in the number of Blue Flags awarded to local beaches.

€150 million funding, the biggest ever, for a project in Malta, is enabling the Water Services Corporation to produce more water, recycle used water, and improve energy efficiency.

Desalination plants are being upgraded, and more seawater can be processed. This means that far less water will need to be taken out of ground-based sources – about four billion fewer litres each year. In Gozo, a plant using advanced ‘reverse osmosis’ technology boosted daily water production by nine million litres a day.

These initiatives are known collectively as the ‘Net Zero Impact Utility’ project, and they are cutting edge in terms of sustainable water production usage across Malta and Gozo. EU investment in this project has helped make this “holistic” and sustainable approach possible.

Malta Tourism Authority’s ‘Eco-certification Scheme’ creates more awareness and promotes sound environmental practices amongst hotel operators and other providers of tourist accommodation. This voluntary national scheme has now expanded from initially being just hotels to include other forms of accommodation. As a result, it is credited with raising standards in environmental practices within this highly important sector.

The Future of the Green Economy in Malta

In 2021, the European Commission unveiled the ‘New European Bauhaus’ initiative, an environmental, economic, and cultural project aimed to design ‘future ways of living’ in a sustainable manner. The new project is about how we live better together with the environment, after the pandemic, while respecting the planet and protecting our environment. In addition, it is about empowering those who have potential solutions to the climate crisis.

The Malta Government plays an active role in deciding how financial resources are allocated between competing uses, at present and in the future. Infrastructure development is one such future-focused investment, including plans to invest in Malta’s industrial zones and estates. There are also schemes to support start-ups through venture capital. The support and strategies aimed at a green transition feed into and support a greener economy.

Your eco-friendly start-up or extending an existing business in Malta, can be part of these exciting changes and a ‘new page’ in the NextGen post-pandemic economy.

Additional Information 

If you would like further information regarding eco-friendly projects for research and development and the opportunities available through Malta, please speak to Jonathan Vassallo: advice.malta@dixcart.com at the Dixcart office in Malta, or to your usual Dixcart contact.

This article has been prepared by Dixcart for the information of clients and associates. Whilst every care has been taken in its preparation, no responsibility can be accepted for inaccuracies. Readers are also advised that the law and practice may change from time to time.

Background – What the UK Offers as a Tax Efficient Jurisdiction

The UK is one of the world’s leading financial countries given its financial services industry and its robust corporate law and governance frame works. This information concentrates on its highly competitive corporation tax system for holding companies.

One of the UK Government’s key ambitions has been to create the most competitive tax system in the G20. It has developed strategies to support, rather than hinder, growth and to boost investment.

Through the implementation of these strategies the Government is aiming to make the UK the most attractive location for corporate headquarters in Europe.

In order to achieve this the UK Government has created an environment where:

• There are low corporate taxes
• Most dividend income is tax exempt
• Most share disposals are tax exempt
• There is a very good double tax treaty network to minimise withholding taxes on dividends, interest and royalties received by a UK company
• There is no withholding tax on the distribution of dividends
• Withholding tax on interest can be reduced due to the UK’s double tax agreements
• There is no tax on profits arising from the sale of shares in a holding company by non-resident shareholders
• No capital duty is applicable on the issue of share capital
• There is no minimum share capital
• An election is available to exempt overseas branches from UK taxation
• Informal tax clearances are available
• Controlled Foreign Company Legislation only applies to narrowly targeted profits

Tax Advantages in More Detail

• Corporation Tax Rate

Since 1 April 2017 the UK corporation tax rate has been 19% but it increased to 25% on 10 April 2023.

The 19% rate will continue to apply to companies with profits of no more than £50,000 with marginal relief for profits up to £250,000.

• Tax Exemption for Foreign Income Dividends

Small Companies

Small companies are companies with less than 50 employees that meet one or both of the financial criteria below:

• Turnover less than €10 million
• Balance sheet total of less than €10 million

Small companies receive a full exemption from the taxation of foreign income dividends if these are received from a territory that has a double taxation agreement with the UK which contains a non-discrimination article.

Medium and Large Companies

A full exemption from taxation of foreign dividends will apply if the dividend falls into one of several classes of exempt dividend. The most relevant classes are:

• Dividends paid by a company that is controlled by the UK recipient company
• Dividends paid in respect of ordinary share capital that is non-redeemable
• Most portfolio dividends
• Dividends derived from transactions not designed to reduce UK tax

Where these exemption classifications do not apply, foreign dividends received by a UK company will be subject to UK corporation tax. However, relief will be given for foreign taxation, including underlying taxation, where the UK company controls at least 10% of the voting power of the overseas company.

• Capital Gains Tax Exemption

There is no capital gains tax on disposals of a trading company, by a member of a trading group, where the disposal is all or part of a substantial shareholding in a trading company or where the disposal is of the holding company of a trading group or sub-group.

To have a substantial shareholding a company must have owned at least 10% of the ordinary shares in the company and have held these shares for a continuous period of twelve months during the two years before disposal. The company must also have an entitlement to at least 10% of the assets on winding up.

A trading company or trading group is a company or group with activities that do not include ‘to a substantial extent’ activities other than trading activities.

Generally, if the non-trading turnover (assets, expenses and management time) of a company or a group does not exceed 20% of the total, it will be considered to be a trading company or group.

• Tax Treaty Network

The UK has the largest network of double tax treaties in the world.  In most situations, where a UK company owns more than 10% of the issued share capital of an overseas subsidiary, the rate of withholding tax is reduced to 5%.

• Interest

Interest is generally a tax deductible expense for a UK company providing loans for commercial purposes. There are, of course, transfer pricing and thin capitalisation rules.

Whilst there is a 20% withholding tax on interest, this can be reduced or eliminated by the UK’s double tax agreements.

• No Withholding Tax

The UK does not impose withholding tax on the distribution of dividends to shareholders or parent companies, regardless of where the shareholder is resident in the world.

• Sale of Shares in the Holding Company

The UK does not charge capital gains tax on the sale of assets situated in the UK (other than UK residential property) held by non-residents of the UK. 

Since April 2016 UK residents have paid capital gains tax on share disposals at a rate of 10% or 20%, depending on whether they are basic or higher rate taxpayers.

• Capital Duty

In the UK there is no capital duty on paid up or issued share capital. Stamp duty at 0.5% is, however, payable on subsequent transfers.

• No Minimum Paid up Share Capital

There is no minimum paid up share capital for normal limited companies in the UK.

In the event that a client wishes to use a public company, the minimum issued share capital is £50,000, of which 25% must be paid up.  Public companies are generally only used for substantial activities.

• Overseas Branches

A company may elect to exempt from UK corporation tax all of the profits of its overseas branches that are involved in active operating business.  If this election is made, branch losses may not be offset against UK profits.

• Controlled Foreign Company Rules

Controlled Foreign Company Rules (CFC) are intended to apply only where profits have been artificially diverted from the UK.

Subsidiaries in jurisdictions detailed on a wide list of excluded territories are generally exempt from CFC taxation if less than 10% of the income generated in that territory is exempt from or benefits from a notional interest deduction.

Profit, other than interest income, in all remaining companies is only subject to a CFC charge if a majority of the business functions relating to assets used or risks borne are performed in the UK; even then only if taxed at an effective rate less than 75% of the UK rate.

Interest income, if taxed at less than 75% of the UK rate, is subject to a CFC taxation charge, but only if it arises ultimately from capital invested from the UK or if the funds are managed from the UK.

An election can be made to exempt from CFC taxation 75% of the interest received from lending to direct or indirect non-UK subsidiaries of the UK parent.

Introduction of a New UK Tax – Directed Towards Large Multinational Companies

On April 2015 the UK introduced a new Diverted Profits Tax (DPT) which has also been called the “Google Tax.” It is aimed at countering aggressive tax avoidance by multinational companies, which historically has eroded the UK tax base.

Where applicable, DPT is charged at 25% (compared to the corporation tax rate of 20%) on all profits diverted from the UK.  It is important to note that this is a new tax and is entirely separate from corporation tax or income tax and, as such, losses cannot be set against the DPT.

Conclusion

The UK continues to be regarded as a leading holding company jurisdiction. Due to the number of tax benefits that are legitimately available, its access to capital markets, its robust corporate law and governance frame works.

The recently introduced Diverted Profits Tax is directed towards a specific and limited group of large multinational organisations.

Which UK Services can Dixcart Provide?

Dixcart can provide a comprehensive range of services relating to the formation and management of UK companies. These include:

• Formation of holding companies
• Registered office facilities
• Tax compliance services
• Accountancy services
• Dealing with all aspects of acquisitions and disposals

Contact

If you would like further information on this subject, please contact advice.uk@dixcart.com, or your usual Dixcart contact.

Background

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

Dixcart Malta can assist with applications to Malta Enterprise, the Government agency which offers support to companies at different stages of their lifecycle. Schemes are available depending on various criteria, including the nature of the project/operation.

Which Sectors are Eligible for Funding?

The main funding options are available for the following sectors: hi-tech, artificial intelligence, advanced manufacturing, life sciences, education and training, digital innovation and data science.

The hi-tech sector is defined to include: 

• Data hosting services 
• Payment gateway services
• Cybersecurity 
• Cloud-based applications 
• Behaviour analytics 
• Automated multilingual customer service development 
• Big data and AI-driven financial analytics and insights 
• Autonomous, decentralised and intelligent system design 
• Digital games 
• Fintech 
• MedTech

How Are Funding Decisions Reached?

Each situation is assessed on its own merits with Malta Enterprise reviewing numerous criteria and reaching a final decision on a case by case basis.

AI Strategy

The national AI strategy of Malta sets out the long-term objective as being to transform Malta into a leading economy in the field of AI by 2030. This maps the path for Malta to gain a strategic competitive advantage in the global economy as a leader in the AI field and has been built on the following three strategic pillars: 

• Investment, start-ups and innovation 
• Public sector adoption 
• Private sector adoption – three strategic enablers: education and workforce, ethical and legal, and ecosystem infrastructure.

New Niches 

Malta is becoming a home to technologies that will shape the future. Technologies such as: 

• Distributed Ledger Technology (DLT) including blockchain 
• MedTech including bioinformatics and medical imaging
• Artificial Intelligence, mainly with a focus on machine learning, natural language processing and speech
• Internet of Things and 5G
• Biometrics 
• Virtual Reality and Augmented Reality 

Malta as a Technology Test Bed

Due to its relatively small size and population, Malta is an ideal micro test bed to enable solutions and service providers to prove their concepts.

Malta incentivises companies to introduce innovative technologies and to help build a new infrastructural future. The Government of Malta continues to invest in bringing the latest technologies to Malta to ensure continuous connectivity.

Malta The Tech Hub in the Mediterranean 

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

This is achieved through various fiscal and financial incentives that are managed and administered by the agency.

The Advantages Offered by Maltese Companies

In addition, a number of benefits, including several tax efficiencies are available to international companies established in Malta and these are explained fully in the Dixcart Article: What Are the Advantages Available to Companies Established in Malta?

Malta’s Expat Population

Malta as a jurisdiction appreciates the positive contribution being made by expats in helping to achieve its ambitious AI and technology objectives. 

25% of Malta’s population are expats living and working in Malta:

• Expats are active across all economic sectors
• Qualified non-residents are employed in roles that cannot be filled by the local labour market 
• Through the newly launched ‘Qualifying Employment in Innovation and Creativity Tax Programme’, qualified non-residents who earn an annual minimum employment income of €52,000 and pay income tax in Malta, are eligible to a flat tax rate of 15% for a maximum period of three years.

 Additional Information

If you require further information regarding setting up a company in Malta and would benefit from a one-stop-shop of corporate services, including support with funding applications, please speak to Jonathan Vassallo at the Dixcart office in Malta: advice.malta@dixcart.com.

Introduction

Whether you are an overseas business looking to expand into the UK, or already in the UK with plans for an exciting new busines, your time is valuable. Getting the compliance and administrative elements setup at an early stage is crucial to allow the business to grow efficiently, but can be a drain in terms of the time required. 

At the Dixcart office in the UK, our combined team of accountants, lawyers, tax advisers and immigration consultants make this process as easy as possible for you.

Bespoke Advice

As every business is different, there will always be some specific items to consider for your particular business, and taking bespoke professional advice at an early stage will always be the right thing to do. 

Please see below a checklist regarding the key compliance matters that every new UK business looking to take on employees needs to consider. 

Checklist

• Immigration: Unless you are looking to only employ workers already with the right to work in the UK, you may need to consider business related visas, such as a sponsor license or sole representative visa.

• Employment contracts: all employees will need to have an employment contract compliant with UK employment laws.  Many businesses will also need to prepare staff handbooks and other policies.

• Payroll: UK income tax rules, benefits-in-kind, pension auto-enrolment, employer’s liability insurance, all need to be understood and implemented correctly.  Administering a UK compliant payroll can be complex. 

• Book-keeping, management reporting, statutory accounting and audits: well- maintained accounting records will help provide information for considered decision-making and financing and remaining compliant with Companies House and HMRC.

• VAT: registering for VAT and filing, in compliance with requirements, will help ensure there will be no unexpected surprises and, if dealt with promptly, can help with early-stage cash-flow. 

• Commercial contracts: whether an agreement with a; vendor, supplier, service provider or customer, a well prepared and robust contract will help protect your business and ensure it is well placed for any future exit strategy. 

• Premises: whilst many businesses are operating more and more online, many will still require office or warehousing space.  Whether renting or purchasing space we can assist. We also have a Dixcart Business Centre in the UK, which may be helpful if a serviced office is needed, with professional accounting and legal services being available, in the same building.  

Conclusion

Failing to take the right advice at the right time can prove costly in terms of time and finance at a later stage.  By working as one professional team, the information Dixcart UK gain when we provide one professional service can be shared appropriately with other members of our team, so you do not need to have to have the same conversation twice.

Additional Information 

If you require additional information on this topic, please contact Peter Robertson or Paul Webb in the UK office: advice.uk@dixcart.com.

The Aim of this Note

The aim of this Article is to highlight the many other reasons for using Guernsey structures, besides the mitigation of tax leakage for holding UK real estate (and other assets). In the past the focus on the benefits of using Guernsey structures was often concentrated purely on the tax benefits available, whilst ignoring other potential benefits.

What’s Changed? – Tax Reforms for Non-UK Resident Owners

Since 2015 the UK government has announced various tax reforms to more closely align the tax treatment of non-UK resident owners of UK property (both residential and commercial) with that of UK residents holding UK property.

These reforms were introduced as part of the UK government’s wider efforts to tackle tax avoidance, evasion and non-compliance and were designed to ‘level the playing field’ in terms of taxation of gains between non-UK resident and UK-resident investors in UK real estate.

Notwithstanding these reforms, investors are still free to structure their investments in UK real estate through Guernsey structures reducing some of the adverse UK tax implications which use of UK vehicles may incur.

Lawful mitigation of tax liabilities is still permissible.

Why the Use of Guernsey Structures Can be Beneficial

There are a number of important non-tax related reasons why structuring through a Guernsey structure is beneficial for holding UK real estate (and other assets):

1. The Versatility of Guernsey Vehicle Options Available

Guernsey legislation allows a versatile variety of structures that can be used.  Some of the key advantages are the flexibility of the laws such as:

Companies – Very flexible company law, distributions on a solvency basis (not limited to distribution of profits), no withholding tax on distributions, re-domiciliation allowed, Guernsey corporation tax is currently 0% with no capital gains tax.

Limited Partnerships / Guernsey Property Unit Trusts (GPUTS) – Both of these provide options for tax transparent structures which can aid planning, particularly where there is a diverse pool of international investors.

Protected Cell Companies – Provides a company which has the ability to appoint different shareholders to different cells and ring fence assets in those cells, and can be an alternative to a Collective Investment Scheme.

Trusts and Foundations – For those investors who have estate planning in mind, Guernsey is a world leader in this area with a well-developed trust regime. Since 2012 Guernsey has been able to offer Foundations for wealth planning and asset holding which are increasingly popular, particularly with clients from civil law jurisdictions. Guernsey Foundations are particularly interesting due to their ‘disenfranchised’ beneficiary legislation.

2. Guernsey Collective Investment Schemes and Listed Real Estate Investment Trusts

Guernsey Collective Investment Schemes (CIS) and The International Stock Exchange (TISE) listed Real Estate Investment Trusts (REITs), which use British offshore entities as the listing vehicles, offer the following benefits to investors:

• improved returns – exemption or potential exemption from UK corporation tax on rental income and from UK capital gains tax on corporate profits at the fund level, through the “transparency election” or an “exemption election”;
• reduced or no transaction costs – no stamp duty arises in relation to the sale of shares in or units of a Guernsey entity unlike the SDLT suffered with a UK entity;
• Private Investment Fund (PIF) Regime – provides a lighter touch regulation for a CIS and is therefore more cost-effective to use, rather than other more regulated fund structures.

3. Eurobond Exemption to UK Withholding Taxes

The TISE is an internationally recognised stock exchange headquartered in Guernsey, with offices in Isle of Man, Jersey, Dublin and London.

Currently, nearly one third of all UK REITs are listed on the TISE to take advantage of the Eurobond Exemption to UK Withholding Taxes, as non-UK companies issuing debt secured on UK real estate can list the debt on a recognised stock exchange in order to pay interest to non-UK Entities and Persons, without deducting UK withholding tax.

4. Privacy and Confidentiality (not secrecy)

Ultimate beneficial ownership of structures is not currently publicly available, but is required to be disclosed to the Guernsey Registry, and shared to fully meet the obligations of the Common Reporting Standard and Tax Information Exchange Agreements. 

In addition, trust and foundation instruments, limited partnership agreements and limited liability company (LLC) agreements are not publicly available, so investors can manage their affairs privately.

5. Internationally Recognised Jurisdiction

Guernsey has a reputation for being a well-regulated and transparent international finance centre. Guernsey has robust and extensive anti-money laundering laws and has entered into over 61 TIEAs based on the OECD model arrangement.  Guernsey also has a world-class, professional infrastructure with numerous legal, tax, accounting and corporate service providers providing the high level of services required from investors.  Other benefits include:

• All trust and corporate services providers must be regulated (not a requirement in many other countries including the UK).
• Most major UK, EU and US financial institutions are familiar with Guernsey and willing to provide services. Compliance related matters and therefore procedures such as opening bank accounts and raising finance can be carried out with minimal issues arising.

6. Guernsey: Ability to Redomicile Entities

It is often necessary or advantageous to move, or redomicile structures to other jurisdictions. For example, where geopolitical events or legislation become adverse, or there is a change in the investment strategy being followed, or there is adverse opinion regarding the structure’s current jurisdiction.

One of the attractions of this re-domiciliation option is that it permits an entity to transfer its legal base to a different jurisdiction, while maintaining its legal personality and so remaining subject to all agreements (including external financing arrangements and related security), to which the entity was party prior to re-domiciliation taking effect.

By contrast, companies incorporated in the UK or in some other jurisdictions cannot be redomiciled, which can limit the multi-jurisdictional structuring options available to such onshore companies.

7. Ability to Open Up to a Wider Buyer Audience on Exit

Holding UK real estate or infrastructure assets through a Guernsey entity can create a wider international buying audience at the time of exit.  An international buyer may not wish to hold shares directly in a UK company if they do not currently have a UK tax exposure.

It is also perfectly acceptable for a UK resident to have the asset held through a Guernsey company, to register the company as UK tax resident, and run the company’s affairs from the UK.  At the time of sale, the shares in the Guernsey company can be sold and the Guernsey company either re-domiciled (as described above), or have its tax residency changed to suit the new owner.

Have UK Tax Reforms Changed the Use of Guernsey Structures?

In short, no, not entirely.  

CIS benefits continue to persist as the UK government permits CIS to make either a transparency election or an exemption election, thereby meaning that investors will not be subject to possible double taxation.  As a result, we have seen a steady use of Guernsey holding structures and continue to see new enquiries.

We have also experienced a number of structures migrating to Guernsey to benefit from the jurisdiction’s reputation and expertise, particularly as substance requirements are now increasingly important to demonstrate.

In addition, advisers and clients are less focused on tax advantages but reverting back to traditional reasons for using Guernsey structures, such as; wealth preservation and succession planning. 

There are clearly a considerable number of benefits to investors in utilising Guernsey structures to hold real estate and other assets, with a great deal of flexibility and variety, to form a structure and to suit any investor.

Additional Information

For more information regarding the use of Guernsey structures to hold UK real estate and other assets, please contact Steven de Jersey or John Nelson at the Dixcart office in Guernsey: advice.guernsey@dixcart.com

Dixcart Trust Corporation Limited has a Full Fiduciary Licence granted by the Guernsey Financial Services Commission