Category: Residency

There are many reasons why individuals and their families choose to take up residence in another country. They may wish to start a new life elsewhere in a more attractive and relaxing environment, or they may find the greater political and economic stability that another country offers, of appeal. Whatever the reason is, it is crucial to research and plan ahead, as much as possible.

Residence routes vary in what they offer and, depending on the country, there are differences regarding how to apply, the time period that residence is valid for, what the benefits are, tax obligations, and how to apply for citizenship.

For individuals considering an alternative country of residence, the most important decision is where they and their family would like to live. It is critical that clients consider the long-term objectives for themselves, and their families, before applying for a particular residence route, to help ensure that the decision is right for now, and in the future.

The main question is: where would you and your family most like to live? The second, and almost equally important question is – what are you hoping to achieve?

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CYPRUS

Cyprus has rapidly become one of Europe’s top hotspots for expatriates. If you are considering relocating, and are a bit of a sun-chaser, Cyprus should be top of your list. The island offers a warm climate, good infrastructure, convenient geographic location, membership of the EU, tax advantages for companies, and incentives for individuals. Cyprus also offers an excellent private healthcare sector, a high quality of education, a peaceful and friendly community, and a low cost of living.

On top of that, individuals are drawn to the island due to its advantageous non-domicile tax regime, whereby Cypriot non-domiciliaries benefit from a zero rate of tax on interest and dividends. These zero tax benefits are enjoyed even if the income has a Cyprus source or is remitted to Cyprus. There are several other tax advantages, including a low rate of tax on foreign pensions, and there are no wealth or inheritance taxes in Cyprus.

Individuals wishing to move to Cyprus can apply for a Permanent Residence Permit. Applicants can make an investment of at least €300,000 in one of the investment categories required, and prove they have an annual income of at least €30,000 (which can be from pensions, overseas employment, interest on fixed deposits, or rental income from abroad) in order to apply for permanent residence.

Alternatively, a temporary residence permit can be obtained by establishing a foreign investment company (FIC). This kind of international company can obtain work permits for relevant employees and residence permits for family members.

Find out more: Benefits, Financial Obligations, and Additional Criteria of the Cyprus Permanent Residence Permit

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MALTA

Located in the Mediterranean, just south of Sicily, Malta offers all of the advantage of being a full member of the EU and Schengen Member States, has English as one of its two official languages, and a climate many chase all year round. Malta is also very well connected with most of the international airlines, which makes travel to and from Malta seamless.

Malta is unique in that it offers a variety of residency routes to meet different individual circumstances. Some are appropriate for non-EU individuals while others provide an incentive for EU residents to move to Malta. From the Malta Permanent Residence Programme, to the Digital Nomad Residence Permit, the Highly Qualified Person’s Programme, targeted towards attracting professional individuals earning over a certain amount each year offering a flat tax of 15%, to Malta’s Retirement Programme. It should be noted that none of the Malta residency routes have any language test requirements.

1. Malta Permanent Residence Programme – open to all third country, non-EEA, and non-Swiss nationals with a stable income and sufficient financial resources.
2. Malta Residence Programme – available to EU, EEA, and Swiss nationals and offers a special Malta tax status, through a minimum investment in property in Malta and an annual minimum tax of €15,000
3. Malta Global Residence Programme – available to non-EU nationals offers a special Malta tax status, through a minimum investment in property in Malta and an annual minimum tax of €15,000
4. Malta Key Employee Initiative – is a fast track work permit application programme, applicable to managerial and/or highly-technical professionals with relevant qualifications or adequate experience relating to a specific job.
5. The Malta Highly Qualified Persons Programme – available to EU nationals for five years (may be renewed up to 2 times, 15 years in total) and non-EU nationals for four years (may be renewed up to 2 times, 12 years in total). This route is targeted at professional individuals earning more than €86,938 in 2021, and seeking to work in Malta in certain industries
6. The Qualifying Employment in Innovation & Creativity Scheme – targeted towards professional individuals earning over €52,000 per annum and employed in Malta on a contractual basis at a qualifying employer.
7. Digital Nomad Residence Permit – targeted at individuals who wish to maintain their current job in another country, but legally reside in Malta and work remotely.
8. Malta Retirement Programme – available to individuals whose main source of income is their pensions, paying an annual minimum tax of €7,500

To make life even more enjoyable Malta offers tax benefits to expatriates and the attractive Remittance Basis of Taxation, whereby a resident non-domiciled individual is only taxed on foreign income, if this income is remitted to Malta or is earned or arises in Malta.

Find out more: A Snapshot of Malta’s Extensive Residence Programmes

PORTUGAL

Portugal, as a destination to relocate to, has been top of the list for several years now, with individuals attracted by the lifestyle, the Non-Habitual Resident Tax Regime, and Golden Visa. Despite not being on the Mediterranean, it is partially considered a member state of the Mediterranean region (along with France, Italy and Spain), with a Mediterranean climate of hot, dry summers and humid, cool winters, and a generally hilly landscape.

Portugal’s Golden Visa is the perfect route to Portugal’s golden shores. Due to its flexibility and numerous benefits, this visa has proven to be one of the most popular in Europe – providing the perfect solution for non-EU citizens, investors, and families looking for Portugal residency, plus the option to apply for citizenship after 6 years if that is the long-term objective.

With changes soon approaching at the end of 2021, there has been a rapid uptake of more applicants in the last few months. Forthcoming changes include Golden Visa investors not being able to purchase properties in high-density areas such as Lisbon, Oporto, and the Algarve, which opens up greater opportunities for investors in Portugal. Alternatively, there are very attractive advantages in any one of the other non-real estate routes (more information can be found here).

Portugal also offers a Non-Habitual Residents regime to individuals who become tax resident in Portugal. This allows them to enjoy a special personal tax exemption on almost all foreign source income, and a 20% tax rate for employment and/or self-employment income, sourced from Portugal, over a 10-year period.

The Golden Visa may seem less important for EU citizens, as they already have a right to live in Portugal without formal immigration or investment being required, but the NHR has proved to be a major motivator for both EU and non-EU citizens looking to relocate.

Find out more: From Portugal’s Golden Visa to the Non-Habitual Residents Regime

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Summary

Moving Abroad? What to think about!

If you require additional information regarding moving to Cyprus, Malta, or Portugal, or would like to speak to an adviser to find out which route and/or country best suits you and your family’s needs, we have staff located in each jurisdiction, to answer your questions:

• Cyprus: advice.cyprus@dixcart.com.
• Malta: advice.malta@dixcart.com.
• Portugal: advice.portugal@dixcart.com.

Dixcart Management Malta Limited Licence Number: AKM-DIXC

Important Considerations – Formerly Domiciled Residents

Background

When individuals are thinking of returning to live in the UK, there are a number of important matters they should consider before they move back to the UK.

This article focuses on Formerly Domiciled Residents (FDRs), who are non-UK domiciled under general law, but are deemed to be domiciled in the UK for taxation purposes.

Formerly Domiciled Residents and Liability to UK Tax

Anyone born in the UK with a UK domicile of origin will always be an FDR if they resume residence in the UK, irrespective of how many years they have lived abroad or whether they have any connections to the UK.

These individuals will pay UK tax on their worldwide income and capital gains, on the same basis as taxpayers who are UK domiciled under general law. Any potential tax advantages which might have been obtained by these individuals, by reason of their UK non-domiciled status, are therefore removed.

Who is a FDR?

A formerly domiciled resident (FDR), is a non-UK domiciled individual who:

1. Was born in the UK; and/or
2. Has a UK domicile of origin; and
3. Is UK resident for the tax year.

Deemed UK domicile is triggered on 6 April in a tax year of UK residence,even if this year is a ‘split’ year under the statutory residence test (SRT).

An individual normally acquires a domicile of origin from their father at birth, or from their mother, if the parents were not married. This is not necessarily the country in which that individual was born.

If an individual does not meet any of the automatic overseas tests but does meet one of the automatic UK tests, or the sufficient ties test, they will be considered a UK resident.

UK Inheritance Tax and Trusts

Assuming an individual meets the above FDR criteria and was resident in the UK in at least one of the two previous tax years, prior to the year in which any Inheritance Tax (IHT) charge arises, property settled into a trust, when they were not domiciled in the UK, cannot be excluded for the purposes of IHT. 

This could have severe consequences with the Trust falling into the ‘Ten Yearly and Exit Charge Regime’. If the Settlor (or his spouse or civil partner) has retained a benefit, the ‘Gift with Reservation of Benefit’ provisions will apply, and a charge to tax on the death of the Settlor will be imposed. Please speak to Dixcart UK, if you would like more details regarding either potential consequence.

It is also important to seek professional advice to understand how specific individuals and clients might be affected and any action that might need to be taken before individuals become UK resident.

Summary

An individual’s domicile status is a fundamental factor in determining his/her liability to UK tax. It also has implications for other branches of the law.

UK Non-domiciled Individuals and Planning

Careful planning and consideration must be taken in order to take advantage of potential tax exemptions, reliefs and protection from inheritance tax which can be obtained by UK non-domiciled individuals.

Due to HMRC’s increased investigations into the tax affairs of UK non-domiciled individuals,   a robust defence should be prepared, in the event of any challenge from HMRC. Professionals at Dixcart UK can help you prepare a ‘domicile review’, to provide evidence of your intentions, supported by the facts. This can be particularly useful in situations where enquiries are opened by HMRC after death.

Contact Details

If you require additional information on this topic and further guidance regarding your domicile status, please contact your usual Dixcart adviser or speak to Paul Webb or Peter Robertson in the UK office: advice.uk@dixcart.com

Highly Qualified Persons Scheme – A Need for Additional Highly Qualified Individuals in Certain Sectors

Since joining the EU in 2004, Malta has been modernising its economy. It is becoming recognized as a high functioning, low cost, and well-regulated jurisdiction with an underlying theme being the availability of trained staff thanks to Malta’s high investment in education and training. The expansion of the financial, aviation and gaming sectors, since Malta joined the EU, and the associated increase in demand for technical skills has in recent years however, highlighted the need for additional highly qualified workers. There is a need to attract individuals with sufficient existing knowledge to Malta, particularly in these sectors of; financial services, gaming, aviation and the associated support services. The Highly Qualified Persons scheme was introduced to attract these individuals.

The objective of the Highly Qualified Persons Rules (SL 123.126), was the creation of a programme to attract highly qualified persons to occupy ‘eligible office’, with companies licensed and/or recognized by the Competent Authority regulating the specific sector.

Benefits of the Highly Qualified Persons Scheme

The scheme is targeted at professional individuals, earning more than €86,938 in 2021, and seeking to work in Malta.

• The qualifying individual’s tax is set at a highly competitive flat rate of 15%, with any income earned over and above €5,000,000 being tax exempt.

The standard alternative in Malta, would be to pay income tax on a sliding scale, with a current maximum rate of 35%.

2021 Update of the HQPS in Malta

Changes were recently introduced in 2021 and were made retrospective as from 31^st  December 2020.

These changes consist of:

• The HQPS has been extended for five years.

No changes to the scheme will now be made until 31^st of December 2025. Some variations to the scheme might potentially be made to HQPS, for relevant employment in Malta that commences between 31^st of December 2026 and 31^st of December 2030.

• Individuals enjoying HQPS now have two different extension options, depending on their nationality: five years for EEA and Swiss nationals, and four years for third-countries nationals.

Definition of an ‘Eligible Office’

‘Eligible office’ in the financial, gaming, aviation and associated supporting services sectors, including any organisation holding an air operator’s certificate,  is defined as employment in one of the following positions:

• Actuarial Professional

• Aviation Continuing Airworthiness Manager

• Aviation Flight Operations Manager

• Aviation Ground Operations Manager

• Aviation Training Manager

• Chief Executive Officer

• Chief Financial Officer

• Chief Commercial Officer

• Chief Insurance Technical Officer

• Chief Investment Officer

• Chief Operations Officer; (including Aviation Accountable Manager)

• Chief Risk Officer; (including Fraud and Investigations Officer)

• Chief Technology Officer

• Chief Underwriting Officer

• Head of Investor Relations

• Head of Marketing; (including Head of Distribution Channels)

• Head of Research and Development; (including Search Engine Optimisation and Systems Architecture)

• Odds Compiler Specialist

• Portfolio Manager

• Senior Analyst; (including Structuring Professional)

• Senior Trader/Trader

Other Applicable Criteria

In addition to individuals having a qualifying position, as detailed above,  individuals must also meet the following criteria:

• The applicant’s income must be derived from an ‘eligible office’, and must be subject to income tax in Malta.
• The applicant’s employment contract must be subject to Maltese Law and is for the purpose of genuine and effective work in Malta. This must be demonstrated to the satisfaction of the Maltese Authorities.
• The applicant needs to provide proof to the authorities that he/she has appropriate professional qualifications, and has at least five years’ professional experience.
• The applicant must not have benefitted from any other deductions available to ‘Investment Service Expatriates’, as detailed in the terms of Article 6 of the Income Tax Act.
• All salary payments and expenses must be fully disclosed to the authorities.
• The applicant must prove to the authorities that:
• He/she is in receipt of sufficient resources to maintain himself/herself and members of his/her family, without recourse to public funds.
• He/she resides in accommodation regarded as normal for a comparable family in Malta, which meets the general health and safety standards in force in Malta.
• He/she is in possession of a valid travel document.
• He/she possesses sufficient health insurance for himself/herself and members of his/her family.
• He/she is not domiciled in Malta.

Summary

In the right circumstances, the Highly Qualified Persons Scheme provides taxation advantages for professional high net worth individuals who want to move to Malta and work on a contractual basis there.

Additional Information

If you would like further information regarding the Highly Qualified Persons Scheme and opportunities available through Malta, please speak to Jonathan Vassallo: advice.malta@dixcart.com, at the Dixcart office in Malta or your usual Dixcart contact.

Dixcart Management Malta Limited Licence Number: AKM-DIXC

Background

“Don’t worry, I never spend more than 90 days in the UK”.

This test for UK tax residence was replaced with a statutory residence test, but it is still commonly believed that the above statement is correct.

It is not and, whilst in many cases, the test might result in an individual triggering UK tax residency without expecting it, in many other circumstances, they might have been limiting themselves to the wrong number of days.

For anyone renting or buying property in the UK and starting to spend more and more time in the UK, they should seek advice to be clear what their day pattern in the UK should or can be.

This note considers a couple who have not previously been tax resident in the UK.  For more information about correctly losing UK tax residence, please see – Tax Residence Planning Opportunities – Case Studies and How To Get it Right. It also does not consider immigration but more information on how Dixcart can assist with UK Immigration can be found here – Dixcart Immigration.

Case Study

Mr Overseas has lived in Europe his whole life.  Having sold his successful overseas business a number of years ago, he took early retirement. He is not married.

Having retired, he wants to spend more time in the UK as he has nephews and nieces whom he enjoys seeing more of.

He also feels that the UK real estate market might be a good investment, so he purchases an apartment that he lives in when he is here.  It is empty the rest of the time.

Thinking he is doing some clever tax planning, he chooses to limit his days in the UK to 85-89 days, because everyone tells him that if he stays in the UK for fewer than 90 days, he won’t become tax resident. 

Mr O Should Take Some Advice!

The part of the UK statutory resident test (Test) relevant to him is part 3, the Connecting Factors.  In the first year he starts spending time in the UK, he does not have a tax resident family member, he has not exceeded 90 days in the UK in either of the two previous tax years, and he does not work in the UK for more than 40 days each tax year.  He does have available accommodation though, so he has just one Connecting Factor.  In the first year, he could spend up to 182 days in the UK without becoming UK tax resident, double what he had originally thought.

In the second year, he would still have available accommodation but also now would have spent more than 90 days in one of the previous two tax years.  His day limit is now 120 days, still more than the “90 days rule” he had been told about.

Once he discovers this, he starts spending up to 115-119 days in the UK

However – The Rules Need Constant Review

As Mr O is now spending more time in the UK, he meets someone special and gets married.  He also gets bored of early retirement and starts a consulting role for most of the days he is in the UK.

Thinking that he has now taken his UK tax advice about residence, he doesn’t think to check it again.

Mr O now has a tax resident spouse, he works for more than 40 days in the UK, he has spent more than 90 days in the UK in at least one of the last two previous tax years and he still has available accommodation.

His tax circumstances have changed dramatically and, in fact, if he wants to still remain non-resident in the UK, his day count would be capped at 45 days!

There is still planning to do though as he might be able to claim the remittance basis as a non-domiciled individual, and, like the residence rules, “Don’t Get it Wrong!” – UK Remittance Basis of Taxation – Don’t Get it Wrong.

Summary and Additional Information

Whilst Mr O’s circumstances shifted during the course of this case study, it is interesting to note that at no point in time was Mr O’s day count cap at 90 days, despite the common belief that those are the rules for UK residence.

The remittance basis of taxation, which is available for non-UK domiciled individuals, can be a very attractive and tax efficient position, but it is crucial that it is properly planned for and properly claimed at the right time. 

If you require additional information on this topic, further guidance regarding your possible entitlement to use the UK remittance basis of taxation, and how to properly claim it, please contact your usual Dixcart adviser in the UK office: advice.uk@dixcart.com.

Dixcart UK, is a combined accounting, legal, tax and immigration firm.  We are well placed to provide these services to international groups and families with members in the UK. The combined expertise that we provide, from one building, means that we work efficiently and coordinate a variety of professional advisers, which is key for families and businesses with cross-border activities.

By working as one professional team, the information we obtain from providing one service, can be shared appropriately with other members of the team, so that you do not need to have the same conversation twice!  We are ideally placed to assist in situations as detailed in the case study above. We can provide cost effective individual and company administration services and also offer in-house expertise to provide assistance with more complex legal and tax matters.

Background

Malta offers a variety of routes to residency. Some are appropriate for non-EU individuals while others provide an incentive for EU residents to move to Malta.

The residence options and the tax benefits they can provide for individuals, where relevant, are detailed below.

1. Malta Permanent Residence

Malta Permanent Residence is available to non-EU individuals and enables them to reside indefinitely in Malta.

Successful applicants receive Permanent Maltese residence immediately and a 5 year residence card. The card is renewed every 5 years if the requirements are still being met. There are two options with regards to this route:

Option 1: Rent a property and pay the full contribution:

• Pay the €40,000 non-refundable administrative fee; AND
• Rent a property with a minimum of €12,000 per year (€10,000 if the property is situated in Gozo or the south of Malta); AND,
• Pay the full Government contribution of €58,000; AND
• Make a donation of €2,000 to a local philanthropic, cultural, scientific, artistic, sport or animal welfare NGO registered with the Commissioner of Voluntary Organisations.

Option 2: Purchase a property and pay a reduced contribution:

• Pay the €40,000 non-refundable administrative fee; AND
• Purchase a property with a minimum value of €350,000 (€300,000 if the property is situated in Gozo or the south of Malta); AND,
• Pay the reduced Government contribution of €28,000; AND
• Make a donation of €2,000 to a local philanthropic, cultural, scientific, artistic, sport or animal welfare NGO registered with the Commissioner of Voluntary Organisations.

It is possible to include up to 4 generations in one application if it can be proven that the additional applicants are principally dependant on the main applicant.

An additional Government Contribution of €7,500 is required for each additional adult dependant (excluding the spouse) included in the application.

Applicants must show capital assets of not less than €500,000, out of which a minimum of €150,000 must be financial assets.

2. Global Residence Programme

The Global Residence Programme entitles non-EU nationals to obtain a special Malta Tax Status and Maltese residence permit through a minimum investment in property in Malta.

Successful applicants can relocate to Malta if they choose to do so. They also have the right to travel to any country within the Schengen Zone of countries without the need for an additional visa(s). There is no minimum day stay requirement, however successful applicants may not reside in any other jurisdiction for more than 183 days per year.

To qualify, an individual must purchase property costing a minimum of €275,000 or pay a minimum of €9,600 per annum in rent. If the property is in Gozo or the south of Malta the minimum property value is €250,000 or €220,000 respectively, or a minimum rent payment of €8,750 per annum is required. In addition, an applicant must not spend more than 183 days in any other jurisdiction in any single calendar year.

• Tax Advantages Available to Individuals – Global Residence Programme

A flat rate of 15% tax is charged on foreign income remitted to Malta, with a minimum amount of €15,000 tax payable per annum (income arising in Malta is taxed at a flat rate of 35%). This applies to income from the applicant, his/her spouse and any dependants jointly.

Foreign source income not remitted to Malta is not taxed in Malta.

Individuals may also be able to claim double taxation relief under the regime.

3. The Malta Residence Programme

The Malta Residence Programme entitles EU nationals to obtain a special Malta Tax Status and Maltese residence permit through a minimum investment in property in Malta.

To qualify for the scheme an individual must purchase property costing a minimum of €275,000 or pay a minimum of €9,600 per annum in rent. If the property is in Gozo or the south of Malta the minimum property value is €250,000 or €220,000 respectively, or a minimum rent payment of €8,750 per annum is required. In addition, an applicant must not spend more than 183 days in any other jurisdiction in any single calendar year.

There is no minimum day stay requirement, however successful applicants may not reside in any other jurisdiction for more than 183 days per year.

• Tax Advantages Available to Individuals –The Malta Residence Programme

A flat rate of 15% tax is charged on foreign income remitted to Malta, with a minimum amount of €15,000 tax payable per annum (income arising in Malta is taxed at a flat rate of 35%). This applies to income from the applicant, his/her spouse and any dependants jointly.

Foreign source income not remitted to Malta is not taxed in Malta.

Individuals may also be able to claim double taxation relief under this route.

4. Highly Qualified Persons Programme

The Highly Qualified Persons Programme is directed towards professional individuals earning over €86,938 per annum (basis year 2021), employed in Malta on a contractual basis.

This route is open to EU nationals for 5 years (may be extended 2 times – 15 years in total) and to non-EU nationals for 4 years (may be extended 2 times – 12 years in total. A list of qualifying positions is available on request.

• Tax Advantages Available to Individuals – Highly Qualified Persons Programme

Income tax is set at a flat rate of 15% for qualifying individuals (instead of paying income tax on an ascending scale with a current maximum top rate of 35%).

No tax is payable on income earned over €5,000,000 relating to an employment contract for any one individual.

5. Retirement Programme

The Malta Retirement Programme is available to EU and non-EU nationals whose main source of income is their pension.

An individual must own or rent a property in Malta as his/her principal place of residence in the world. The minimum value of the property must be €275,000 in Malta or €220,000 in Gozo or south Malta; alternatively, property must be leased for a minimum of €9,600 annually in Malta or €8,750 annually in Gozo or south Malta.

In addition, there is a requirement for an applicant to reside in Malta for a minimum of 90 days each calendar year, averaged over any 5-year period. Individuals must not reside in any other jurisdiction for more than 183 days in any calendar year during which they benefit from the Malta Retirement Programme.

• Tax Advantages Available to Individuals – The Retirement Programme

An attractive flat rate of 15% tax is charged on a pension remitted to Malta. The minimum amount of tax payable is €7,500 per annum for the beneficiary and €500 per annum for each dependant.

Income that arises in Malta is taxed at a flat rate of 35%.

6. Key Employee Initiative

Malta’s ‘Key Employee Initiative’ is available to non-EU passport holders and is applicable to managerial and/or highly technical professionals with relevant qualifications or adequate experience relating to a specific job.

Successful applicants receive a fast-track work/residence permit, which is valid for one year. This can be renewed annually.

Applicants must provide proof and the following information to the ‘Expatriates Unit’:

• Annual gross salary of at least €30,000 per annum.
• Certified copies of relevant qualifications warrant or proof of appropriate work experience. Declaration by the employer stating that the applicant has the necessary credentials to perform the required duties.

• Tax Advantages Available to Individuals

The standard Remittance Basis of Taxation apply. Individuals that intend to stay in Malta for some considerable time but do not intend to permanently establish themselves in Malta, will be classified as resident but not domiciled in Malta. Income earned in Malta is taxed on a progressive scale with a maximum rate of 35%. Non-Malta sourced income not remitted to Malta or Capital remitted to Malta are not taxed.

7. The Qualifying Employment in Innovation & Creativity

This route is targeted towards certain professional individuals earning over €52,000 per annum and employed in Malta by a qualifying employer on a contractual basis. The applicant can be a national of any country.

This routeis available for a consecutive period of not more than 3 years.

• Tax Advantages Available to Individuals

Income tax is set at a flat rate of 15% for qualifying individuals (instead of paying income tax on an ascending scale with a current maximum top rate of 35%).

8. Nomad Residence Permit

The Malta Nomad Residence Permit enables third country individuals to maintain their current job in another country, whilst they legally reside in Malta. The permit can be for a period of between 6 and 12 months. If a 12 month permit is issued then the individual will receive a residence card which allow for visa-free travel throughout the Schengen Member States. The permit may be renewed at the discretion of the agency.

Applicants for the Nomad Residence Permit must:

1. Prove they can work remotely using telecommunication technologies
2. Be third country nationals.
3. Prove they work in any of the following categories:
   • Work for an employer registered in a foreign country and have a contract for this work, or
   • Perform business activities for a company registered in a foreign country, and be a partner/shareholder of said company, or
   • Offer freelance or consulting services, mainly to customers whose permanent establishment is in a foreign country, and have supporting contracts to verify this.
4. Earn a monthly income of €2,700 gross of tax. If there are additional family members, they will each have to satisfy the income requirements as specified by the Agency Policy.

• Tax Advantages Available to Individuals

Successful applicants will not be taxed on their income as the income will be taxed in their home country.

How Can Dixcart Assist?

Dixcart can assist in providing advice as to which route would be most appropriate for each individual or family. We can also organise visits to Malta, submit the application , assist with property searches and purchases, and provide a comprehensive range of individual and professional commercial services once relocation has taken place.

Additional Information

For further information about moving to Malta please contact Jonathan Vassallo: advice.malta@dixcart.com at the Dixcart office in Malta. Alternatively, please speak to your usual Dixcart contact.

Dixcart Management Malta Limited Licence Number: AKM-DIXC

Why Switzerland?

There are many reasons why Switzerland is a desirable country to live in.

• A high standard of living with excellent working conditions and business opportunities.
• Beautiful scenery and an active outdoor lifestyle.
• A central location within Europe, with flight connections to over 200 international locations.

Non-Swiss nationals are allowed to stay in Switzerland as tourists, without registration, for up to three months. After three months, anyone planning to stay in Switzerland must obtain a work and/or residence permit, and formally register with the Swiss authorities.

How to Become a Legal Swiss Resident

There are two alternative routes to become a Swiss resident:

• By working in Switzerland
• Through the Swiss ‘Lump Sum System of Taxation’

Working in Switzerland

The acquisition of a Swiss work permit allows a non-Swiss national to become a Swiss resident.

There are three ways to be entitled to work in Switzerland:

• Being hired by an existing Swiss company.
• Forming a Swiss company and become a director or an employee of the company.
• Investing in a Swiss company and become a director or an employee of the company.

When applying to work in Switzerland and/or for residence permits, different regulations apply to EU/EFTA nationals, compared to nationals of other countries.

It is a straightforward process for EU/EFTA citizens as they enjoy priority access to the labour market in Switzerland.

Non-EU/EFTA nationals can work in Switzerland as long as the are appropriately qualified, for example managers or specialists and/or with higher education qualifications.

An alternative route is for non-Swiss nationals to form a Swiss company and obtain a residence permit in Switzerland. Relevant individuals must be employed by the company that they establish in Switzerland.

Non-EU/EFTA businesses need to create jobs and business opportunities in Switzerland, as specified by each particular canton.

Lump Sum Taxation

A non-Swiss national, who does not work in Switzerland, can apply for Swiss residency under the system of ‘Lump Sum Taxation’.

• The taxpayer’s lifestyle expenses are used as a tax base instead of his/her global income and wealth. There is no report of global earnings and assets.

Once the tax base has been determined and agreed with the tax authorities, it will be subject to the standard tax rate relevant in that particular canton.

Work activities outside Switzerland are permitted. Activities relating to the administration of private assets in Switzerland can also be undertaken.

Third country nationals (non-EU/EFTA), may be required to pay a higher lump-sum tax on the basis of “predominant cantonal interest”. This will depend on a number of factors and varies case by case.

How can an Individual Become a Swiss Citizen?

• An EU or non-EU/EFTA national must have lived in Switzerland for at least 10 years, to be able to apply for a Swiss passport.
• However, if an EU or non-EU/EFTA national is the spouse of a Swiss national, they need only to have lived in Switzerland for 5 years.

Additional Information

If you require additional information regarding moving to and living in Switzerland, or have any other questions about this jurisdiction, please contact Christine Breitler or Thierry Groppi at the Dixcart office in Switzerland: advice.switzerland@dixcart.com.

Background

Until recently, the Malta Retirement Programme was only available to applicants from EU, EEA, or Switzerland. It is now available to EU and non-EU nationals and is designed to attract individuals who are not in employment but instead are in receipt of a pension as their regular source of income.

Individuals taking advantage of the Malta Retirement Programme, can hold a non-executive position on the board of a company, resident in Malta. They would, however, be prohibited from being employed by the company in any capacity. Such individuals can also be engaged in activities related to an institution, trust or foundation of a public nature, that is involved in philanthropic, educational, or research and development activities in Malta.

Benefits of the Malta Retirement Programme

In addition to the lifestyle benefits of living on a Mediterranean island, which enjoys more than 300 days of sunshine per year, individuals benefiting from the Malta Retirement Programme are granted a special tax status.

• An attractive flat rate of 15% tax is charged on a pension remitted to Malta. The minimum amount of tax payable is €7,500 per annum for the beneficiary and €500 per annum for each dependant.
• Income that arises in Malta is taxed at a flat rate of 35%.

Who May Apply?

Applicants who meet the following criteria are eligible to apply for the Malta Retirement Programme:

• Non-Maltese nationals.
• Own or rent a property in Malta as his/her principal place of residence in the world. The minimum value of the property must be €275,000 in Malta or €220,000 in Gozo or south Malta; alternatively, property must be rented for a minimum of €9,600 annually in Malta or €8,750 annually in Gozo or south Malta. Applicants renting the property must take out the lease for a minimum period of 12 months, and a copy of the lease contract needs to be submitted with the application.
• The pension which is received in Malta must constitute at least 75% of the beneficiary’s chargeable income. This means that the beneficiary can only earn up to 25% of his/her total chargeable income from any non-executive post(s), as referred to above.
• Applicants must have Global Health Insurance and provide evidence that they can maintain this for an indefinite period.
• The applicant must not be domiciled in Malta and should have no intention of becoming domiciled in Malta, within the next 5 years. Domicile means the country where you officially have a permanent home or have a substantial connection with. You can have more than one residence, but only one domicile.
• Applicants must reside in Malta for a minimum of 90 days in each calendar year, averaged over any five-year period.
• The applicant must not reside in another jurisdiction for more than 183 days in any one calendar year during the period that they benefit from the Malta Retirement Programme.

Special Carer

A ‘special carer’ is an individual who has been providing substantial and regular, curative or rehabilitative health care services to the beneficiary or his/her dependants, for at least three years prior to an application for special tax status, under the Malta Retirement Programme.

A special carer may reside in Malta with the beneficiary, in the qualifying property.

Where the care has not been provided for a minimum period of three years, but has been provided on a regular basis for a long and established period, the Commissioner in Malta may assess that this criteria has been met. It is important that the provision of such services is formalised by a contract of service.

A special carer would be subject to tax in Malta, at the standard progressive rates and is precluded from benefiting from the 15% tax rate. The special carer must register with the relevant tax authorities in Malta.

Applying to the Malta Retirement Programme

An Authorised Registered Mandatory in Malta must apply to the Commissioner of the Inland Revenue on behalf of an applicant. This is to ensure that the individual enjoys the special tax status as provided in the programme. A non-refundable administrative fee of €2,500 is payable to the Government on application.

Dixcart Management Malta Limited is an Authorised Registered Mandatory.

Individuals with special tax status are required to submit an annual return to the Commissioner of the Inland Revenue, with evidence that they have met the specified criteria.

Additional Information

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

Dixcart Management Malta Limited Licence Number: AKM-DIXC

Background

UK inheritance tax should be carefully considered, and appropriate tax planning should be taken by all individuals who have assets in the UK, not just those that live in the UK.

What is UK Inheritance Tax? 

On death, UK inheritance tax (IHT) is at a rate of 40%.

IHT is a tax on money or assets held at death, and on some gifts made during a lifetime (most importantly those gifts made less than 7 years prior to death). 

A certain amount can however be passed on tax-free. This is known as the ‘tax-free allowance’ or the ‘nil rate band’.  

Each individual has a tax-free inheritance tax allowance of £325,000. This allowance has remained the same since 2010-11. In the case of a married couple this tax-free allowance can be passed onto a surviving spouse, which means that, following their death, the estate will enjoy a £650,000 tax free allowance.

Additional Nil Rate Allowance

Individuals who died after 6 April 2017, with an estate value greater than their tax-free allowance of £325,000, due to the value of their home being passed to their children, may pass on an additional tax-free allowance. In tax year 2020 – 2021 this additional amount is £175,000 per estate.

Lifetime Gifts

Gifts made more than seven years prior to death, without the retention of a benefit (such as continuing to live in a gifted property rent free), will not be included in the deceased’s estate. Any gifts made within seven years will, in most circumstances, form part of the estate.

Gift Allowances

There are certain gift allowances that can be used year on year, where the seven-year rule is not applicable. The six key gift options are detailed below. These options, if planned for properly across several years, can reduce the inheritance tax liability considerably.

Dixcart recommends that a record of all gifts made is kept with the Will.

• Give away money each year – each year an individual can give away up to £3,000. This gift can be to anybody or split across any number of people.
• Wedding presents – parents can each give a wedding gift of up to £5,000 to their children. This gift allowance must be made before the ceremony.
• Unlimited small gifts – an unlimited number of gifts of up to £250 each in any tax year can be made as long as they are to different people.
• Charitable donations – charitable gifts are free from inheritance tax. If at least one-tenth of net wealth (calculated as a percentage of the estate, on death) is donated, the Government has the discretion to cut an individual’s inheritance tax rate from 40% to 36%.
• Contributing to living costs – money used to support an elderly person, an ex-spouse, and/or a child under the age of 18 or in full-time education is not considered to be within the deceased’s estate on death, whatever amounts have been paid.
• Payments from surplus income – an individual with surplus income should not ignore the opportunities provided by this provision. If the criteria, detailed below are met, the seven-year period is not relevant:

1. it was made as part of the usual expenditure of the transferor; and
2. the transferor retains sufficient income to maintain his usual
   standard of living, having taken account of all the income transfers
   that form part of his usual expenditure.

Does UK Inheritance Tax Apply to a Non-UK Tax Resident? 

The UK inheritance rules are different depending on a person’s domicile.  The concept of domicile is based on a complex set of laws (outside the scope of this note). However, as a broad overview, an individual is domiciled where they consider themselves to be indefinitely settled and “at home”. There may also be estate or inheritance tax liabilities in other jurisdictions.  Therefore, local advice should be taken in any jurisdiction where taxes might be chargeable. 

For UK IHT purposes, there are three categories of domicile:  

• UK Domiciled – the worldwide assets of the individual will be
  subject to UK inheritance tax, whether the individual is UK resident or
  not.
• Non-UK Domiciled (“non-dom”) – the assets of this individual,
  situated in the UK, will be subject to UK inheritance tax irrespective
  of whether the individual is UK resident or not.
• Deemed UK Domiciled – where an individual is a non-dom but has lived
  in the UK in 15 out of the previous 20 tax years (prior to their
  death). According to UK inheritance tax rules he is considered to be UK
  domiciled and his worldwide assets will therefore be subject to
  inheritance tax on his death. The rules are slightly different if the
  individual has fulfilled this requirement but is no longer resident at
  the date of their death although IHT may well still be chargeable in
  this instance. 

When an individual moves to the UK, dependent on all of the circumstances of the move and the new life adopted in the UK, there may be an argument that an individual has immediately become UK domiciled.  Even if this is not the situation, once an individual has lived in the UK for 15 years, he/she will be deemed domiciled for UK inheritance tax.

As is often the case, a complex set of laws is best considered through explanatory examples. 

Tax Planning Opportunities for Non-UK Tax Residents 

Tom is an Australian citizen; he was born in Australia and has always lived and worked there. He is a UK non-dom and has a net worth of £5m.  He is divorced with one child aged 19. 

Tom’s child, Harry, chooses to study at a university in the UK and Tom is aware that UK real estate has over the last few years shown some good returns. 

Tom purchases a property in his sole name, mortgage free, near to his son’s university in the UK for £500,000 for his child to live in while studying in the UK. 

Planning Opportunity 1: Property Ownership 

Even though Tom is not UK tax resident and is non-dom, any assets that he has in his own name situated in the UK are subject to UK inheritance tax on his death.  If Tom dies while owning the property, leaving his whole estate to Harry, there will be a tax liability of £70,000 on his death.  This is 40% of the value of the property above the £325,000 nil rate band, assuming that Tom has no other UK assets. 

• Tom could have considered purchasing the property jointly in the
  name of himself and his son. Had he done so; on his death the value of
  his UK asset would have been £250,000.  This is below the nil rate band
  threshold and therefore no UK inheritance tax would be payable. 

Planning Opportunity 2: Remittance of Money 

Tom is getting close to retirement and decides to move to the UK to be with his child, who has settled in the UK after finishing university. He sells his Australian home but keeps his Australian bank accounts and other investments. He sends £1m over to a newly opened UK bank account before moving to the UK, to live on once in the UK. 

• Tom would be better advised to remit these funds to a tax neutral,
  sterling jurisdiction, such as the Isle of Man. If Tom was
  to die before becoming domiciled for UK inheritance tax purposes, these
  funds would be outside the inheritance tax net.
• By structuring such an account correctly, Tom could bring capital
  only to the UK and thereby avoid any obligation to pay income tax.
  Please contact Dixcart to take advice on this topic, prior to moving to
  the UK.

Planning Opportunity 3: Use of a Trust 

Tom dies having lived in the UK for 25 years of his retirement.  He leaves his whole estate to his son.  As Tom was deemed domiciled at death, his entire worldwide estate, not just his UK situated assets, will be subject to UK inheritance tax at 40%, except for the nil rate band at the time of his death.  If his estate is still worth £5m, the inheritance tax payable will be £1.87m at current rates and nil rate band. 

• Before Tom became deemed domiciled in the UK, he could have settled
  the non-UK assets he still had into a non-UK resident discretionary
  trust (traditionally in a tax neutral jurisdiction). This would place
  those assets outside his UK estate for UK inheritance tax purposes.
  Following Tom’s death, the trustees could distribute the trust assets to
  Harry; achieving the same results as a will but passing on the assets
  free from inheritance tax liabilities. 

Planning Opportunity 4: Distribution of Assets from a Trust 

Following Tom’s death, his son decides to leave the UK for New Zealand, having lived in the UK for the previous 30 years.  He sells all of his properties and other assets and deposits the proceeds in a New Zealand bank account. He dies within a year of moving to New Zealand. 

As Harry only left the UK a year prior to his death, he will still have been UK resident for more than 15 of the previous 20 years.  He will therefore still be considered UK deemed-domiciled at death and his entire estate would be taxable to UK inheritance tax at 40%, even though he had no assets in the UK on his death. 

• Rather than the trustees distributing the assets to Harry on his
  father’s death, it might have been prudent for the trustees to only
  distribute assets as needed by Harry over time. This would mean that the
  entire estate would not be in his name on his death and would not
  therefore be subject to inheritance tax in the UK.  The assets would
  remain in the trust and be available for future generations of the
  family. Advice should be taken on distributions from a trust to ensure
  that these are as tax efficient as possible. 

Summary and Additional Information

UK inheritance tax is a complex issue. Careful consideration and advice need to be taken regarding the best manner to structure the holding of UK assets. 

It is important for both UK and non-UK tax residents to take advice, as early as possible, and this should be reviewed regularly to allow for any changes in the law and/or family circumstances. A number of important tax planning steps can be put in place, in particular for non-UK tax residents.

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

Spring 2020, and we are experiencing an unprecedented period in terms of threat to health and economic stability.

Lower key disruption took place in April 2010, due to the ash caused by a volcanic eruption in Iceland and the subsequent cancellation of a large number of flights.

At this current time, there may be a number of other, less serious, but important unforeseen consequences.

Tax Residence

You may be in the unfortunate position of having to remain in a country and not being able to travel elsewhere and/or to return to your country of residence. If this is the case, you may inadvertently become tax resident by overstaying the number of days you should remain in that country. 

Action to Take

Please see below a suggested list of action you can take, to help mitigate an unplanned over-stay of days, if you need to:

• Keep records of why you are in the country, and for how long.
• Keep all travel tickets/records.
• Keep any notifications advising you that you cannot leave that particular country.
• It is worth checking the legislation of the country you are in to see if there are exceptions to the usual residency rules. For example, HMRC in the UK provided exemptions during the volcanic ash episode in 2010.

All of the above sounds very simple – but can easily be forgotten in difficult and stressful times.

Additional Information

If you would like further information about the tax residence regime in a particular country, or what your particular status might be, do not hesitate to speak to your usual Dixcart contact or please email: advice@dixcart.com.