UK Tax Regulator Focuses on Offshore Corporates Owning UK Property

A New Campaign

A new campaign was launched by the UK tax regulator (HMRC), in September 2022, aimed at overseas entities that may not have met UK tax obligations in relation to the UK property that they own.

HMRC have stated that it has reviewed data, from HM Land Registry in England and Wales and other sources, to identify companies who may need to make disclosures for; non-resident corporate rental income, annual tax on enveloped dwellings (ATED), the transfer of assets abroad (ToAA) legislation, non-resident capital gains tax (NRCGT), and, finally, income tax under the transactions in land rules.

What is Taking Place?

Depending on the circumstances, companies will receive letters, accompanied by a ‘certificate of tax position’, recommending that they ask connected UK-resident individuals to re-examine their personal tax affairs, in the light of relevant anti-avoidance provisions.

Since 2019, ‘certificates of tax position’ have been issued to UK residents who receive offshore income.

The certificates typically require a declaration of the recipients’ offshore tax compliance position within 30 days. HMRC has previously noted that taxpayers are not legally obliged to return the certificate, which could expose them to criminal prosecution, if they make an incorrect declaration.

Standard advice to taxpayers is that they should consider very carefully whether they return the certificate or not, regardless of whether they have irregularities to disclose or not.

The Letters

One of the letters concerns undisclosed income received by non-resident corporate landlords and liability to ATED, where applicable.

This will also prompt UK-resident individuals who have any interest in the income or capital of a non-resident landlord, whether directly or indirectly, to consider their position as they may fall within the scope of the UK’s ToAA anti-avoidance legislation meaning that the income of the non-resident company can be attributed to them.

The letter recommends that any such individuals should seek professional advice to ensure their affairs are up-to-date.

An alternative letter is being sent to non-resident companies that have made a disposal of UK residential property between 6 April 2015 and 5 April 2019, without filing a non-resident capital gains tax (NRCGT) return.

Disposals of UK residential property by non-resident companies were subject to NRCGT between 6 April 2015 and 5 April 2019. Where the company purchased a property before April 2015 and the whole gain has not been charged to NRCGT, that part of any gain not charged, may be attributable to the participants in the company.

Such corporates may also be liable to pay UK tax on rental profits, as well as income tax under the transactions in land rules and ATED.

The Need for Professional Advice

We strongly recommend that UK-resident individual participants in these companies should seek professional advice, from a firm such as Dixcart UK, to ensure that their matters are up to date.

The Register of Overseas Entities

This new focus coincides with introduction of the new Register of Overseas Entities (ROE), that came into force on 01 August 2022.

Criminal offences may be committed for non-compliance, with the requirement for overseas entities to register certain details (including those of the beneficial owners) to Companies House. 

Please see below the Dixcart article on this topic:

Additional information

If you have any questions and/or would like advice regarding non-resident status and the obligations in relation to tax on UK property, please speak to Paul Webb: at the Dixcart office in the UK: advice.uk@dixcart.com

Alternatively, if you have any queries regarding the UK public register of beneficial ownership of overseas entities, please speak to Kuldip Matharoo at: advice@dixcartlegal.com

UK

A Comprehensive Guide to the New Registration Requirements for Overseas Owners of UK Property

Time to take action now

Since the introduction of the Economic Crime (Transparency and Enforcement) Act 2022 earlier this year, we have been waiting for signs of when the new Register of Overseas Entities would be introduced.

  • The government have announced that the new register of overseas entities (ROE) will come into force at 9am on 1 August 2022.

As criminal offences may be committed for non-compliance with the requirement for overseas entities to register certain details (including those of the beneficial owners) to Companies House, it is time to take action now. 

Below, we explain what has changed, who you need to identify, what information is required to enable you to register and how we can help you.

What has changed since the enactment of the Economic Crime (Transparency and Enforcement) Act 2022?

The three new statutory instruments have been introduced:

In essence, an overseas entity will need to gather evidence and information required under the 2022 Act and forward this to an independent verification officer in the UK. The verification officer will then submit an application to Companies House to add the relevant entity to the register which will generate a unique Overseas Entity ID code.

Who needs to register?

The beneficial owner of any overseas entity (being a corporate body, partnership or other legal person) governed by the laws of a country or territory outside of the United Kingdom that owns, leases or disposes of qualifying real estate.

For the purposes of the Economic Crime (Transparency and Enforcement) Act 2022 a beneficial owner could be:  

What are the timelines from when the register goes live?

  • Overseas entities who already own qualifying property in the UK (excluding Northern Ireland where different rules apply) acquired at any time on or  after 1 January 1999 will have 6 months from the date the register becomes live to register with Companies House.  
  • Overseas entities acquiring freehold property or a lease granted for 7 years or more in the UK will be required to register with Companies House as soon as the register becomes live.
  • Overseas entities that have disposed of qualifying property (by sale of a freehold or the grant or assignment of a lease with 7 or more years in term or the grant of a legal charge) between 28 February 2022 and 6 months from the date the register goes live.

What information is required before registration can take place at Companies House?

Schedule 1 of the Economic Crime (Transparency and Enforcement) Act 2022 sets out the required information needed in order to register the beneficial interest at Companies House as per the below table.

*(being those who meet the thresholds for control or ownership as above)

An overseas entity may give an information notice to any person that it knows, or has reasonable cause to believe, is a registrable beneficial owner in relation to the entity.

The notice will require the person to whom it is given to state whether or not they are a registerable beneficial owner (and then provide the information above). The overseas entity may also give a person an information notice if it knows or has reasonable cause to believe that the person knows the identity of a person who is a registrable beneficial owner in relation to the overseas entity, any other beneficial owner in relation to the overseas entity, a person likely to have knowledge of the identity of a person falling into either of the first two categories.

It is an offence for the person served either notice not to; respond or to give false or make reckless statements. The person, subject to a summary conviction may face subsequent imprisonment.

The Secretary of State also has powers to require an overseas entity to apply for registration within a period of 6 months of the date of the notice. Again, sanctions apply for non-compliance.

In addition to the above, the overseas entity must also deliver one of the following three statements regarding its registerable beneficial owner and provide the relevant evidence to back up the statement as follows:

If either statement 2 or 3 above applies, then further information is required as to the “managing officer” (a director, manager, secretary). Part 4 of Sch 1 of the 2022 Act requires the additional following information to be provided in relation to the managing officer:

Who submits the information and how?

The register will be a digital service with information to be submitted in English.

Before any application for first registration or later updating applications/rectifications and amendments can take place, the information above will be subject to formal verification by a relevant person (being one falling within section 3 and 8 of The Money Laundering Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017). Broadly, a relevant person will include an independent legal professional, financial institutions, auditors, estate agents, auction platforms etc. 

Once the information has been verified the relevant person will need to confirm to the  Companies House Registrar that it has completed verification in accordance with the new Act and regulations and provide a  statement complying with Part 2 (5) of The Register of Overseas Entities (VPI) Regulations 2022.  If the relevant entity has made no relevant dispositions  between 28 February 2022 and the date the application is made, the application must state this.

The information itself is to be retained by the relevant person for a period of 5 years.

What happens once registration is accepted?

Companies House will then publish the identity on a public register and assign a unique Overseas Entity ID. The name of the relevant entity and their agent will be available to the public on the Companies House website. The Overseas Entity ID will be required by the Land Registry before it registers any dealings with real estate in England & Wales.

The 2022 Act requires registered entities to update their information annually.

Secondary legislation allows individuals to be able to protect some of their information from public disclosure in limited circumstances (if it can be shown an individual or the people they reside with will be at serious risk of violence or intimidation).

Failure to comply with registration and/or within the time limits imposed?

In England and Wales a person guilty of an offence is liable on summary conviction to a daily fine of up to £2,500 or unlimited fines and a prison sentence of up to 5 years. Failure to register will also prevent any dealings with the real estate in question.

What can we do to help you?

We appreciate the above information is a bit of a mine-field especially as we are expecting further amendments to the legislation in the next few weeks.

We can keep you up to date of the latest developments, assist and advise you on your obligations and aid in collecting the required information. If you require, we can also verify the required information for you and make the application for registration to Companies House and communicate the unique Overseas Entity ID number to you as well as process annual returns.

Additional information

If you have any questions and/or would like advice on the UK public register of beneficial ownership of overseas entities, please speak to Kuldip Matharoo in the Dixcart office in the UK: advice.uk@dixcart.com

Guernsey – Tax Efficiencies for Individuals, Companies and Funds

Background

Guernsey is a premier international financial centre with an enviable reputation and excellent standards. The Island is also one of the leading jurisdictions providing international corporate and private client services and has developed as a base from which internationally mobile families can organise their worldwide affairs through family office arrangements.

The island of Guernsey is the second largest of the Channel Islands, which are situated in the English Channel close to the French coast of Normandy. Guernsey combines many of the reassuring elements of UK culture with the benefits of living abroad. It is independent from the UK and has its own democratically elected parliament which controls the Island’s laws, budget and levels of taxation.

Taxation of Individuals in Guernsey 

For Guernsey income tax purposes an individual is; ‘resident’, ‘solely resident’ or ‘principally resident’ in Guernsey. The definitions relate primarily to the number of days spent in Guernsey during a tax year and, in many cases, also relate to the days spent in Guernsey in several preceding years, please contact: advice.guernsey@dixcart.com for further information.

Guernsey has its own system of taxation for residents. Individuals have a tax-free allowance of £12,175. Income tax is levied on income in excess of this amount at a rate of 20%, with generous allowances.

‘Principally resident’ and ‘solely resident’ individuals are liable to Guernsey income tax on their worldwide income.

Attractive Tax Caps

There are a number of attractive features of the Guernsey personal taxation regime:

  • ‘Resident only’ individuals are taxed on their worldwide income, or they can elect to be taxed on their Guernsey source income only and pay a standard annual charge of £40,000.
  • Guernsey residents falling under any one of the three residence categories, detailed above, can pay 20% tax on Guernsey source income and cap the liability on non-Guernsey source income at a maximum of £130,000 per annum OR cap the liability on worldwide income at a maximum £260,000 per annum.
  • New residents to Guernsey, who purchase an ‘open market’ property, can enjoy a tax cap of £50,000 per annum on Guernsey source income in the year of arrival and the subsequent three years, as long as the amount of Document Duty paid, in relation to the house purchase, is at least £50,000.

Additional Benefits of the Guernsey Tax Regime

The following taxes are not applicable in Guernsey:

  • No capital gains taxes.
  • No wealth taxes.
  • No inheritance, estate or gift taxes.
  • No VAT or sales taxes.

Immigration to Guernsey

The Dixcart Information Note: Moving to Guernsey – The Benefits and Tax Efficiencies contains additional information about moving to Guernsey. Please contact the Guernsey office if you have any specific questions or require any additional information regarding immigrating to Guernsey: advice.guernsey@dixcart.com

Taxation of Companies and Funds in Guernsey

What are the Advantages Available to Guernsey Companies and Funds?

  • A key advantage for companies registered in Guernsey, is a ‘general’ corporate tax rate of zero.

There are a number of additional advantages:

  • The Companies (Guernsey) Law 2008, the Trusts (Guernsey) Law 2007 and the Foundations (Guernsey) Law 2012, reflect Guernsey’s commitment to providing a modern statutory basis and increased flexibility for companies and individuals using the jurisdiction of Guernsey. The laws also reflect the importance placed on corporate governance.
  • Guernsey’s Economic Substance regime was approved by the EU Code of Conduct Group and endorsed by the OECD Forum on Harmful Tax Practices, in 2019.
  • Guernsey is home to more non-UK entities listed on the LSE markets than any other jurisdiction globally. LSE data shows that at the end of December 2020 there were 102 Guernsey-incorporated entities listed across its various markets.
  • Legislative and fiscal independence mean that the Island responds quickly to the needs of business. In addition the continuity achieved through the democratically elected parliament, without political parties, helps deliver political and economic stability.
  • Located in Guernsey, there are a wide range of internationally respected business sectors: banking, fund management and administration, investment, insurance and fiduciary. To meet the needs of these professional sectors, a highly skilled workforce has developed in Guernsey.
  • 2REG, the Guernsey aviation registry offers a number of tax and commercial efficiencies for the registration of private and, off-lease, commercial aircraft.

Formation of Companies in Guernsey

A few key points are detailed below, outlining the formation and regulation of companies in Guernsey, as embodied in the Companies (Guernsey) Law 2008.

  1. Incorporation

Incorporation can normally be effected within twenty four hours.

  • Directors/Company Secretary

The minimum number of directors is one. There are no residency requirements for either directors or secretaries.

  • Registered Office/Registered Agent

The registered office must be in Guernsey. A registered agent needs to be appointed, and must be licensed by the Guernsey Financial Services Commission.

  • Annual Validation

Each Guernsey company must complete an Annual Validation, disclosing information as at 31st December of each year. The Annual Validation must be delivered to the Registry by 31st January of the following year.

  • Accounts

There is no requirement to file accounts. However, proper books of account must be maintained and sufficient records must be kept in Guernsey to ascertain the financial position of the company at no greater than six monthly intervals.

Taxation of Guernsey Companies and Funds

Resident companies and funds are liable to tax on their worldwide income. Non-resident companies are subject to Guernsey tax on their Guernsey-source income.

  • Companies pay income tax at the current standard rate of 0% on taxable income.

Income derived from certain businesses, however, may be taxable at a 10% or 20% rate.

Details of Businesses Where a 10% or 20% Corporate Tax Rate is Applicable

Income derived from the following types of business, is taxable at 10%:

  • Banking business.
  • Domestic insurance business.
  • Insurance intermediary business.
  • Insurance management business.
  • Custody services business.
  • Licensed fund administration business.
  • Regulated investment management services to individual clients (excluding collective investment schemes).
  • Operating an investment exchange.
  • Compliance and other related activities provided to regulated financial services businesses.
  • Operating an aircraft registry.

Income derived from the exploitation of property located in Guernsey or received by a publicly regulated utility company, is subject to tax at the higher rate of 20%.

In addition, income from retail businesses carried out in Guernsey, where taxable profits exceed £500,000, and income from the importation and/or supply of hydrocarbon oil and gas are also taxed at 20%. Finally, income derived from the cultivation of cannabis plants and income from the use of those cannabis plants and/or licensed production of controlled drugs is taxable at 20%.

Further Information

For additional information regarding personal relocation, or the establishment or migration of a company to Guernsey, please contact the Dixcart office in Guernsey: advice.guernsey@dixcart.com

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

Dixcart Fund Administrators (Guernsey) Limited: Protection of Investors Licence granted by the Guernsey Financial Services Commission

Malta-Ukraine Double Taxation Agreement and Additional Attractive Malta DTAs

Background

A new Double Taxation Agreement between Malta and the Ukraine was ratified in 2017 and was made effective as from 1 January 2018.

As a result of this DTA, tax advantages for both countries are available and the Maltese holding company regime may prove attractive to Ukrainian investors. This DTA allows for dividends to be taxed in the country of source, at a withholding tax rate of 5%, if the volume of shares held is greater than 20%.

Taxation of Income

The tax treaty provides a low withholding tax rate on dividends, interest and royalties. 

  • Dividends

Withholding tax for dividends is capped at 15%. A lower rate of 5% applies to dividends received by a company owning at least 20% of the capital of the company paying the dividends. 

Due to its full imputation tax system, Malta does not withhold tax on distribution of dividends, irrespective of the nationality, domicile or residence of the beneficial owner of those dividends.

  • Interest and Royalties

Interest and royalty income is subject to a maximum 10% withholding tax.

The country of source has a limited primary right to tax the income, while the country of residence has a secondary right, with the obligation to grant relief from double taxation.

According to the Maltese Income Tax Act, interest and royalties received by non-residents is exempt from Malta tax and therefore no tax is withheld on such payments.

Additional Attractive Malta Double Tax Treaties

Malta has a network of over 70 double tax treaties.

In addition to the Ukraine, Cyprus and Switzerland have particularly beneficial double tax treaties with Malta.

Malta-Cyprus Double Tax Treaty

Foreign companies seeking to establish a certain type of entity in Europe, for example a company established for financing activities, should consider establishing a Cyprus company and managing it from Malta. This can result in double non-taxation for the passive foreign sourced income.

  • The Malta-Cyprus Double Tax Treaty contains a tie breaker clause that provides that the tax residence of the company is where its effective place of management is. A Cyprus company with its effective place of management in Malta will be resident in Malta and would therefore only be subject to Cyprus tax on its Cyprus source income.

It will not pay Maltese tax on non-Maltese passive source income not remitted to Malta. It is therefore possible to have a Cyprus company resident in Malta that enjoys tax-free profits, as long as the proceeds are not remitted to Malta.

Malta-Switzerland Double Tax Treaty

Malta’s holding company regime, coupled with the beneficial Double Taxation Agreement between Malta and Switzerland, provides a number of advantages when a Malta company is used to hold shares in a Swiss subsidiary.

The key features of the Double Taxation Agreement are:

  • The standard withholding tax on dividends paid from Switzerland is 35%. The agreement provides for a withholding tax exemption on dividends from Switzerland to a Maltese company, where the Maltese company directly holds 10% or more of the Swiss company’s capital for at least one year. Both companies must be subject to taxation.
  • Interest received in Malta is taxed at 35%. However a shareholder can claim a refund from the Maltese tax authorities in respect of a substantial element of the taxation paid by the Maltese company relating to dividend payments to shareholders.  This results in low net Maltese taxation on interest, generally an effective Maltese tax rate of 10%.
  • There is no withholding tax on royalties. This, coupled with Malta’s tax refund regime and unilateral double tax relief, in the form of a flat rate tax credit, results in very low net Maltese tax on royalty income.

Additional Information

If you would like additional information regarding the double tax treaty between Malta and Ukraine, or other Maltese Double Taxation Treaties, please contact Sean Dowden or Jonathan Vassallo at the Dixcart office in Malta: advice.malta@dixcart.com or your usual Dixcart contact.

UK

Living Overseas with Property Assets in the UK, or Intending to Buy? Here is what you need to know.

Five years have passed since the UK government set out its intention to create a public register of the beneficial ownership of “overseas entities’” UK assets – progress was slow to say the least with Brexit and then the pandemic slowing progress further.  The recent invasion of the Ukraine by Russia saw the government expedite that intention and the new  Economic Crime (Transparency and Enforcement) Act  2022 (“the ECA”) received royal assent on the 15 March 2022.

What is an “overseas entity”?

To understand the ECA we need to understand that it is an addition to a raft of historical measures seeking to impose financial or coercive measures on overseas legal entities to identify, control, change or stop them from behaving criminally. The ECA seeks to identify the ultimate foreign beneficial owner(s) on a public register even if that owner tries to hide behind a complex structure of shell companies.

Any corporate body including a partnership that is governed by the law of a country or a territory outside of the United Kingdom will be caught under the new rules. This will include  those holding more than 25% of the shares or voting rights in the entity. If this test cannot be satisfied then the ECA looks to any beneficial foreign owner who nonetheless exercises significant control over the relevant entity (or has the right to do so), including those with the right to remove (or appoint) a majority of the board of directors.

What does the new ECA do and when will you need to comply by?

There are three main parts to the ECA:

Part 1  – establishes a new register of foreign owners of UK property, which will be held at Companies House and will be retrospective, in that it will (subject to a few limited exceptions) include all property purchases in England & Wales since 1999 (2014 for Scotland). 

Foreigners looking to buy UK property will have 6 months, from the date of acquisition of freehold or leasehold land with over 7 years to run, to comply with the new rules. 

In practice, it is unlikely the Land Registry will register an overseas entity as owner of a UK property until it has registered its beneficial ownership at Companies House first. 

Those  who already own UK property will have six months from the date of the ECA’s commencement to either apply for registration or dispose of their property.  However, overseas entities trying to sell their UK property to get around the new rules, will not be allowed to without being registered first. Would-be sellers of property between 28 February 2022 and the date of full implementation of the new register are obliged to submit their details for registration.

Part 2 –  makes wide ranging amendments to powers under the unexplained wealth order (or UWO) regime –  a mechanism designed to confiscate the proceeds of crime, using civil rather than criminal powers pursuant to section 1 of the Criminal Finances Act 2017 (CFA 2017). This includes giving authorities the ability to apply for interim freezing orders.

Part 3 – strengthens provisions about sanctions. Fines of up to £2,500 per day can be levied against those who break the new rules, including criminal penalties for non-compliance of up to 5 years.  Even where no monetary fine is imposed, the Office of Financial Sanctions will be empowered to publicly identify companies and individuals that it suspects to have breached financial sanction rules.

Further guidance and action

Bearing in mind the speed at which the UK government rushed the ECA through,  further guidance from government and regulators regarding how and when entities should report is expected imminently. 

In practical terms there is a lot to do and only time will tell whether Companies House and the Land Registry will cope with the deluge of applications.

To learn more

To learn more, please see:

https://www.legislation.gov.uk/ukpga/2022/10/contents/enacted

https://www.gov.uk/government/news/new-measures-to-tackle-corrupt-elites-and-dirty-money-become-law

Additional information

Dixcart Legal can assist with property related enquiries in the UK. If you have any questions about this article or require any further information, please contact Kuldip Matharoo or Peter Robertson: advice.uk@dixcart.com.

Portugal 1

The Craze Around Portugal Explained – Companies and People

What is it about Portugal, other than the great food and weather, that everyone is talking about? You may have heard that Portugal has become a hotspot for millennials wishing to embark on a business venture start-up, or it is where crypto traders are now relocating to, or the fact that companies like Google and Amazon are setting up offices in the acclaimed ‘Florida’ of Europe.

Tax Advantages for Individuals

The buzz and energy in Portugal has sparked interest in many and for various reasons – Portugal is currently attracting the affluent, as well as a wide range of other individuals, through their favourable tax regime.

Individuals may be exempt from foreign income, or taxed at a flat rate of 20% for income earned in Portugal, for a period of 10 consecutive years. Those wishing to be eligible for this regime; the non-habitual resident regime (NHR), need to register specifically for this regime to be entitled to the tax related benefits. It is definitely  worth using a tax specialist, such as Dixcart Portugal to assist as the regime can be quite complex.

The main criteria are; an individual becomes Portuguese tax resident and has not been a Portuguese tax resident for any of the previous five years, and his/her income must be earned from a high value-added activity or is of a scientific, artistic or technical nature.

Benefits Offered by the International Business Centre of Madeira

The Portuguese island of Madeira has famously been acclaimed as one of the best islands in the world due to its natural beauty. It has won awards for several consecutive years up to 2021, namely; “Europe’s Leading Island Destination” and “World’s Leading Island Destination”. It also boasts an attractive international shipping registry, regarded as among the highest in the world. Efficient tax structures are also available for shipping companies and crew members.

This autonomous Portuguese island presents numerous opportunities – the International Business Centre of Madeira (IBC) allows for the registration of companies where income from international or online activities is taxed at a flat rate of 5%, provided certain criteria are met such as having a full time employee employed in Madeira and making a specified initial investment into the company. Companies wishing to register outside this framework are taxed at rates ranging from 11.7% to 14.7% . Companies registered in the IBC also have access to all of the double taxation agreements entered into by Portugal and have full access to the EU single market.

Incorporating Companies in Portugal

Companies also consider Portugal as a location to create an efficient tax structure, by making use of the participation regime. This regime means that companies may be exempt from dividend tax, provided certain conditions are met.

The conditions include the shareholder; holding at least 10% of the shares (the shareholdings in question must have been held, uninterruptedly, during the year prior to the distribution), and not being tax resident in a country considered to be a tax haven by Portugal. In addition, there must be no distribution of income in the first year of operation.

Although it is becoming harder, it is still possible for companies to find an affordable place to rent (or even purchase) as office space. Over the last decade, popular areas of Lisbon and Porto have however seen incremental price escalations as a result of the increased attention Portugal has received.

Why Are Individuals Moving to Portugal?

The recent popularity of Portugal is also witnessed in the tourist sector. Many individuals have moved onto relocate, after visiting. The streets of Lisbon and Porto are culturally rich with traditions that the country boasts proudly of. It is not hard to understand why tourists are in love with these cities! From the trams in Lisbon to the port wine in Porto.

D7 and D2 Visas

Through the introduction of various visas by the Portuguese government, it has become possible for almost anyone to come to Portugal, and apply for a residence permit.

Individuals are typically applying for D7 or digital nomad related visas, essentially a visa for those earning passive and/or independent income, and able to support themselves. This income can be for example from: property rentals, financial investments, profits and dividends from a company, copyright, etc.

Others, who are more entrepreneurially wired and wishing to venture to Portugal, are applying for a D2 visa. Those who can benefit are self-employed individuals or individuals who intend to set up or buy a company in Portugal. This visa  requires a business plan to be submitted to the Portuguese authorities, amongst other criteria.

The country has shifted gear in ensuring the right calibre of people are moving to this jurisdiction and it is clear that there are many opportunities in this country situated in the far West tip of Europe.

Golden Visa Program

Those wishing to keep Portugal as an option for relocation purposes, can register for the Golden Visa program. It is a quick way for foreign investors from non-EU countries to obtain a valid permanent residence permit in Portugal, and also allows them to travel freely in most European countries (Schengen Area).

Since inception of this program, over 17,000 family members have benefited from the Portuguese Golden Visa. The program has specific investment criteria – the most popular in recent times has been an investment in a fund to the value of €500,000. The program has been so successful that the Portuguese government has raised the limit, from the previous minimum of €350,000.

The stay requirements in Portugal are minimal, with an average of only 7 days stay per annum, over a 5 year period, unlike the other visas which require you to make a permanent move to Portugal.

Summary

As you can see from the above, there is more than just the crispy custard tarts and more than 300 days of sun that Portugal has to ‘shout’ about.

The reasons many are relocating to Portugal are numerous – with each person having their own story and set of circumstances.

Dixcart Assistance

Dixcart has assisted many families and businesses to relocate to various parts of the world, including Portugal.

Please reach out to Dixcart Portugal should you have any questions: advice@portugal.com.

We appreciate that better decisions can often be made with a professional adviser by your side.

UK

The UK Tax Treatment of Cryptoassets

Over the past few years, there has been an increase in customers buying goods and services using digital platforms and this has accelerated during the pandemic. This article will cover exactly what cryptoassets are and the tax treatment, in the UK, for both individuals and businesses.

What are Cryptoassets?

Cryptoassets, also known as ‘tokens’ or ‘cryptocurrencies’, are cryptographically secured digital representations of value or contractual rights that can be:-

  • Transferred
  • Stored
  • Traded electronically

There are numerous types of cryptoassets and they each work in different ways. The main 4 types of cryptoasset that you may encounter are as follows:

  • Exchange tokens – Intended to be used as a means of payment and this includes the most well-known token, the bitcoin.
  • Utility tokens – This provides the holder with access to particular goods or services on a platform. This is usually where a business will issue tokens and commit to accepting the tokens as payment for particular goods or services.
  • Security tokens – This provides the holder with particular rights or interests in a business, such as ownership or entitlement to a share in future profits.
  • Stable coins – These tokens minimise volatility as they are aligned to something that is considered to have a stable value, such as precious metals.

How the UK Tax Authorities Treat Cryptoassets

The tax treatment of all types of tokens is dependent on the nature and use of the tokens. It is not based on the definition of the token. HMRC does not consider a cryptoasset to be currency or money.

Tax Treatment of Cryptoassets for Individuals

Income Tax Treatment

Cryptoasset activity must be recognised as a trading activity for income tax rules to apply. To determine if a trading activity has taken place, HMRC will apply a series of tests known as ‘The Badges of Trade’. Any profits from this activity will be subject to income tax at an individual’s marginal rates (20%, 40% and 45%). There will also be Class 2 and 4 National Insurance due at the current rates applicable.

Capital Gains Tax Treatment

Where the transactions in cryptoassets are regarded as a personal investment, then they should be treated as a chargeable asset for Capital Gains Tax (‘CGT’) purposes. Any gain realised on a cryptoasset bought and subsequently sold, is subject to CGT at the current rate of 10% for a basic rate taxpayer and 20% for a higher rate taxpayer. Losses realised in the same way, can only be relieved against capital gains chargeable to CGT.

Non-Domiciled Individuals

The nature of cryptoassets is that they are decentralised, digital in nature and do not have a physical location. Determining the location or ‘situs’ of an asset is therefore important for UK resident, non-domiciled individuals, as it can change the tax consequences.

HMRC guidance has stated that the location of a cryptoasset is wherever the beneficial owner is resident. If the cryptoasset owner is resident in the UK, then the cryptoasset may also be located in the UK.

There is a need to watch out for the circumstances in which a UK resident, non-UK domiciled individual purchases cryptoassets using their untaxed foreign income or gains. They may have remitted those funds into the UK and triggered a tax liability on acquisition. If the individual then disposes of the cryptoasset and makes a gain, then the gain may also be taxable in the UK, without the benefit of the remittance basis of taxation.

Tax Treatment of Cryptoassets for Companies

Numerous transactions in cryptoassets by a company will invariably be regarded as trading for tax purposes. These profits will be subject to corporation tax at the current rate applicable (currently 19% for 2021 financial year). Any losses arising from cryptoassets are dealt with in the same manner as a trading loss.

However, if a business is not trading in cryptoassets, any profits will be treated as a chargeable gain for the company. The calculation of the gain would follow the pooling rules which also apply to shares and securities.

How Can Dixcart Help?

We are aware that HMRC are showing an increasing interest in cryptoassets and a planned ‘nudge letter’ campaign will reportedly target UK taxpayers who may have failed to properly pay tax on their cryptoassets. 

HMRC are now armed with data gathered from cryptoasset exchanges and other sources, meaning that investigations into the UK tax affairs of crypto investors are likely to be imminent. 

Any taxpayers who receive a ‘nudge letter’, or who may generally be concerned about their tax position, in respect of cryptoassets, should contact Paul Webb in  the Dixcart office in the UK: advice.uk@dixcart.com as soon as possible to discuss the position.

Introduction to Paul Webb, Karen Dyerson and Ravi Lal – Members of the UK Tax Team

The Dixcart Tax Team in the UK office is a busy department, largely due to the fact that many of the vehicles and individuals to whom we provide advice, have a UK element and/or assets in the UK.

The three members of the UK Tax Team, we are introducing you to today are; Paul Webb, Karen Dyerson and Ravi Lal.

Tax Advice

Prior to many decisions being taken, they should be considered and evaluated with a thorough knowledge of the potential tax implications

Advice to UK and non-UK domiciliaries on; inheritance tax, UK property ownership matters, and ongoing UK residence tax status, are important aspects of individual tax planning.

Corporates also need expertise regarding tax efficient UK share schemes, the tax aspects of mergers and acquisitions and working with maximising the tax relief available under the UK R&D and Patent Box regimes.

Paul Webb

paul.webb@dixcart.com

Director

CTA ATT BSc (Econ)

After gaining an honours degree in Economics, Paul Webb qualified as a member of the Chartered Institute of Taxation in 2001. Paul has a broad base of tax knowledge and advises both clients and other tax practitioners, both in the UK and around the world.

Paul joined the Dixcart Group in February 2013 and is based at the Dixcart office in the UK. He uses his extensive technical knowledge to help a varied portfolio of clients deal with their tax obligations in an efficient manner.

Paul was made a Director of Dixcart International Limited in 2014 and heads up the tax department in the UK. When travel is permitted he regularly travels to India, and extensively within the UK.

His main areas of expertise are; UK corporation tax, UK personal tax, and domestic and international tax structuring. He works alongside the Dixcart Immigration Department to assist non-UK domiciliaries and their families during their planning for a move to the UK, or when making an investment into the UK. Once in the UK, he advises internationally mobile individuals regarding the use of the UK remittance basis of taxation.

Paul also provides expertise to UK and non-UK domiciliaries on inheritance tax planning, UK property ownership matters, and ongoing UK residence tax status, if needed.

He invariably works with clients from the very early stages of tax planning and subsequently manages ongoing tax matters across the following years.

In recent years, Paul has been involved in establishing tax efficient UK share schemes, advising clients on the tax aspects of mergers and acquisitions and working with clients to maximise the tax relief available under the UK R&D and Patent Box regimes.

Karen Dyerson ATT

karen.dyerson@dixcart.com  

                       
Tax Manager, Dixcart International Limited 

Ravi Lal

ravi.lal@dixcart.com

Tax Senior, Dixcart International Limited

Karen and Ravi work closely with Paul and provide tax advice to both corporate and individual clients. They are both experienced professionals and assist on various tax matters such as corporation tax and R&D for businesses and income tax, capital gains tax and inheritance tax for individuals.

Karen is a member of theAssociation of Tax Technicians and has been qualified for over 25 years.

Ravi worked for a top 15 UK accountancy firm prior to joining Dixcart, working in all aspects of tax compliance including self-assessment, corporation tax, tax planning, P11Ds, PSA and ATED.

Additional Information

If you have a question regarding UK tax obligations, further guidance regarding your possible entitlement to use the UK remittance basis of taxation, or have a question in relation to UK corporate tax, please contact Paul Webb: advice.uk@dixcart.com.

Cyprus

Making Cyprus Even More Attractive – Proposed Initiatives for 2022

In October 2021, the Cyprus Government announced an ‘action plan’ to attract additional companies to operate and/or expand their activities in Cyprus.

The action plan is certainly forward-looking and innovative in terms of the further measures to be introduced, to attract companies and individuals to move to Cyprus.

Timing

The action plan will be implemented from January 1st 2022, except where new legislation is required, as in the case of the three points below. The aim is for the relevant legislation to be submitted to the House of Representatives by the end of December, and to be approved in the first quarter of 2022.

  • Extension of the tax exemption that applies to employees in the Republic.
  • Increased tax deduction (in addition to the existing one) for research and development expenses.
  • Application to gain Cypriot citizenship, after having spent five of the previous ten years in Cyprus.

1.Business Facilitation Unit: Visas for Highly Skilled Third Country Nationals

The Ministry of Finance announced the introduction of the Business Facilitation Unit that will assist highly skilled third country employees, with a minimum gross salary of €2,500 per month, to gain work permits. Such individuals are required to present a university degree, or equivalent qualification, or certificate.

The maximum quota of work permits for third-country nationals per company, is set at 70% of all employees, over a period of five years. Permits will be issued within one month of application and will last up to three years. The spouses of such employees will also have access to the country’s labour market.

2.Digital Nomad Visa

Eligibility

Via the Digital Nomad Visa Programme, non-EU nationals active as self-employed, salaried or on a freelance basis can apply for the right to live and work in Cyprus. Applicants must work remotely using information technology and communicate remotely with clients and employers outside Cyprus.

Residence status

A Digital Nomad has the right to stay in Cyprus for a period of up to one year, with the right to renew for another two years. If they reside in the Republic for a period that in total exceeds 183 days within the same tax year, they are then considered tax resident in Cyprus.

During the stay in Cyprus, the spouse or partner of the Digital Nomad and any minor family members are not allowed to undertake dependent work or to engage in any kind of paid activity in the country.

Digital Nomads must have; salaries of at least €3,500 per month, medical coverage, and a clean criminal record from their country of residence.

3.Extension of the tax exemption that applies to foreign employees in the Republic and reduction of the threshold

There is a tax exemption of 50% to new and existing employees relocating/relocated to Cyprus (with the requirement that they were not Cyprus residents during the previous 10 years) with employment remuneration of €55.000 and above.

The exemption is valid for a period of 17 years from the year of employment.

4.Increased tax deduction for research and development expenses

Research and development expenses will be subject to an increased discount.

Eligible research and development expenses will be deducted from taxable income equivalent to 120% of the actual expenditure.

Please note that the relevant legislation is still to be submitted and approved.

5.Application for acquisition of Cypriot citizenship

The option will be available to apply for Cypriot citizenship after a period of five years of residence and work in the Republic of Cyprus, instead of the seven years that was applicable before.

Please note that the relevant legislation is still to be submitted and approved.

Additional Information

For additional information about the attractive tax regime for individuals in Cyprus, please contact Robert Homem or Charalambos Pittas at the Dixcart office in Cyprus: advice.cyprus@dixcart.com.

Malta Passes the MoneyVal Test

On Thursday 29th April 2021, the Council of Europe’s Anti-Money Laundering (AML) committee (MONEYVAL) voted in favour of a final report on Malta’s AML and terrorism- financing safeguards.

MONEYVAL, is a permanent monitoring body of the Council of Europe, entrusted with the task of assessing compliance with the principal international standards to counter money laundering and the financing of terrorism and the effectiveness of implementation measures. It is also tasked with making recommendations to national authorities in respect of necessary improvements to their systems.

Background

Two years ago, Malta failed an exhaustive test of its anti-money laundering rules and policing and has since been at risk of being put on the ‘grey list’.  There are currently 19 countries on the grey list. Being put on the grey list comes with a strict reform procedure and ‘hand-holding’ by global authorities. The grey list does not imply any economic sanctions but serves as a signal to the global financial and banking system about heightened risks from transactions with the country in question.

AML Reforms

Since then, Malta has introduced a raft of reforms to strengthen their AML regime and address the shortcomings highlighted by the MONEYVAL Report.

Amongst the changes introduced, substantial investment was made in the police’s economic crimes unit which has led to a number of high profile prosecutions in relation to money laundering and other financial crimes.

Malta has significantly ‘stepped up’ its AML rules, demonstrating its commitment to fighting money laundering and terrorism financing and that the jurisdiction can appropriately manage major cases of financial crime and corruption.

What Happens Now?

The news was welcomed by Malta, and the country will now undertake a visit by the Financial Action Task Force (FATF), an intergovernmental organisation set up to combat money laundering. 

Malta has been engaging with FATF since the start of the year, and their team will have a series of meetings with senior officials from Malta’s regulatory and law enforcement bodies, in a week-long visit scheduled for May. 

Additional Information

If you would like further information, please speak to Jonathan Vassallo: advice.malta@dixcart.com, at the Dixcart office in Malta or to your usual Dixcart contact.