Category: Private Client

Isle of Man Foundations

Since Foundations have been written into Manx law, they have been used frequently as part of intermediaries’ offshore wealth planning for any number of purposes, but all must conform to the same constitutional principles.

This is the second in a three-part series we have produced on Foundations, building up to a webinar hosted by experts who can help you to meet your clients’ needs. If you would like to read the other articles in this series, please see:

• Isle of Man Foundations for Offshore Planning – An Introduction (1 of 3)
• When to use an Isle of Man Foundation (3 of 3)

In this article we’ll be discussing the nuts and bolts of an Isle of Man Foundation (IOM Foundation), to further or refresh your understanding:

• What do I need to establish an Isle of Man Foundation?
• The Isle of Man Foundation Instrument document
• The Isle of Man Foundation Rules document
• Isle of Man Foundation legal challenges

What do I need to establish an Isle of Man Foundation?

As required by the Isle of Man Registrar of Foundations (Registrar), and under the Foundations Act 2011 (the Act), the application must be made by an Isle of Man Registered Agent (IOM RA) holding a class 4 license from the Isle of Man Financial Services Authority. The IOM RA will generally also be the Nominated Officer, as defined within the Beneficial Ownership Act 2017.

The IOM RA, typically a Corporate Service Provider like Dixcart, must also make a declaration that:

• They will act as Registered Agent on establishment;
• The Isle of Man address provided is the business address of the IOM RA;
• That the IOM RA is in possession of the Foundation Rules, which have been approved by both the IOM RA and the Founder.

There are several options with regards to the application and its turnaround time, currently: a standard fee of £100 for establishment within 48 hours, £250 within 2 hours if received before 14:30 on a business day, or £500 for a ‘while you wait’ service if received before 16:00 on a business day.

On approval, the Registrar will make note of the names and addresses of the foundation, Council Members and IOM RA, its Objects and provide a Certificate of Establishment and registration number. Once established, the IOM Foundation gains legal personality and, for example, now has the ability to enter into contracts, sue and be sued.

There are several constitutional elements of an IOM Foundation that must be present for an application to be acceptable; this includes a completed application form, correct fee as detailed above and the Foundation Instrument (Instrument), and a redacted copy of the Foundation Rules (Rules) – in fact it is an offence for a Foundation to not possess these documents. We will examine the noteworthy facets of the Instrument and Rules in more detail within the following sections.

Isle of Man Foundation Instrument

By law, all IOM Foundations must have an Instrument (also known as the Charter) written in English that complies with the Act. A copy of this document is incorporated into the application proforma and supplied to the Registrar on application.

IOM Foundation Instrument – Name

Among other things, the Instrument will detail the name of the IOM Foundation; which must also comply with The Company and Business Names etc. Act 2012, which provides direction and limitations on the name of an IOM Foundation. The Registrar has produced a Guidance Note to assist with ‘Choosing Your Company or Business Name’.

The IOM Foundation’s name can be altered if permissible under the Instrument and Rules, but notice of this must be given to the Registrar and supplied to the IOM RA. Alternatively, the Instrument and Rules can prohibit any changes to the name, if desirable.

IOM Foundation Instrument – Objects

The Instrument will also note the IOM Foundation’s Objects, providing broad information; the Instrument does not need to detail the specific purposes or classes of beneficiaries etc., it simply needs to ensure that the Objects are ‘certain, reasonable, possible, lawful and not contrary to public policy or immoral’. The Instrument should also detail whether the Objects are to be Charitable, Non-Charitable or Both, and that these are to be administered in accordance with the Rules.

IOM Foundation Instrument – Council Members and Registered Agent

Finally, the Instrument must detail the names and addresses of all Council Members and the IOM RA. These parties can be altered in line with the Rules in the future, but again, notification must be provided to the Registrar and IOM RA where appropriate.

There can be a minimum of one Council Member. An individual acting as a member must be aged at least 18 years, of sound mind and not disqualified. The Founder can be a Council member. Council Members can be appointed or removed in line with the Rules throughout the lifetime of the IOM Foundation.

As previously stated, whilst the IOM RA can be altered, this role is mandatory from establishment and throughout.

In many ways the Instrument is like the Foundation’s incorporating document, giving notice of certain key persons and their regulatory roles and the IOM Foundation’s Objects. It is similar to a memorandum, giving the Registrar the headline information.

Isle of Man Foundation Rules

If the Instrument is the memorandum, the Rules are, as their name suggests, the rulebook on how the Foundation should be administered. This document is specific to the individual Objects, functions and purpose of the IOM Foundation.

The Rules are a legal requirement under the Act and can be written in any language, but an English copy must be supplied to and retained by the IOM RA.

IOM Foundation Rules – Objects

The Rules must stipulate the manner and form of amends to the IOM Foundation’s Objects. Where the Foundation is established for specific purpose, or to benefit any person or class of persons, this will include how these details can be amended. For example, how beneficiaries can be added, removed or the classes extended.

Where Charitable Objects have been exclusively specified within the Instrument, the Rules cannot contain any provision for the alteration of these Objects to non-charitable pursuits.

IOM Foundation Rules – Council Members

The Rules must also establish a Council to administer the IOM Foundation’s assets and oversee its Objects. The proceedings of the Council are detailed within the Rules. In doing so, the Rules must also detail how Council Members can be appointed or removed and where appropriate, remunerated.

IOM Foundation Rules – Registered Agent

An IOM RA is a perpetual requirement for an IOM Foundation, and must be accounted for within the Rules. This will include the procedure for appointment and removal, to ensure an IOM RA is always appointed. The Rules will also cover the remuneration of the IOM RA as appropriate.

The removal of an IOM RA does not take effect until another appropriately licensed IOM RA has been appointed.

IOM Foundation Rules – Enforcer

An Enforcer can be appointed to ensure that the Council carries out its duties to further the IOM Foundation’s Objects and in compliance with the Rules.

Where an Object of the IOM Foundation is a specified non-charitable purpose, an Enforcer must be appointed. However, where the Object is simply to benefit a person or class of persons, it is an optional appointment and not a requirement.

Where an Enforcer is present, the Rules must provide the Enforcer’s name and address along with their remit and procedure for appointment, removal and remuneration – the remit can include the ability to approve or veto Council actions. Apart from the Founder and the IOM RA, a person may not be both a member of the Council and its Enforcer.

IOM Foundation Rules – Dedication of Assets

An IOM Foundation does not need to hold any assets at the time of establishment, but where a dedication is made from outset, details must be provided within the Rules. Additional assets can be dedicated at any time, and by persons other than the Founder, unless prohibited by the Rules.

If further dedications are contributed, the Rules must be amended to reflect the details of the dedication. It is important to note that Dedicators do not gain the same rights as the Founder after providing assets to the IOM Foundation.

IOM Foundation Rules – Term and Winding-up

The Rules may stipulate the length of the IOM Foundation’s lifetime and the procedure for winding-up the vehicle. The term, unless otherwise stated, is perpetual. The Rules can detail certain events or a lifespan that determines when the IOM Foundation is dissolved. Where desirable, full details must be included within the Rules.

Beneficiaries do not have an automatic legal right to the IOM Foundation’s assets. However, if a person becomes entitled to benefit in accordance with the Instrument and Rules, they may seek a Court Order from the High Court enforcing that benefit.

Legal Challenges to an Isle of Man Foundation

The Act provides that any legal challenge to the IOM Foundation, or the dedication of its assets, will be the jurisdiction of the Isle of Man Courts and subject to Manx law only:

s37(1)

“…must be determined in accordance with the law of the Island without reference to the law of a jurisdiction outside the Island.”

Therefore, the establishment or dedication of assets cannot be deemed void, voidable, set aside or invalidated by a foreign jurisdiction because:

• It does not recognise the structure;
• The structure defeats or potentially avoids a right, claim or interest imposed on a person by the law of a jurisdiction outside the Isle of Man; or
• Of the existence of forced heirship rights; or
• It contravenes the rule of law within that jurisdiction.

It is important to note that, due to the relatively recent introduction of this structure into Manx law, the IOM Foundation has not yet been legally tested on these matters. It is also worth noting that the exclusion of foreign law is only in respect of otherwise compliant IOM Foundations or dedicated assets – for example, the Founder or Dedicator must have legal title to the assets being contributed.

Record Keeping

The Act sets out various documents and records that must be maintained at the registered address of the IOM Foundation or such other Isle of Man address as the Council determines. This includes various registers and also accounting records.

The IOM Foundation must also submit an annual return to the Registry, due each year on the anniversary of establishment. Failure to submit an annual return is an offence.

Supporting the Establishment and Administration of Foundations

At Dixcart, we offer a full suite of offshore services to advisers and their clients when considering the establishment of an IOM Foundation. Our in-house experts are professionally qualified, with a wealth of experience; this means we are well placed to support and take responsibility for different roles, including acting as Registered Agent, Council Member or Enforcer as well as to provide specialist advice when required. 

From pre-application planning and advice, to the day-to-day administration of the Foundation, we can support your goals at every stage.

Get in touch

If you require further information regarding Isle of Man Foundations, their establishment or management, please feel free to get in touch with Paul Harvey: advice.iom@dixcart.com.

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

Background

Switzerland is a very attractive jurisdiction for the coordination of asset protection for a number of reasons, including the stability of this international centre and the highest level of confidentiality that is guaranteed. An English, Guernsey, Isle of Man or Maltese Law based trust, with Swiss Trustees can offer a number of tax efficiencies, as well as advantages in terms of wealth preservation and confidentiality.

Dixcart can establish and manage such trust structures.

Reasons Why Switzerland is a Favoured Location

• Political, Financial, Social and Economic Stability

The economy of Switzerland is one of the world’s most advanced. The service sector plays a significant economic role, particularly the financial services sector. The Swiss economy ranked first in the world in the 2019 Global Innovation Index, and fifth in the 2019 Global Competitiveness Report.

The stable political and economic environment of Switzerland makes it an appealing jurisdiction from an asset protection perspective, with the added benefit of attractive tax regimes for both companies and individuals. These factors, combined with the country’s high regard for personal privacy and confidentiality, are of appeal to Family Offices from all over the world.

• Banking Advantages

Switzerland offers one of the strongest and most commercial banking centres in the world.

It has a long history of expertise in dealing with international currencies and open capital markets. Many banks have dedicated desks for particular jurisdictions, providing specific services to clients.

The main benefits of having a Swiss bank account are the low level of financial risk and high level of privacy

• Trusts and Private Trust Companies as Asset Protection Vehicles 

Widely used in Anglo-Saxon countries, a trust is flexible and, in the right circumstances, can be an effective asset protection vehicle. It provides anonymity for families, and confidentiality regarding the assets and/or companies held within it. Trusts can be a useful aid in terms of succession planning and can assist with long term inheritance matters.  

A Private Trust Company (PTC) is a corporate entity authorised to act as trustee. The client and their family can actively participate in the management of the assets and decision-making processes, as well as sitting on the board of the PTC. 

Switzerland recognised trusts with the ratification of The Hague Convention on the Law Applicable to Trusts (1985), on 1 July 2007. Whilst there is no domestic law governing trusts in Switzerland, trusts from other jurisdictions, and their specific rules, are recognised and can be administered in Switzerland.

In Switzerland the Settlor (the individual who settles assets into the Trust for the benefit of the Beneficiaries) can choose the law of any specified trust jurisdiction to govern the trust. For example, a Guernsey trust can be established with a Swiss Trustee.

The tax advantages available in using a trust with Swiss Trustees essentially depend on the tax residence of the Settlor and the Beneficiaries. Professional advice should be taken.

Reasons to Use Swiss Trustees

• Taxation of Trusts in Switzerland

The Hague Convention (Article. 19) stipulates that the Convention does not prejudice the powers of sovereign states in fiscal matters. Consequently Switzerland has maintained its sovereignty in relation to the tax treatment of trusts.

The tax advantages available in using a trust with a Swiss Trustee essentially depend on the tax residence of the Settlor and the Beneficiaries.

In terms of Swiss Law:

• A Swiss resident Trustee is not liable to Swiss income tax or capital gains tax on the assets held under management in a trust.
• Settlors and Beneficiaries are exempt from Swiss taxation as long as they are not considered to be Swiss residents.
• Regulation of Swiss Trustees

Swiss Trustees have to be registered as financial intermediaries in accordance with Swiss Anti Money Laundering Law. They can be registered with the Central Regulatory Authority or with a self-regulatory organisation (SRO), which must be recognised by the Swiss Federal State.

• Protection

Under Common Law the Trustee is the owner of the assets and is required to administer the trust assets separately from his own assets. In the event of death or bankruptcy of the Trustee, the assets are not considered as belonging to the Trustee but are submitted to the trust’s protection and held separately for the Beneficiaries. The trust’s assets are therefore segregated from the Trustee’s estate.

• Confidentiality in Switzerland

Switzerland is well known for its commitment to banking services, professional confidentiality and commercial competence.

SATC provides that: “Any and all information related to a trusteeship and acquired by a Member must be kept strictly confidential by the Member, its directors, officers and other employees.”

A breach of confidentiality, whether professional or commercial, would only be permitted by law in the event of criminal liability.

Dixcart and Swiss Trustee Services

The Dixcart office in Switzerland has been providing Swiss Trustee services for over twenty years and is a member of the Swiss Association of Trust Companies (SATC) and registered with the Association Romande des Intermediaires Financiers (ARIF).

The Swiss Federal Act on Financial Institutions (FINIG), came into effect at the start of 2020 and Family Offices and Trustees must now gain mandatory approval. Dixcart Trustees (Switzerland) SA meets all of the required regulatory obligations and continues to do so.

Additional Information 

If you would like additional information regarding the use of Switzerland for asset protection, please contact Christine Breitler at the Dixcart office in Switzerland: advice.switzerland@dixcart.com. Alternatively, please speak to your usual Dixcart contact.

The UK has for many centuries been a popular hub. As we start to come out of the pandemic, people will start moving again.

This Article briefly reviews key current lifestyle reasons why people seek to move to the UK. It is by no means an exhaustive analysis.

When any move of residence to a new jurisdiction takes place, a thorough review of how a family’s wealth is held, needs to be undertaken. In order to avoid costly errors, this should happen before the move has occurred.

• If you are moving to the UK, Dixcart can help ensure that the actions you take are as tax efficient as possible and meet family objectives, taking into account the location of assets and of family members.

Dixcart can also be of assistance, with pre-exit planning, should you be considering a move from the UK to another country

Key Lifestyle Considerations – Why People Move to the UK

• A multi-cultural environment that has welcomed diversity for many decades and encouraged and incentivised the ‘entrepreneur spirit’. Innovation is  applauded and rewarded.
• The UK is ranked by the world bank as being the 8^th easiest place to do business out of the 190 countries assessed.
• An education system whose quality is recognised throughout the world, both at school and university level.
• A robust and durable legal system used as the template in an extensive number of countries across the world.
• The opportunities that Brexit has created.
• Pound sterling is one of the strongest currencies in the world, and the UK is the 5^th  largest economy in the world and the second largest in Europe.
• An attractive regime whereby persons resident but not domiciled in the UK can elect for the remittance basis of taxation. This means that they will only be taxed in the UK, on UK source income and gains, and only on foreign income and gains in so far as these are remitted to the UK.
• A number of appealing visa options to enable a move to the UK to take place.
• Home of cream teas, a ground breaking fashion industry, football, fish and chips and Harry Potter with a depth of history, variety and quality of the arts.

Matters to Consider Prior to Moving

As indicated above, it is important that families evaluate their tax and succession arrangements well ahead of any move, a practical list of some of  the factors that should be taken into consideration is detailed below:

Practical matters:

• Travel documents (visas)
• Formal enrolment in country/jurisdiction of ‘arrival’, including communication with tax authorities, healthcare and schooling.

Taxation matters:

• Confirm the arrangements that affect heirs and family in other countries.
• Plan for the optimal timing of loss of tax residence, and any exit charges.
• Consider any action that needs to be taken to ensure assets are held in the  optimal way, prior to moving. Leaving this until after arrival can result in unexpected and large tax bills that could have been avoided.
• Plan the timing of disposals and acquisitions to ensure the best possible tax outcome.
• Consider establishing new banking arrangements to segregate income and gains.

Succession and inheritance:

• Confirm which laws govern succession and if a choice of different jurisdiction law is available.
• Confirm whether marital/family laws are affected and whether a choice of different jurisdiction law is available.
• Review estate planning documents (wills, succession, and prenuptial documents), and consider the interaction of wills, appropriate for different jurisdictions.
• Consider the use of trusts for estate planning, not forgetting that the timing of the settlement of trusts could be key to the taxation outcome.

Implications of transferring physical wealth:

• Family heirlooms, jewellery, works of art, aircraft, cars and yachts: can they be transferred, are import duties applicable?

Gifts and Donations:

• Confirm whether gifts or donations should be executed in advance of acquiring the new residency.

Ongoing Matters to be Reviewed at Least Annually

There are a series of important reviews, that should be taken at least annually to take into account both changes in personal circumstances and the law:

• Review of estate planning documents. These include wills, succession and prenuptial documents.
• Review of trusts arrangements, structures, and bank accounts.
• Review of any changes to tax laws and the implications in relation to existing agreements and structures.

How can Dixcart Help?

Dixcart can assist with:

• Pre arrival and departure tax planning.
• Advice and assistance with Visas for residence in the UK.
• Accounting, legal and taxation advice, as well as compliance regarding setting up businesses in the UK or in any of the jurisdictions in which Dixcart has an office.

Additional Information

If you would like to discuss how you should plan ahead, for a potential move of location and/or to ensure that your existing structuring meets your current circumstances, please contact Peter Robertson at the Dixcart office in the UK: advice.uk@dixcart.com.

This Article begins by reviewing a number of generic reasons to use a foundation and then considers the specific characteristics and benefits that can be provided by a Malta foundation.

Why Establish a Foundation?

There are numerous reasons why a foundation may be of benefit, each of which are relevant in terms of Malta private foundations: 

• Asset protection: if a home country is not politically or economically stable, a foundation can be established overseas and assets transferred into it (professional advice should always be taken in the home country, prior to any transfer taking place).
• Confidentiality: the foundation deed must state the foundation’s name, its registered address, a description of the initial endowment with which it was formed, and its purposes and objects.
• Lifestyle planning: partners who are not married, or whose family arrangements are not straight-forward, may find that some countries’ legal systems do not provide adequate solutions on their death or separation. In such cases, a specifically drafted foundation can be used to ensure that partners, and children of such partners, are treated as the founder intends.
• Securitisation vehicle: Maltese law allows for the use of a foundation in place of a trust, as an appropriate vehicle for the securitisation of debt.
• Spendthrift beneficiaries: foundations can be created to prevent reckless heirs from spending family wealth on the death of their parents, by limiting their interest to income or to capital (at least until they reach a certain age, or until they fulfil certain requirements).
• Succession planning: a foundation can generate a greater degree of privacy and flexibility than may be possible with a will alone. Foundations can be used to avoid the division of family estates and to prevent disputes between heirs.

Maltese Foundation Legislation

In 2007, Malta enacted specific legislation regarding foundations. Subsequent legislation was introduced, regulating the taxation of foundations, and this further enhances Malta as a jurisdiction for international private asset planning.

Characteristics of Maltese Foundations

• Maltese private foundations are regulated by the ‘Second Schedule to the Civil Code of the Laws of Malta’. New legislation introduced a registration procedure, which has been designed in a way to safeguard the privacy of Maltese private foundations.
• A foundation can only be constituted by virtue of a public deed ‘inter vivos,’ drawn up by a notary public or by means of a will. Once the foundation is constituted, it is registered with  the Malta Registrar of Legal Persons.
• A private foundation is limited to a maximum period of 100 years.
• In terms of Maltese legislation, it is possible to re-domicile a foundation into and out of Malta.
• A foundation may be terminated at any time if all of the beneficiaries agree, provided they are all alive, none have been convicted of a crime or are minors. If the founder is still alive his consent would also be required. Termination obligations must be included in the deed.

An interesting feature of a Maltese foundation, is that segregated cells can be established within a foundation to achieve particular purposes with particular assets. The segregated cell does not have separate legal personality, however the assets and liabilities of the cell are ring-fenced from the other assets and liabilities of the foundation, and/or other cells.

Maltese Foundations: A Choice to be Taxed In One of Two Ways

• A foundation can either be treated as a trust, OR as a company, which is both resident and domiciled in Malta:

Taxation as a Trust

A Maltese foundation can irrevocably elect, that the foundation be treated as a trust for tax purposes.

An election to be treated as a trust gives rise to beneficial private asset planning opportunities, particularly where the founder and beneficiaries are not resident and/or domiciled in Malta. In such a situation no tax and/or duty will be payable in Malta. This applies on settlement and in relation to the income, attributable to the foundation.

Taxation as a Company

If a Maltese foundation decides to be taxed as a company, as with other companies in Malta, the income and/or gains realised, are subject to tax in Malta on a worldwide basis at the flat rate of 35%.

However, on the distribution of qualifying foreign or local source income, by the foundation in favour of its beneficiaries, the beneficiaries will generally be entitled to a refund of 6/7ths of the Malta tax paid by the foundation, giving an effective tax rate of 5%. This assumes that the beneficiaries are not resident and/or domiciled in Malta.

A number of reliefs are also available to foundations, as well as to companies. These include; the full imputation system, participation exemption, and access to appropriate unilateral agreements, Malta also has a wide network of Double Tax Treaties.

How Can Dixcart Assist?

The Dixcart office in Malta can assist with the efficient establishment and management of a foundation to meet the agreed objects.

Additional Information

For further information about Maltese foundations and the benefits that they offer, please speak to Jonathan Vassallo: advice.malta@dixcart.com at the Dixcart office in Malta. Alternatively, please speak to your usual Dixcart contact.

Whilst Isle of Man Trusts and Isle of Man Limited Companies have been mainstays of offshore wealth planning for decades, the relatively recent introduction of the Isle of Man Foundation in 2011 has provided advisers with a blend of features possessed by corporate entities and fiduciary vehicles, to further their clients’ objectives.

Having been the preferred choice of our Civil Law counterparts for centuries, a Foundation offers objectivity and operational structure without compromising on flexibility, where discretion is concerned.

This is the first in a three part series we have produced on Foundations, building up to a webinar hosted by experts who can help you to meet your clients’ needs.

• Establishing and Administering an Isle of Man Foundation (2 of 3)
• When to use an Isle of Man Foundation (3 of 3)

In this introductory article, we will discuss the rudimentary aspects of Foundations, to aid or refresh your understanding:

• What is an Isle of Man Foundation?
• Foundation vs Trust vs Limited Company
• What is an Isle of Man Foundation used for?
• Supporting the Establishment & Administration of Foundations

What is an Isle of Man Foundation?

An Isle of Man Foundation is established and regulated under the Foundations Act 2011, and registered on the Isle of Man. The Act has added the Civil Law entity to the toolbelt of advisers seeking to provide offshore services from a well-established international financial centre.

The blended approach that Foundations offer is unique, with features that make them distinct from more familiar structures such as Limited Companies or Trusts.

The next article in this series will take a dive into the technicalities of all aspects of this vehicle, but for now we have just provided a brief overview of the constituent elements that you need to be aware of:

• Founder – The person who initially instructed the establishment and agreed the objects of the foundation.
• Dedicators – Anyone other than the Founder that dedicates assets to the Foundation.
• Official Documents – There are two official documents, the Foundation Instrument and the Foundation Rules, which set out the details relating to the administration of the foundation and the rights and obligations of the persons appointed under the rules.
• Objects – Specified in the Foundation Instrument, these detail the specific purpose and objectives of the Foundation.
• Council – Comprised of one or more members, the Council carries out the administration of the Foundation in accordance with the Official Documents.
• Registered Agent – All Foundations must have a Registered Agent licensed by the Isle of Man Financial Services Authority. You can find more information on Isle of Man Registered Agents here.
• Enforcer – If an object of a foundation is to carry out a non-charitable purpose, the foundation must have an Enforcer.  This person ensures that the Council operate in line with the Official Documents and in the best interests of the Foundation.
• Beneficiary – The party that can benefit from the Foundation.  

Foundation vs Trust vs Limited Company

The table below compares and contrasts the features of Isle of Man Foundations, Trusts, and Limited Companies and may be helpful to determine the most appropriate vehicle to achieve the desired objectives.

Whilst Foundations cannot conduct commercial trade directly, other than trade relating to the Objects, it can hold subsidiary companies which can in turn be used for commercial transactions.

As you can see from the table, both a Foundation and a Trust can be used in very similar circumstances, to benefit successive generations or charitable initiatives. The main differences relate to the flexibility in making operational changes (e.g. appointment and removal of Council Members / Trustees and/or editing the constitutional documents), liability of the managers (i.e. legal action is against the Foundation rather than its Council Members), perpetuity and winding up – each offering discretion or choice in certain areas, which can make it better suited to the client’s needs.

Ultimately, a Foundation provides a living structure that can be reactive and adaptable to changing needs, where provided for, in the Official Documents. Something that can be more limiting when using a Trust structure.

Of course, Foundations can also be used in conjunction with trusts to provide some of the benefits of a trust combined with those of a corporate entity – e.g. diversified interests, to act as trustee and to provide additional oversight and transparency; which might make institutional transactions more attractive.

What is an Isle of Man Foundation used for?

A Foundation holds and owns assets, typically provided for specific purpose; for example, to benefit family members or philanthropic endeavours. With this in mind, uses of Isle of Man Foundations can include:

• A familiar alternative to trusts for clients from Civil Law jurisdictions;
• A legal entity for succession planning or philanthropic pursuits;
• A wealth planning vehicle to hold assets (e.g. private company shares, yachts, aircraft);
• Use in conjunction with a Trust to provide additional structure and oversight;

Supporting the Establishment and Administration of Foundations

At Dixcart, we offer a full suite of offshore services to advisers and their clients when considering the establishment of an Isle of Man Foundation. Our in-house experts are professionally qualified, with a wealth of experience; this means we are well placed to support and take responsibility for different roles, including acting as Registered Agent, Council Member or Enforcer as well as providing specialist advice, where appropriate. 

From pre-application planning and advice, to the day-to-day administration of the Foundation, we can support your goals at every stage.

Get in touch

If you require further information regarding Isle of Man Foundations, their establishment or management, please feel free to get in touch with Paul Harvey at Dixcart: advice.iom@dixcart.com

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

Certainty/Uncertainty

At the end of the first quarter of 2021, optimism is starting to rise and the challenges of 2020 and the start of 2021, are beginning to slowly diminish. Vaccine programmes have started to be put in place in a number of countries, with some achieving excellent vaccination rates, in a relatively short space of time.

For the UK and for Europe, Brexit has also taken place. There will be some heated discussions along the way, but the high element of uncertainty has been reduced.

There is a new era of politics in the US, with Joe Biden adopting a more conventional approach and hopes of less division and a more positive period for USA international policy.

However, many uncertainties remain and are likely to do so throughout 2021 and into 2022.

This climate has led to new trends emerging in the fund arena and has reconfirmed other existing trends, a number of these are detailed below: 

Ethical Investing and Renewable Energy

There has been a significant increase in sustainable and ethical investing. The fallout due to a worldwide pandemic has reinforced fears of a similar outcome, if carbon emissions are not reduced.

The pandemic has encouraged more people to be aware of and embrace environmental causes. The temporary lull in economic activity during lockdown, with its positive effects on air quality being appreciated by many, has prompted calls for an even more rapid move towards carbon neutrality. The US has already re-entered the Paris Climate Change Agreement and green issues are increasingly being discussed, as part of the political agenda in most countries.

As Governments seek to stimulate their economies, renewable energy, such as wind and solar power, are becoming popular areas to invest into. There is also likely to be increasing resources directed towards solutions in terms of how to store the excess power generated from renewable energy sources, for use, when it is needed.

Technology: Cloud Computing, Automation and Artificial Intelligence

A number of significant areas of the tech industry are becoming stronger; cloud computing for example.

Such technology has enabled millions of people to work,  shop and to play from home. The downloading of music and films, and taking part in eGaming has increased. E-learning has also mushroomed. The delivery of take-away meals is another sector that has increased significantly and again relies on cloud computing.

Whilst there will be a gradual return to people going back to work at their ‘place’ of employment and shopping in the high street, many patterns and routines have irrevocably changed.

As the world starts to recover from covid-19, a world-wide growth in entrepreneurship is predicted to occur, again relying on cloud computing technology. Even greater numbers of people will be starting their own ventures in the wake of covid-19, as the likelihood of unemployment looms large for many.

The pandemic is likely to accelerate investment into technology such as robotics and artificial intelligence. Organisations will be motivated to reduce the number of employees on the ‘shop floor’ and the growth in e-commerce demand is a phenomenon heavily reliant on API.

Healthcare

Bio Tech companies have multiplied as gene and cell therapies have offered exciting advances in the way diseases are treated, cured or vaccinated against.

Pharmaceutical companies such as AstraZeneca and Pfizer have proved themselves to be innovative and efficient in terms of developing a vaccine and the mass production of these medicines. There are a number of other pharmaceutical companies developing additional vaccine solutions.  

Ongoing Uncertainty – Particularly for Certain Sectors

It is difficult to predict the speed with which life might return to normal, post-covid, and this is likely to vary from country to country.

There is potential for airlines, leisure companies and the hospitality sector to thrive in the second half of 2021 and 2022, but only if the world moves out of the pandemic reasonably quickly.

The key to a successful business will be, a high quality product or service, an efficient organisational structure and a strategy that allows for more than one outcome. Diversification may be needed to insure against the possibility of a slow recovery from the pandemic.

Digital Transformation of Business Services

As with other sectors, business services have needed to rapidly adopt digital solutions to keep in touch with clients and contacts.

For many such organisations, including those in the funds sector, this has necessitated the introduction of updated governance and reporting mechanisms.

Additional Information

This Article summarises recent influences affecting the Funds sector.

If you would like additional information regarding Funds and the solutions that Dixcart can offer, please contact Antonio Pereira at the Dixcart office in Portugal: advice.portugal@dixcart.com.

Introduction

The Private Trust Company (PTC), is a concept introduced into Maltese law in 2014. PTCs offer high net worth individuals and their families, a tailor-made solution for their estate and succession planning.

Such solutions give families the possibility to manage their own estate, through a bespoke estate planning tool, to suit their specific needs.

Benefits of a PTC

A PTC is a trustee, acting for a family trust, which is the corporate equivalent of a private individual trustee. Malta can therefore offer an alternative to the more traditional and common professional trustee/administrator or individual private trustee.

Why is a Malta PTC Attractive?

• Malta PTCs are considered to be an attractive option to incorporate within a family estate succession plan, due to the simplicity and speed of the registration process.

Another advantage of a PTC is that it allows a degree of family involvement in the administration of the trust. Family members may be appointed to the board of directors of the PTC. Those involved in the management of the assets will have better knowledge of the asset performance in the trust and the flow of information can also be improved, via the board. Information relating to the family trust, can easily be shared with the family members.

An additional benefit of a PTC is the management cost. PTCs can typically be integrated within a family business, and can share a common board of directors and administrative facilities, as the family business, which in turn reduces costs. The initial set-up costs of a PTC might be higher, but the ongoing running cost will be reduced.

PTC Registration Process

A PTC is not required to undergo the full authorisation process, with the Malta Financial Services Authority (MFSA), that professional trustees and/or the administrators of foundations are required to undergo.

As long as all of the criteria are met, a PTC can then apply to register with the MFSA. This relatively simple registration process gives PTCs a significant advantage compared to  professional trustees and/or administrators, in terms of the reduced compliance obligations that need to be met, and the time taken.

PTC Objectives

PTC Objectives and Activities are limited to the following:

• Acting as a trustee in relation to a specific settlor or settlors;
• Providing administrative services in respect of a specific family trust or trusts;
• Trustee services, available through a PTC must not be offered to the public;
• Trustees must not frequently act as a trustee, and must not do so for more than 5 settlors of a family trust, at any given time.

Requirements for the Establishment of a PTC

A PTC should be a limited liability company based in Malta, to be eligible for registration, and must submit a form requesting inclusion in the ‘Register of Trustees for Family Offices’.

A PTC must have insurance cover proportionate to the size and nature of the trustee’s business operations.

The board of directors must comprise of at least 3 directors, each of which are collectively responsible. One director must take up the role of Money Laundering Reporting Officer (MLRO), and at least one of the directors of the company must have knowledge and experience in relation to the administration of trusts. The directors must be individuals, deemed by the MFSA, to be fit and proper individuals.

The Memorandum and Articles of Association of the PTC must limit the Objects and Activities to providing; trustee services, including administrative services to not more than 5 settlors at a time.

Additional Information

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

The transfer of wealth to the next generation is a critical issue. The next two years are expected to see the largest transfer of wealth from ‘Baby Boomers’ (those born between 1944 and 1964) to the younger generations. One of the biggest question is whether the inheriting generations and beneficiaries are in a position to handle whatever is passed down to them, and what are the best structures in order to achieve this?

It is not surprising that the US has the largest amount of UHNW wealth (US$16 trillion). The next “top hot spot” countries are: Germany (US$1.645 trillion), Japan (US$1.645 trillion), the UK (US$830 billion) and Brazil (US$560 billion).

Since the breakout of Covid-19, more individuals are now reviewing their estate and putting practical measures in place regarding succession planning. Although not a catalyst for encouraging individuals to review their affairs, Covid-19 has certainly reinforced the importance of it. The last year has provided a reason for many families to ‘take stock’ and to put in place or revise practical measures regarding succession planning. 

A family’s financial wellbeing can be lost or reduced in disputes over control and management of the wealth. Unfortunately, the old English expression “from rags to rags in three generations” can often become true. The ability and understanding of the next generation as to how to deal with the organisation and management of the wealth being passed to them is also a vital consideration.

Where in the world?

In a number of countries, succession planning can be complex, particularly some Latin American countries and other Civil Law countries, where forced heirship rules still apply. Unless alternative plans are put in place early, at least part of an estate, will be automatically divided between surviving family members, rather than shared according to the individual’s preference. 

International taxation is another reason why individuals may wish to put structuring measures in place. Many high-net-worth individuals and families incorporate one or more of a Corporate Family Investment Structure, a Trust or Foundation as part of their planning. But how to choose which one?

How to transfer wealth wisely? Trusts and Foundations for Succession Planning

Both Guernsey and the Isle of Man are highly favoured locations for the establishment and administration of Trusts and Foundations; each has an established and robust legal structure and specific legislation.

At an early stage, a family structure can be transferred to a single fiduciary provider or trustee with whom the family has a good relationship and understanding of the family needs. These structures usually take the form of a discretionary Trust or Foundation.

Trust structures are generally used by Common Law jurisdictions, whereas Foundations can fulfil many of the same functions in Civil Law countries. Dixcart has over forty-five years’ experience in assisting clients with managing their assets and can help you and your family decide the right structure to best suit your needs.

Private Trust Companies (PTC)

For many years, PTC’s have been the preferred vehicle for administering the assets of wealthy families. One of the main attractions of the PTC is that decisions relating to the underlying trusts, are made by directors who are carefully chosen by the family or may even be family members. There are a number of variants of the PTC, which can be limited by either shares or guarantee or even with separate classes of shares for voting purposes. Careful consideration as to the level of control exerted over the PTC needs to be planned so as not to lead to tax implications.

Whilst PTC’s remain a popular specialist solution, our Guernsey and the Isle of Man offices can offer a simpler structure through the Private Trust Foundation (PTF).

Private Trust Foundations (PTF)

The PTF removes the need for any ownership layers above the PTC and can simplify the structure and therefore administration and cost. The PTF is established under the relevant law for either of the two islands with the sole purpose of acting as trustee of the trusts for the benefit of an individual or family.

The Law will make it clear that a Foundation, upon establishment, has its own legal personality, independent from that of its founder and any foundation officials. The PTF will be run and managed in a similar way to a PTC with the involvement of a local licensed fiduciary, such as Dixcart, but with the significant advantage that, as an orphan vehicle, it does not have any other owners or controllers.

Additionally, family members or other trusted advisors can be appointed to the PTF council, which is responsible for acting as trustee to the underlying family trusts.

Corporate Family Investment Structures

A family investment company is a company where the shareholders are drawn from different generations of the same family. The use of a family investment company has grown significantly in recent years, particularly in situations where it has become difficult to pass value into a trust, without incurring an immediate tax charges but there is a desire to continue to have some control and influence over the family’s wealth preservation. 

More information regarding the benefits of a family investment company is available on our website.  

Summary

As wealth owners move from one jurisdiction to another, an opportunity to restructure the ownership of family wealth for succession planning purposes presents itself. Simultaneously, this provides an opportunity to implement the initial organisation of an ongoing family office and the tax neutral organisation of family affairs.

Dixcart works with each family wealth structure to coordinate communication with the family and to provide access to, and liaison with, additional independent, professional advisers.

Plans can be put in place to allow for changes in a family’s structure and relationships to be recognised. Dixcart can coordinate variations in structure to accommodate individual and specific family wishes, whilst complying with the overall family office policy.

If you would like further information, please speak to your usual Dixcart contact or to one of the professional advisers in the Guernsey and Isle of Man offices: advice@dixcart.com.

Each of the nine offices in the Dixcart Group provide wealth management services. In addition to Guernsey and the Isle of Man, the Dixcart offices in Cyprus and Switzerland are licensed to offer trust services.

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

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

Why are People More Mobile in their Lifestyle and What are the Options?

Dixcart has extensive experience, in advising individuals around the world regarding potential changes of residence, when family reasons, personal and/or financial, are dictating that a move is desired or would be helpful.

How Can Dixcart Help?

Dixcart has almost fifty years of experience helping clients structure their international wealth and investments with supporting advice on changes of residence and/or citizenship changes.

Support and advice can include:

• Assistance in choosing the most appropriate country to re-locate to and/or invest into, considering multiple personal and tax efficiency considerations.

• Wealth management – a review of the most appropriate way to structure wealth internationally, including succession planning.

• Exploring business ideas and opportunities with tax efficient corporate structures. Dixcart has the relevant accounting, legal and tax expertise to also provide support for the management of these entities.

• Assisting individuals to move to the UK and other countries in Europe: pre and post arrival planning and immigration advice. 

• Tax advice for individuals, including expertise regarding the UK remittance basis of taxation, for clients moving to the UK.

Snapshot Summary by Jurisdiction

Please see below, a ‘snapshot’ of what different countries might offer and where Dixcart can offer direct assistance:

• Cyprus, is within the EU and has an attractive regime for new residents offering a number of benefits, for companies and individuals.

• Malta has several residence and visa programmes appropriate to different circumstances, each of which offers tax efficiencies. Malta is within the EU. 

• Portugal is also a member of the EU and offers the Non-habitual Residents Regime (NHR), which is proving very popular with individuals already in Europe and also those from outside Europe. Portuguese companies are being used increasingly for international business and investment.

• Switzerland is not a member of the EU, but is located in Europe and is a member of the European Free Trade Association (EEFTA). It offers an attractive tax regime for individuals and is world-renowned as a centre for holding companies.

• United Kingdom – post Brexit the UK has already successfully negotiated trade deals with the EU and 63 other countries, with more deals under negotiation. The UK Remittance Basis of Taxation can offer significant tax advantages for individuals, for up to 15 years of residence.

Action to Consider

If you are considering a move abroad for yourself, or other family members, this can open up significant investment and financial opportunities. We strongly recommend that you take professional advice to discuss any such move and the pre and post planning that should take place.

Dixcart has many years of experience in managing family wealth across a number of countries and coordinating the movement of individuals. Services also include assistance in securing the necessary visas involved and the establishment and/or re-domiciliation of companies

Additional Information

If you would like any additional information on this topic, please speak to Peter Robertson: advice.uk@dixcart.com.