Category: Taxation

Don’t Miss Your Portuguese Personal Tax Deadlines

Posted on | by Megan Raguro

As the tax season progresses in Portugal, it is crucial for residents to be aware of upcoming deadlines to ensure compliance and avoid potential penalties. Our team at Dixcart Portugal are here to provide clarity and support in navigating these obligations. This article highlights some critical dates and actions you should consider.

New Non-Habitual Resident (NHR) Applications: Deadline Approaching

Applications must generally be submitted before 15 January of the following year after becoming tax resident in Portugal (Portugal’s tax years run in line with calendar years). This regime offers attractive tax benefits for new residents in Portugal, but the application process requires careful attention to detail. We strongly urge anyone considering applying for NHR status to contact us immediately to discuss their eligibility and ensure a timely submission so they do not miss this opportunity. More information can be found here.

Other Important Personal Tax Deadlines:

Beyond the NHR application deadline, several other personal tax obligations require attention. While the specific dates may vary slightly each year, it is wise to prepare well in advance. These typically include:

  • IRS (Personal Income Tax) Declarations: A tax year in Portugal runs in line with the calendar year and the deadline for submitting your annual IRS (Imposto sobre o Rendimento das Pessoas Singulares) declaration in Portugal is 30 June of the following year. This declaration covers income earned in the previous year. Gathering all necessary documentation, such as income statements, receipts for deductible expenses, and bank statements, is essential for accurate and timely filing.
  • Personal Tax Deductions: To benefit from deductions on expenses such as healthcare, rent, education, gym memberships, and vehicle maintenance, it is essential to validate all relevant invoices on the e-Fatura portal by 25 February. This validation process is vital for those seeking to reduce their taxable income in Portugal.
  • IMI (Municipal Property Tax): While IMI payments are typically spread throughout the year, understanding your payment schedule and ensuring timely payments is crucial to avoid penalties. Here’s a simple breakdown of IMI payment deadlines:
    • €100 or less: Pay the full amount by 31 May of the following year.
    • €100 to €500: Pay in two instalments: one by 31 May, and the other by 30 November of the following year.
    • €500 or more: Pay in three instalments: one by 31 May, one by 31 August, and the final one by 30 November of the following year
  • Social Security Contributions: If you are self-employed or receive income from specific sources, you may be required to make regular social security contributions. After the first year of exemptions, you must submit a report to the social security system quarterly and pay the contribution monthly. Read here for more information.

Understanding your obligations and payment deadlines is vital to ensure compliance and avoid penalties.

Plan Ahead for a Stress-Free Tax Season:

Tax efficiency is a year-round process, not just a last-minute scramble. We understand that navigating the complexities of the Portuguese tax system can be challenging, that is why we encourage you to reach out to our team of experienced tax professionals well in advance of any deadlines.

Why Contact Us Now?

  • Sufficient Time for Preparation: Early engagement allows us to thoroughly review your financial situation, identify potential deductions and credits, and ensure all necessary documentation is in order.
  • Personalised Service: We provide tailored service based on your specific circumstances, ensuring you optimise your tax position within the legal framework.
  • Peace of Mind: Knowing that your tax obligations are being handled by experienced professionals provides peace of mind and allows you to focus on other priorities.
  • Avoid Penalties: Missing deadlines or submitting inaccurate information can result in penalties. Proactive planning helps you avoid these costly mistakes.

Contact Information

Contact Dixcart Portugal today to schedule a consultation. We are here to assist you in navigating the Portuguese tax landscape and ensuring compliance. Let us help you make this tax season as smooth and efficient as possible.

For more information, please contact us at: advice.portugal@dixcart.com.

Residence-Based Regime for UK Inheritance Tax and Foreign Income and Gains

Posted on | by Megan Raguro

As part of its wide-ranging changes to the current non-domicile (non-Dom) regime, the UK government is set to introduce a residence-based regime for both Inheritance Tax and Foreign Income and Gains with effect from 6th April 2025.

This is a major shift from the historic domicile-based regime and presents both challenges and opportunities for individuals who may already be UK tax resident or considering taking up residence in the UK post April 2025 who would previously have taken advantage of the non-Dom regime.

One possible mitigation strategy is to use an Isle of Man (IoM) company to hold non-UK property related investments, ensuring that the situs of the investment remains outside the UK.

Residence-based regime for Inheritance Tax

The most significant change is that from 6 April 2025, the test for whether non-UK assets owned by UK resident individuals will be subject to IHT will be whether the individual is deemed as “Long Term Resident”. A long-term resident being an individual has been resident in the UK for 10 of the proceeding 20 years prior to the tax year in which the chargeable event arises.

New Foreign Income and Gains (FIG) Regime

An additional change is that with effect from 6 April 2025 the UK’s new FIG regime which will replace the existing remittance basis of taxation currently available to Non-Dom’s, providing 100% relief on FIG for new arrivals to the UK for their first four years of tax residence, provided they have not been UK tax residents in any of the 10 consecutive years prior to their arrival.

Why Use an Isle of Man Company?

The Isle of Man offers a robust and internationally recognised jurisdiction, adhering to the highest international standards. Key benefits of using an IoM company for newly arrived UK resident include:

  1. Succession and Estate Planning: Investments held through an IoM company, including UK situs non-property investments, fall outside UK inheritance tax (IHT) until the individual is deemed “Long Term Resident.”
  2. Non-UK Situs for Investments: A properly structured IoM company is considered non-UK situs, meaning its assets are not directly held by UK individuals. This can potentially mitigate UK tax exposure under the new FIG regime for the first 4 years of residence. This presents planning opportunities for individuals who do not intend to remain in the UK in the longer term
  3. Favourable Tax Environment: The Isle of Man has a 0% corporate tax rate on most income, no capital gains tax, and no withholding tax on dividends, making it an attractive jurisdiction for investment holding structures.
  4. Investor Confidentiality: The Isle of Man maintains a high level of investor privacy and protection, making it an appealing choice for high-net-worth individuals and family offices.

Conclusion

The increasingly mobile nature of HNW individuals means that using an Isle of Man company can provide significant tax efficiencies by ensuring that investments remain non-UK situs, thereby reducing exposure to UK taxation in the short to medium term.

However, as always careful structuring and professional tax advice are imperative to when considering any structuring.

If you would like to talk to us about how an Isle of Man Company might be appropriate for you or your clients, please contact us: advice.iom@dixcart.com.

Dixcart Management (IOM) Limited is Licensed by the Isle of Man Financial Service Authority

Exciting Changes to the Cyprus Startup Visa Scheme and New Opportunities for Global Entrepreneurs

Posted on | by Megan Raguro

Introduction

At the end of 2024 a number of revisions to the existing Cyprus Startup Visa Scheme were approved. These changes make an already very attractive scheme more appealing and accessible.

Overview of the Scheme

The Cyprus Startup Visa Scheme allows talented entrepreneurs from non-EU and non-EEA countries, whether individuals or a team, to enter, reside and work in Cyprus while establishing, operating, or growing a high-potential Startup. The aim of the scheme is to create new job opportunities in Cyprus, promote innovation and research, grow the business ecosystem and consequently the overall economic development of the country.

For the purposes of the Scheme, Innovative Startups are defined as unlisted small enterprises registered within the last 5 years, with no profit distribution and have not been formed through a merger. The enterprise should develop or offer new products, services, or processes that create or disrupt markets. Such innovations are based on new technologies, should adapt existing technologies, and/or employ new business models.

Beneficiaries of the Scheme are categorised under either the ‘Individual Startup visa scheme’ or under the ‘Team Startup visa scheme’.  A team is considered as “a maximum of 5 individuals consisting of non-EU country nationals”. The Team should consist solely of the founders of an innovative Startup or of at least one founder and other senior executives. In both the Individual and the Team Startup visa scheme at least 25% of the company’s shares should be owned by one or more member(s) of the applicant or team of applicants.

What has Changed?

The revisions to the Cyprus Startup Visa Scheme include:

  • An extension to the residence permit offered to successful applicants from 2 to 3 years, with a possibility of 2-year renewals, instead of the original renewal for 1 year;
  • A reduction to the required percentage of equity third country applicants must have in the Cypriot company from 50% to 25%. It is noted that a start-up group applying for this specific visa may consist of up to five founders (or one founder and additional executive members), and must have a minimum of €20,000 capital or €10,000 if the founders are less than two;
  • The ability to increase the number of third country nationals employed from 30% to 50% of the company’s entire staff, with the option of hiring additional foreign personnel if the start-up investment in Cyprus is equal to, or exceeds, €150,000;
  • The implementation of different evaluation criteria for start-ups that have sales revenues of at least €1,000,000, and whose research and development expenditure amounts to at least 10% of the total operating expenses for one of the past 3 years.

While the updated programme offers greater flexibility to foreign entrepreneurs and investors, it also establishes more distinct and objective conditions for the renewal of the start-up visa after the initial 3-year period. Specifically, start-ups wishing to renew their relevant visas will be required to demonstrate either a minimum increase of 15% in their revenues or investments of at least €150,000 during the period of their operation in Cyprus. Additionally, the companies applying for a renewal visa will be expected to have either created at least 3 new jobs in Cyprus, or participated in a local innovation support scheme, or launched at least one product or service.

Tax Benefits

With an ever-expanding double tax treaty network of approximately 70 countries across the globe, Cyprus offers a number of tax benefits to start-ups and foreign investors of such start-ups, such as:

  • A non-Cypriot individual relocating to Cyprus to set-up their startup is exempt from tax on dividends, capital gains and most types of interest income, though they will still be subject to income tax on any income earned as a salary from their employment in Cyprus.
  • Investors in innovative start-up companies (which have been certified as such by the Ministry of Finance in Cyprus) can enjoy up to 50% tax exemption on their annual taxable income in Cyprus.
  • Corporate tax on net profits of Cypriot companies is currently set at 12.5%. Technology companies producing Intellectual Property can apply for an 80% tax exemption, reducing the corporate tax rate to an effective 2.5%.
  • Capital gains arising from the disposal of the qualifying IP are fully exempt from tax. Any gains earned by the entrepreneur from the disposal of his/her shares in a Cypriot tax resident company are generally exempt from tax in Cyprus.
  • Cyprus tax resident companies may carry forward tax losses incurred during a tax year over the following 5 tax years to offset future taxable profits, allowing startups, which are commonly loss making in their early stages, to benefit in the future.
  • Upon the introduction of new equity, a Cyprus tax resident company is entitled to claim a notional interest deduction (NID) as a tax-deductible expense. The deduction is available on an annual basis and may reach up to 80% of the taxable profit generated from the new equity. Depending on the level of capitalisation, a startup company may reduce its effective tax rate to as low as 2.5%.
  • Profits from disposals of corporate ‘titles’ are tax exempted from corporate income tax. However, capital gains on immovable property situated in Cyprus (on non-quoted shares directly or indirectly holding such Cyprus-situated immovable property) are taxed.
  • Special defence contribution is imposed only on non-exempt dividend income, ‘passive’ interest income, and rental income earned by Cypriot tax resident companies and Cypriot permanent establishments of non-Cyprus tax resident companies.

How can Dixcart Cyprus Help?

With over 50 years of expertise in the industry, we bring a deep understanding of supporting individuals, families, and businesses. Our teams combine extensive knowledge of the local regulatory framework with the global reach, resources and expertise of our international group, ensuring we deliver tailored solutions that perfectly meet your needs.

At Dixcart, we recognise that every client is unique, and we pride ourselves on offering personalised services. By working closely with you, we gain an in-depth understanding of your specific requirements, enabling us to provide bespoke solutions, recommend the most suitable structures, and support you every step of the way.

Our comprehensive range of services include company incorporation, management and accounting services, company secretarial support, and even providing a fully serviced office for your Cypriot company.

If you are considering how Cyprus can play a role in managing your wealth or business needs, we would be delighted to discuss your options. Please do not hesitate to contact us at advice.cyprus@dixcart.com.

UK Non Dom

The End of UK Non-Dom Tax Benefits: Should You Stay or Go?

Posted on | by Megan Raguro

Introduction

The talk around the taxation of non-domiciled individuals in the UK has been a hot topic for a few years in the press and more recently in the political arena. In March, the previous government announced a new proposal, effectively scrapping the exiting remittance basis regime and replacing it with a residence-based system. Following a lot of debate, a general election, and a new government, the new rules have now been finalised.

As with most UK tax laws, they are not simple, and this article is not intended to set out every element of the new rules in detail, but rather help answer some common questions that are on the non-dom community’s lips. For more information on the new regime, and other announcements in the Budget of 30 October 2024, please visit our Autumn 2024 Budget Summary here.

Below is a hypothetical example of an individual whose situation closely mirrors that of many non-doms currently living in the UK.

Mrs Non-Dom

Mrs Non-Dom (known as ND by her friends and family) has lived in the UK for 12 years, having been born overseas to non-UK parents, making her a non-UK domiciled (non-dom) under the current rules. She has enjoyed living in the UK enjoying the great food and even better weather. She is a member of the promoter family of an overseas listed entity and owns 10% of the shares worth the equivalent of $100 million. Each year she receives a dividend of $1 million and has bank accounts with $5 million in them, paying $250,000 interest per year. 

Before moving to the UK, she took some great advice and created a healthy pot of clean capital to live off. She has claimed the remittance basis in her UK tax returns and has lived off her clean capital.

A few years after arriving in the UK, she settled a non-UK Trust with some of her non-UK assets and is a discretionary beneficiary of the Trust along with her spouse and children. She also owns 100% of the shares in a non-UK company which has some passive investments.

Current position

As a remittance basis user, she has only been paying tax on her UK source income and gains as well as the UK’s remittance basis charge.  ND has correctly segregated her clean capital from new income and gains, and these have not been remitted into the UK.

Her Trust is an excluded property Trust meaning the assets held within the Trust are protected from inheritance tax at the time she becomes deemed domiciled after living in the UK for 15 years.

The income and gains generated in her investment company are not taxable for her in the UK as she claims the remittance basis.

Position post 5 April 2025

As she has already been tax resident in the UK for more than 4 years, she will not be eligible for any benefits under the new FIG regime. As a result, her overseas dividend and interest will be taxable in the UK from 6 April 2025.

As a settlor interested Trust, the tax position of the Trust will now follow her UK tax position.  While she remains a UK tax resident, the income and gains in the Trust will be taxable.  The underlying assets will also now fall into her UK estate for inheritance tax purposes as she has been resident in the UK for more than 10 years.

The income and gains generated by the investment company will also now be taxed directly. The value of the company itself will also fall into her UK inheritance tax estate, as will all of her overseas assets as she has been UK tax resident for more than 10 years.

What steps can she take?

Income and gains

She will be able to benefit from the proposed Transitional Provisions which will firstly allow her to designate pre-6 April 2025 income and gains and pay 12% UK tax on them (with no foreign tax credit) up to 5 April 2027, and then 15% for the following tax year. It will also mean any assets sold at a gain post 6 April 2025 can be rebased to April 2017.

This may mean she will want to bring some income forward (where possible) to before the new tax rules take effect so they can then be used in the UK at a lower tax rate under these transitional provisions.

She should also consider the position of any assets she is considering selling. Each position will be subjective, and the financial and commercial aspects of the decision should not be ignored, but some may be better sold before 6 April 2025 (and then designated under the transition provisions at the 12%/15% rates) or some may be better sold under the new rules and, whilst then taxable at the prevailing capital gains tax rates (now 24% for most assets), may benefit from the rebasing. Each scenario should be assessed separately as each asset may fall into a different category.

Whilst new income and gains will be taxable on a worldwide basis from 6 April 2025, she should consider any foreign taxes she also suffers (and as a remittance basis user has perhaps not considered previously) to ensure she is able to claim any foreign tax credits.  Please note that credit for foreign taxes paid is not possible under the Transitional Provisions.

The UK has an extensive Double Tax Treaty network, and she should consider whether she can avail any benefits under these.

Inheritance tax

Alongside the UK’s extensive Double Tax Treaty network, it has 10 Estate Tax Treaties, and she should consider whether she can avail any benefits under these, for Inheritance tax purposes.

The more traditional inheritance tax planning opportunities of lifetime gifts and gifts out of excess income should not be ignored.

Under the new rules, now she has been UK tax resident for more than 10 years, if she were to leave after 6 April 2025, she would be subject to UK inheritance tax for a further 3 years.  This would be the case if she left after 13 years too but after that, this “tail” will follow her for an extra year, per year of residence. So, for example, if she leaves after 16 years, the tail will be 6 years and will continue increasing by a year up to a maximum of 10 years.

Leaving the UK

The new rules will result in Mrs Non-Dom being exposed to higher UK taxes than she has been previously. She may therefore decide to relocate to a more tax-friendly jurisdiction. As with any relocation, the tax consequences in both jurisdictions must be considered. 

The UK Statutory Residence Test will dictate how many days she can continue to remain in the UK. She should take advice and develop a plan for her days in the UK for the coming years, to be sure she does become non-UK tax resident.  There is more detail information in our note here.

She may discover that where she has chosen to move to is no more efficient from a tax perspective.  Dixcart is able to offer the immigration and tax support in a number of tax efficient jurisdictions and would be happy to assist. More information can be found here.

Conclusion

The new FIG regime is a significant shift in the tax laws and more importantly in many UK tax resident individual’s lives. Dixcart UK, and the wider Dixcart Group, can assist with providing advice on the new rules and developing a plan for the future, sadly perhaps not in the UK.

As is always the case, tax advice cannot be taken soon enough, so please do reach out to your usual Dixcart contact, or through our contact page to start these discussions: advice.uk@dixcart.com.

US Individuals Moving to Portugal: Portuguese Tax Considerations You Need to Consider

Posted on | by Megan Raguro

Portugal’s allure is undeniable, offering a pleasant climate, affordable living, high safety standards, a rich cultural heritage, and a warm community, making it a perfect place for a fresh start.

However, to ensure a seamless transition, it is important individuals consider the tax implications before moving to Portugal. Tax compliance not only provides peace of mind but is a necessity.

Portugal’s residency-based tax system means residents are taxed on their global income. This requires filing tax returns in both the US and Portugal. Below we have summarised several key considerations for US citizens requiring tax assistance in order to meet their tax obligations in Portugal.

Who is Required to Pay Taxes in Portugal?

Tax residents in Portugal will be required to pay tax on any income earned in Portugal.

Portuguese tax residents are required to file a tax return, regardless of source of amount. This includes:

  • Employment income,
  • Self-employed income,
  • Dividend, interest or capital gains earned,
  • Rental income,
  • Pension income.

The Portugal tax rate will be driven by the source and/or value.

Who is a Tax Resident in Portugal?

If you spend more than 183 days in Portugal in a year, or if you have a home in Portugal that you intend to live in, you are considered a tax resident in Portugal.

Tax Deadlines and Tax Year-End

The Portugal tax year runs from 1 January to 31 December. Tax returns must be filed by 30 June of the following year, and if tax is owed, it must be paid by 31 August.

Agreements between the US and Portugal

A Double Taxation Agreement does exist which allows prevention of double taxation on specific income sources in Portugal and the USA. Further, a Totalization Agreement also exists – which prevents expats from paying duplicate social security contributions in both countries. A tax adviser will be able to confirm the treatment tailored to a client’s specific circumstances.

Other Tax Considerations for US Citizens

Each client has a unique tax situation, and below is a list of taxes and social security considerations that may be applicable. It is important to consult with a tax adviser, and to ensure the general information included within the links below is not taken as advice.

Other: Non-Resident Income Tax in Portugal

Although this article is focussed on Portuguese tax residents, US individuals who are non-resident in Portugal for tax purposes, and who earn Portuguese sourced income, are taxed at a flat rate of 0%, 25%, or 28%. More information can be found here regarding capital gains and rental income for non-residents.

Reach Out for More Information

Dixcart Portugal provide support to international expats from around the world to ensure compliance with accounting and tax, providing clients with peace of mind.

We also provide assistance for clients relocating, and individuals considering the appropriate Portuguese visa option for them – see further reading available here. Please feel free to get in touch: advice.portugal@dixcart.com.

Cyprus: A Year in Summary – Private Wealth, Business, and Taxation in 2024

Posted on | by Megan Raguro

Introduction

Throughout 2024, we have shared various articles explaining and highlighting the benefits and routes available to those moving to Cyprus. We have also covered the corporate benefits and the required parameters for establishing a company in Cyprus.

In our final article for 2024, we highlight the key information from the last 12 months, with additional links for those looking for more detail. 

Individuals

Cyprus Tax Residency for Individuals

Cyprus tax residency rules are simple, there are only two rules. The 183-day rule and the 60-day rule. The 60-day rule means you could be considered tax resident after spending only 60 days in Cyprus each year, subject to further conditions.

It is also possible to receive a government issued tax residency certificate to provide to other jurisdictions to evidence your tax residency if required.

The Cyprus Non-Dom Regime

Cyprus has a very competitive Non-Domicile Regime which taxes an individual on their worldwide income at special rates. This means individuals can remit their income to Cyprus and use it, rather than keeping it ringfenced in a separate jurisdiction.

The special rates include 0% income tax on most Dividends, Interest, Capital Gains and Royalties. On top of this there is also no wealth or inheritance tax in Cyprus.

The Non-Dom Regime is available for 17 years in the first 20 years of tax residency and does not have a cost of participation like many others from across Europe.

Moving to Cyprus

There are a number of routes to gain residency in Cyprus, but they can be broken down into routes for EU and EEA nationals and routes for non-EU and EEA nationals, otherwise known as 3rd country nationals.

The route for EU and EEA nationals is simple. Due to EU directives, any EU and EEA national has the right to live and work in Cyprus, which is a member state of the EU. This means that the process is fast and straightforward and comes down to providing evidence to show that you will not become “a burden on the social security system of the Republic of Cyprus”.

For 3rd country nationals there are a number of options but the most common of them is through establishing a Foreign Interest Company (FIC) or through Permanent Residency by Investment (PRP). These both have individual specific advantages and requirements but the most notable is the right to work. Under the FIC method, 3rd country nationals have a residence and work permit, whereas under the PRP they do not have the right to undertake any form of employment within Cyprus.

Corporates

The Cyprus Corporate Tax Regime

Provided that a company has sufficient Economic Substance in Cyprus, it is considered Cyprus Tax Resident, and as a result can make the most of the fantastic Corporate Tax Regime available.

Some of these benefits include 0% Corporation tax on most Dividends, Interest, Capital Gains and Royalties as well as a standard rate of 12.5% corporation tax on revenues, which can be reduced to as little as 2.5% if your company is eligible to apply the Notional Interest Deduction (NID).

There are also no Withholding Taxes in Cyprus and over 60 double tax treaties making disbursing funds and receiving funds highly tax efficient.

The above benefits make Cyprus the perfect place for a Holding Company or a Family office, as it is a fantastic place to manage your investments from.

How Can Dixcart Cyprus help?

With over 50 years of experience in the sector, we have a wealth of knowledge in assisting families, and our teams offer in-depth expert knowledge on the local regulatory framework along with the backing of our international group of offices to help us find the perfect solution for you.

At Dixcart we know that every individual’s needs are different, and we treat them as such. We work very closely with our clients and have an in-depth understanding of their needs. This means we can offer the most bespoke services possible, propose the most appropriate structures, and support your specific requirements every step of the way.

We offer services raging all the way from company incorporation, Management and accounting services, and company secretarial services all the way to providing a serviced office for your Cypriot company.

Get In Touch

If you are interested in discussing your options and how using Cyprus to manage your wealth could help you, please contact us. We will be happy to answer any questions you have and assist in any way we can: advice.cyprus@dixcart.com.

The End of the UK’s Non-Domiciled Regime: Why People are Considering Malta for Tax Residency

Posted on | by Megan Raguro

Recent developments on the non-domiciled regimes in the UK led many individuals to reconsider their UK tax residency.

Chancellor of the Exchequer, Rachel Reeves, delivered the Autumn Budget on 30 October 2024, announcing several changes: from 6 April 2025, the existing Non-Dom regime will end and the concept of domicile as a relevant connecting factor in the current tax system will be replaced by a system based on tax residence.

The change, which reduces the period under which a resident, non-domiciled individual will benefit from the remittance basis only for 4 years, provided that s/he has been non-tax resident for the last 10 years, will impact a significant number of UK Non-Doms, who are now looking for an alternative.

Relocating to a new country is a life-changing decision that cannot be taken lightly, and individuals and families need to take into consideration many aspects of their lives, before deciding (please read this Dixcart article for more information). Malta represents a strong option for several reasons.

Key Strengths of Malta

Malta is a politically stable country, with a well-developed legal framework that protects foreign investments and ensures security to those seeking long-term tax residency.

The remittance basis of taxation is available in Malta. In fact, residents are taxed only on income remitted to Malta, while foreign-sourced income that is not remitted to the country remains tax-free. This regime applies to individuals who are residents of Malta but are not domiciled there. Foreign-sourced capital gains (profits from selling assets like real estate, stocks, or other investments abroad) are not taxed, even if remitted, making it attractive to investors and those with significant capital gains abroad.

Furthermore, Malta has an extensive network of Double Taxation Treaties (DTAs) with over 70 countries, including major trading partners in the European Union, Asia, the Middle East, and Africa.

Malta also has no inheritance or wealth taxes, which is a major attraction for high-net-worth individuals looking to protect and transfer their assets and maintain their fortune through future generations.

In addition to advantageous fiscal conditions, Malta has many features that are highly appreciated by individuals and families who are considering relocating: English is one of the official languages, and its geographical location, with a good climate throughout the year and a Mediterranean lifestyle, make the country particularly attractive.

To complete this appealing scenario, the island boasts an excellent healthcare system, a wide choice of international schools and a constantly growing foreign community, which reinforce the positioning of Malta as a sought-after destination in the global mobility sector.

Residency Options Available in Malta for Non-EU Individuals

Malta offers several residency routes for individuals considering moving to Malta: under the Global Residence Program (GRP), beneficiaries are subject to a 15% tax rate on remitted foreign income, with a minimum annual tax of only €15,000. The Malta Permanent Residence Programme (MPRP) offers non-Maltese individuals the option to acquire residency in an EU country and travel VISA-free within the Schengen area.

Should you wish to discover the details of all residency routes to Maltese residency, please click here.

How can Dixcart assist?

The Dixcart office in Malta has professionals that can assist in providing advice as to which route would be most appropriate for each individual or family.

We can also assist with visits to Malta, applying for the relevant Maltese residence option, assist with property searches for rentals and purchases, and provide a comprehensive range of individual and professional commercial services once relocation has taken place.

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

The UK Autumn Budget 2024: Key Tax Changes and Implications for Non-Doms

Posted on | by James Navarro

On 30 October 2024, Chancellor of the Exchequer, Rachel Reeves, delivered the Autumn Budget, confirming a number of changes originally outlined in the Spring Budget.

As expected, from 6 April 2025, the existing non-dom regime will end and the concept of domicile will be replaced by a system based on tax residence.

Currently, individuals who are UK resident but not domiciled in the UK can benefit from the remittance basis for their first 15 years of UK residence. This means they do not pay UK tax on non-UK income and gains unless remitted to the UK. Under the new system, individuals who opt into the new regime will not pay UK tax on any foreign income and gains arising in their first 4 years of tax residence, provided they have been non-tax resident for the last 10 years.

Who is Eligible for New Regime?

Individuals will qualify for the new regime if they have been non-UK tax resident for at least 10 consecutive tax years, regardless of their domicile status. The new regime will apply for their first 4 tax years of UK residence, so this will apply to returning UK domiciliaries.

Key Announcements

Individuals will not pay tax on foreign income and gains (FIG) arising in the first 4 years after becoming UK tax resident, where a claim is made. They will be able to bring these funds to the UK free from any additional charges and there will be no need to segregate or trace funds during this period. They will continue to pay tax on UK income and gains, as is the case for non-domiciled individuals now.

Individuals who on 6 April 2025 have been tax resident in the UK for less than 4 out of the previous 10 will be able to use the new regime for any tax year of UK residence in the remainder of those 4 years. For example, an individual who became resident in the UK in 2022/23, after a 10 year period of non-residence, will have been resident in the UK for up to 3 tax years on 6 April 2025. They will be able to claim under the new 4 year FIG regime for 2025/26 because this is their fourth year following a period of 10 years non-UK tax residence.

Transitional Provisions

As the new regime will represent a significant change for existing Resident Non-Domiciled individuals, there are a number of transitional arrangements that will be available as follows:

  • Individuals who have previously claimed the remittance basis of taxation and are neither UK domiciled not deemed domiciled by 6 April 2025, will be able to elect to rebase assets held personally to their value at 5 April 2017, so they will only be taxed on capital gains since that date. This is in respect of disposals which take place on or after 6 April 2025.
  • Individuals who have previously been taxed on the remittance basis will be able to elect to remit foreign income and gains that arose before 6 April 2025 to the UK at a reduced rate of 12%. This is a new Temporary Repatriation Facility that will only be available for the tax years 2025/26 and 2026/27, with the rate rising to 15% in the tax year 2027/28. This facility will not apply to foreign income and gains generated within trusts and trust structures.

Taxation of Assets Held in Trust

From 6 April 2025, the protection from taxation on future income and gains that arise within Trust structures (wherever established) will be removed for all current non-domiciled and deemed domiciled individuals who do not qualify for the new 4 year FIG regime.

Under the new regime, for as long as an individual qualifies for the new 4 year regime, they will not pay UK tax on the income and gains of the trust as they arise or on receipt of trust distributions.

Once the individual Is no longer eligible for the new 4 year FIG regime, they will be required to pay UK tax on all profits arising within a Trust structure which they have established.

Inheritance Tax (IHT)

The freeze on inheritance tax thresholds will be extended for a further two years, until 2030. This means that the first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence that has been passed to direct descendants, and £1 million when a tax-free allowance is passed to a surviving spouse or civil partner.

Individuals who have been resident in the UK for 10 of the previous 20 years will be subject to UK inheritance tax on their worldwide assets.

If an individual has been resident in the UK for at least 10 out of the 20 years and then becomes non-resident and does not return to the UK before the chargeable event, there will be provisions to shorten the length of time they are deemed to remain a long-term resident.

  • For those who are resident between 10 and 13 years, they will remain in scope for 3 tax years.
  • This will then increase by one tax year for each additional year of residence. So, if a person was resident for 15 out of 20 tax years on leaving, they would remain in scope for 5 years; if resident for 17 out of 20 tax years on leaving, they would remain in scope for 7 tax years.
  • An individual will not be treated as long-term resident for IHT purposes in the year following 10 consecutive years of non-residence, even if they return to the UK, and the test is effectively reset.

HMRC has said there will be no changes to the IHT treaties or how these operate.

Conclusion

The announcements in the Autumn 2024 Budget represent the biggest change to the way in which non-UK domiciled individuals are taxed in the UK. This is an area which is likely to continue to develop and further details will emerge in the coming months which will hopefully allow individuals time to prepare for the new regime well in advance of its implementation date of 6 April 2025. If you would like to speak to our advisers regarding any of the changes, please contact: advice.uk@dixcart.com.

Understanding Double Taxation Treaties in Portugal: A Technical Guide

Posted on | by Megan Raguro

Portugal has established itself as a prime destination for businesses seeking a strategic base within Europe. One of the key factors contributing to its appeal is its extensive network of Double Taxation Treaties (DTTs). These treaties, which Portugal has signed with over 80 countries, play a crucial role in eliminating or minimising the risk of double taxation on income and profits, thereby fostering cross-border trade and investment.

In this note, we will give a general overview into some of the aspects of Portugal’s double tax treaties, exploring some of its benefits, and how they can be utilised by businesses and individuals.

The Structure of a Double Taxation Treaty (DTT)

A typical Double Taxation Treaty follows the Organisation for Economic Co-operation and Development (OECD) Model Convention, though countries may negotiate specific provisions based on their unique circumstances. Portugal’s DTTs generally adhere to this model, which outlines how income is taxed depending on its type (e.g., dividends, interest, royalties, business profits) and where it is earned.

Some of the key elements of Portugal’s DTTs include:

  • Residence and Source Principles: Portugal’s treaties distinguish between individual tax residents (those who are subject to tax on their worldwide income) and individual non-tax residents (who are taxed only on some of the Portuguese-sourced income). The treaties help clarify which country has taxing rights over specific types of income.
  • Permanent Establishment (PE): The concept of a permanent establishment is central to DTTs. In general, if a business has a significant and ongoing presence in Portugal, it may create a permanent establishment, giving Portugal the right to tax the business’s income attributable to that establishment. DTTs provide detailed guidelines on what constitutes a PE and how profits from the PE are taxed.
  • Elimination of Double Taxation Methods: Portugal’s DTTs typically employ either the exemption method or the credit method to eliminate double taxation in a scenario of a corporation:
    • Exemption Method: Income taxed in the foreign country is exempt from Portuguese tax.
    • Credit Method: Taxes paid in the foreign country are credited against Portuguese tax liability.

Specific Provisions in Portugal’s Double Taxation Treaties

1. Dividends, Interest, and Royalties

One of the most significant benefits of DTTs for companies is the reduction in withholding tax rates on dividends, interest, and royalties paid to residents of the treaty partner country. Without a DTT, these payments might be subject to high withholding taxes in the source country.

  • Dividends: Portugal generally imposes a 28% withholding tax on dividends paid to individuals who are non-resident in Portugal, but under many of its DTTs, this rate is reduced. For example, the withholding tax rate on dividends paid to individual shareholders in treaty countries can be as low as 5% to 15%, depending on the stake in the paying company. Under specific conditions, shareholders may be exempt from withholding tax.
  • Interest: Portugal’s domestic withholding tax rate on interest paid to non-residents is also 28%. However, under a DTT, this rate can be significantly reduced, often to 10% or even 5% in some cases.
  • Royalties: Royalties paid to foreign entities are typically subject to a 28% withholding tax, but this can be reduced to as low as 5% to 15% under certain treaties.

Each treaty will specify the applicable rates, and businesses and individuals should review the provisions of the relevant treaty to understand the exact reductions available.

2. Business Profits and Permanent Establishment

A crucial aspect of DTTs is determining how and where business profits are taxed. Under Portugal’s treaties, business profits are generally only taxable in the country where the business is based, unless the company operates through a permanent establishment in the other country.

A permanent establishment can take various forms, such as:

  • A place of management,
  • A branch,
  • An office,
  • A factory or workshop,
  • A construction site lasting more than a specified period (typically 6-12 months, depending on the treaty).

Once a permanent establishment is deemed to exist, Portugal gains the right to tax the profits attributable to that establishment. However, the treaty ensures that only the profits directly related to the permanent establishment are taxed, while the rest of the company’s global income remains taxed in its home country.

3. Capital Gains

Capital gains are another area covered by Portugal’s Double Tax Treaties. Under most DTTs, capital gains derived from the sale of immovable property (such as real estate) are taxed in the country where the property is located. Gains from the sale of shares in real estate-rich companies may also be taxed in the country where the property is situated.

For gains on the sale of other types of assets, such as shares in non-real estate companies or movable assets, the treaties often assign taxation rights to the country where the seller is resident, though exceptions can exist depending on the specific treaty.

4. Income from Employment

Portugal’s treaties follow the OECD model in determining how employment income is taxed. Generally, the income of a resident of one country who is employed in another country is taxable only in the country of residence, provided:

  • The individual is present in the other country for less than 183 days in a 12-month period.
  • The employer is not a resident of the other country.
  • The remuneration is not paid by a permanent establishment in the other country.

If these conditions are not met, the employment income may be taxed in the country where the company is based. This provision is particularly relevant for expatriates working in Portugal or Portuguese employees working abroad.

In these situations, the foreign company will have to request a Portuguese tax number to fulfil with its tax obligations in Portugal.

How Double Tax Treaties Eliminate Double Taxation

As mentioned earlier, Portugal uses two primary methods to eliminate double taxation: the exemption method and the credit method.

  • Exemption Method: Under this method, foreign-sourced income may be exempt from tax in Portugal. For instance, if a Portuguese resident earns income from a country with which Portugal has a DTT and under internal Portuguese tax rules the exemption method may be applied, and that income may not be taxed in Portugal at all.
  • Credit Method: In this case, income earned abroad is taxed in Portugal, but the tax paid in the foreign country is credited against the Portuguese tax liability. For example, if a Portuguese resident earns income in the United States and pays tax there, they can deduct the amount of U.S. tax paid from their Portuguese tax liability on that income.

Key Countries with Double Tax Treaties with Portugal

Some of Portugal’s most significant Double Taxation Treaties include those with:

  • United States: Reduced withholding taxes on dividends (15%), interest (10%), and royalties (10%). Employment income and business profits are taxed based on the presence of a permanent establishment.
  • United Kingdom: Similar reductions in withholding taxes and clear guidelines for the taxation of pensions, employment income, and capital gains.
  • Brazil: As a major trading partner, this treaty reduces tax barriers for cross-border investments, with special provisions for dividends and interest payments.
  • China: Facilitates trade between the two countries by reducing withholding tax rates and providing clear rules for taxation of business profits and investment income.

How Can Dixcart Portugal Can Assist?

At Dixcart Portugal we have a wealth of experience in helping businesses and individuals optimise their tax structures using Portugal’s Double Tax Treaties. We offer specialised advice on how to minimise tax liabilities, ensure compliance with treaty provisions, and navigate complex international tax scenarios.

Our services include:

  • Assessing the availability of reduced withholding taxes on cross-border payments.
  • Advising on the establishment of permanent establishments and the related tax implications.
  • Structuring business activities to take full advantage of treaty benefits.
  • Providing support with tax filings and documentation to claim treaty benefits.

Conclusion

Portugal’s network of Double Taxation Treaties offer significant opportunities for businesses and individuals engaged in cross-border operations. By understanding the technical details of these treaties and how they apply to specific situations, companies can greatly reduce their tax liabilities and enhance their overall profitability.

At Dixcart Portugal, we are experts in leveraging these treaties to benefit our clients. If you are looking to start a business in Portugal or need expert advice on international tax strategies, we provide the support you need to simplify the process and position your business for success.  Please contact Dixcart Portugal for more information advice.portugal@dixcart.com.

uk non-dom

UK Non-Dom Update History: Tracking Changes and Insights

Posted on | by Charlotte McGonigle

Welcome to our UK non-dom Update History Page. As the landscape of UK tax policies evolves, we are committed to providing you with the most current and factual information to aid your decision-making process regarding relocation abroad. This page archives all our past updates on the UK Spring Budget proposals and related developments. Stay informed and explore our update history to track the progression of changes that could affect you.

To explore key considerations for UK non-dom individuals considering moving abroad, visit our dedicated page.

30th July 2024

8th July 2024

13th June 2024

The Labour Party has launched its election manifesto, which includes several pledges that could impact non-doms. Key proposals include:

1. Abolishing non-dom status: This will be replaced with a modern scheme for people genuinely in the country for a short period. No further details are provided in the manifesto, but it is expected to resemble Conservative policies announced in the Spring Budget. We understand that under Labour’s proposals, the 50% reduction to tax on foreign income for 2025-26 would not be available.

2. Ending the use of offshore trusts to avoid inheritance tax: This was not part of the Conservative policies announced in the Spring Budget and would likely also impact deemed domiciled taxpayers who have already created protected settlements, which would otherwise avoid UK taxation.

3. Aligning the taxation of carried interest: This would be adjusted so it is subject to income tax rates instead of the lower capital gains tax rates.

4. Introducing an additional 1% SDLT charge on non-residents buying UK property.

7th June 2024

As of 7th June 2024, no definitive changes have been enacted. The UK Spring Budget proposals are still under review and, given the forthcoming General Election, the current tax policies remain in place for the foreseeable future.  However, individuals considering a move away from the UK would be well placed to start considering their options.