What Are The Tax Benefits Available in Portugal For Digital Nomads and Other Individuals Moving There?

The Rise of Digital Nomads

Following on from the restrictions caused by the pandemic and the significant increase of people no longer working in an office, or place of work, a number of individuals have realised that they can work from ‘anywhere’. Portugal offers a temporary residence visa that can be used by freelancers and entrepreneurs, which digital nomads can take advantage of.

Digital Nomad Village in Madeira, Portugal

The local government in Madeira has launched the ‘Madeira Digital Nomads’ project, to attract foreign professionals to the island. Those taking advantage of this initiative can live in the nomad village in Ponta do Sol, in villas or hotel accommodation and enjoy free; wi-fi, coworking stations, and specific events.

The Attractions of Portugal – to a Wide Audience

Portugal is an attractive and popular location – not only for digital nomads to move to – but for a large variety of individuals, in many different circumstances.

Not only is it a beautiful country, offering an attractive lifestyle, but it also offers the popular Golden Visa (GV), and the Non Habitual Residents (NHR) programme, which can be combined, and offer a route for individuals to move to Portugal and to enjoy tax advantages once they re-locate here.

The GV is less important for EU citizens, as they already have a right to live in Portugal without formal immigration or investment being required.

  • NHR has proved to be a major motivator for both EU and non-EU citizens.

Key Advantages of Portugal NHR status:

Portugal is a full member of the EU and therefore legal residents can travel freely and visa-free throughout the EU under Schengen.

NHR status lasts for ten years.

Tax efficiencies in relation to NHR status include:

  • It is possible, with careful structuring, for NHRs to not be taxed on income, other than Portuguese-source income, for the ten year NHR designated term.
  • Recent amendments now include a tax of 10% on pension income, which remains considerably less than the standard Portuguese tax on pensions.
  • 20% flat rate for certain Portuguese source income (from specific professions and from self-employment), as opposed to standard Portuguese income tax rates of up to 48%.

Criteria to Meet NHR Status

The following criteria must be met:

  • The right to reside in Portugal, either by being an EU/EEA/Swiss citizen, or through schemes such as the Golden Visa programme.
  • Must not have been resident in Portugal within the last five Portuguese tax years.
  • Must not have been a Portuguese tax resident in the five years prior to taking up residence in Portugal.
  • The individual must have a place to live in Portugal, this could be the rental of a modest apartment.
  • To apply for NHR, a fiscal representative, such as Dixcart, needs to be appointed in Portugal.

Additional Information

If you require additional information regarding moving to Portugal, please contact Catarina Sardinha in the Dixcart office in Portugal: advice.portugal@dixcart.com.

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Malta Funds – What Are The Benefits?

Background

Malta has long been an established choice for fund managers seeking to set-up in a reputable EU jurisdiction whilst being cost-effective.

What Type of Funds Does Malta Offer?

Since Malta became an EU member in 2004, it has incorporated a number of EU fund regimes, most notably; the ‘Alternative Investment Fund (AIF)’, the ‘Undertakings for the Collective Investment in Transferable Securities (UCITS)’ regime, and the ‘Professional Investor Fund (PIF)’.

In 2016 Malta also introduced a ‘Notified Alternative Investment Fund (NAIF)’, within ten business days of completed notification documentation being filed, the Malta Financial Services Authority (MFSA), will include the NAIF on its online list of notified AIFs of good standing. Such a fund remains fully EU compliant and also benefits from EU passporting rights.

EU Collective Investment Schemes

A series of European Union Directives allow collective investment schemes to operate freely throughout the EU, on the basis of a single authorisation from one member state

Characteristics of these EU regulated funds include:

  • A framework for cross-border mergers between all types of EU regulated funds, allowed and recognised by each member state.
  • Cross-border master-feeder structures.
  • Management company passport, which allows an EU regulated fund established in one EU member state to be managed by a management company in another member state.

Dixcart Malta Fund Licence

The Dixcart office in Malta holds a fund licence and can therefore provide a comprehensive range of services including; fund administration, accounting and shareholder reporting, corporate secretarial services, shareholder services and valuations.

The Benefits of Establishing a Fund in Malta

A key benefit of using Malta as a jurisdiction for the establishment of a fund is the cost savings. The fees for establishing a fund in Malta and for fund administration services are considerably lower than in many other jurisdictions. 

The advantages offered by Malta include: 

  • An EU Member State since 2004
  • A highly reputable financial services centre, Malta was placed among the top three financial centres in the Global Financial Centres Index
  • Single regulator for Banking, Securities and Insurance – highly accessible and robust
  • Regulated quality global service providers in all areas
  • Qualified professionals
  • Lower operational costs than other European jurisdictions
  • Quick and simple set-up processes
  • Flexible investment structures (SICAV’s, trusts, partnerships etc.)
  • Multilingual and professional work-force – an English-speaking country with professionals usually speaking four languages
  • Fund listing on the Malta Stock Exchange
  • Possibility of creation of umbrella funds
  • Re-domiciliation regulations are in place
  • Possibility of using foreign fund managers and custodians
  • The most competitive tax structure within the EU, yet fully OECD compliant
  • An excellent network of double taxation agreements
  • Part of the Eurozone

What are the Tax Advantages of Establishing a Fund in Malta?

Malta has a favourable tax regime and a comprehensive Double Tax Treaty network.  English is the official business language, and all laws and regulations are published in English.

Funds in Malta enjoy a number of specific tax advantages, including:

  • No stamp duty on the issue or transfer of shares.
  • No tax on the net asset value of the scheme.
  • No withholding tax on dividends paid to non-residents.
  • No taxation on capital gains on the sale of shares or units by non-residents.
  • No taxation on capital gains on the sale of shares or units by residents provided such shares/units are listed on the Malta Stock Exchange.
  • Non prescribed funds enjoy an important exemption, which applies to the income and gains of the fund.

Summary

Maltese funds are popular due to their flexibility and the tax efficient features that they offer. Typical UCITS funds include equity funds, bond funds, money market funds and absolute return funds.

Additional Information

If you require any further information regarding establishing a fund in Malta, please speak to your usual Dixcart contact or to Jonathan Vassallo at the Dixcart office in Malta: advice.malta@dixcart.com

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Isle of Man

An Introduction to Isle of Man Foundations for Offshore Planning (1 of 3)

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

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

This is the first in a three part series we have produced on Foundations, building up to a webinar hosted by experts who can help you to meet your clients’ needs. In this introductory article, we will discuss the rudimentary aspects of Foundations, to aid or refresh your understanding:

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

What is an Isle of Man Foundation?

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

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

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

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

Foundation vs Trust vs Limited Company

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

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

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

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

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

What is an Isle of Man Foundation used for?

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

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

Supporting the Establishment and Administration of Foundations

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

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

Get in touch

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

Alternatively, you can connect with Steve on LinkedIn

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

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Low Tax Trading opportunities

Are These The First Moves Towards A Minimum Worldwide Corporate Tax Rate?

Background

There has been discussion for many years regarding potential major changes to the way that international corporation tax is collected.

Reforms have previously been proposed by the EU, the United States and the Organisation for Economic Cooperation and Development (OECD).

So What Has Changed Recently and What is Proposed?

Much has changed during the past eighteen months, but the most significant factor in this debate, is the change in Government in the US and the arrival of Joe Biden as President.

Janet Yellen, the new US Treasury Secretary, is also pivotal to this initiative and has long been a supporter of moves by the OECD to level the international corporate tax playing field.

What is Proposed?

The new President has already announced plans for a big increase in taxes on the ‘offshore earnings’ of US businesses.

The US aim is to effectively stop countries using corporation tax as a competitive tool to attract investment:

  1. The US is proposing to implement a minimum global tax on its companies. A key proposal is a 21% minimum tax rate on global earnings. The US administration also proposes to change the way this tax would be levied, removing a key allowance exempting earnings below a certain threshold, and collecting the tax for each jurisdiction that the company operates in.

Using Ireland as an example, this would currently mean US companies paying a top up of 8.5% in the US, having paid 12.5% corporation tax in Ireland.

There is, however, a long way to go before the details and the new US tax rate are agreed.

  • Momentum is also building regarding the OECD minimum tax plan. The US position, favouring a global minimum rate being agreed by all countries at the OECD, is gaining support from a number of countries including the larger EU countries.

Exactly what level this rate might be set at is open to speculation. Until recently a rate of around 12.5% was considered possible, but with the US now supporting a minimum 21%, there is likely to be much debate.

Eventual agreement might be reached, at OECD level, on a lower rate, for example 15% or 18%, but this is highly speculative. Equally speculative, is the possibility that the US might subsequently be willing to sets its international corporate minimum tax rate at the agreed OECD rate, rather than 21%.

The OECD Digital Tax Sales Plan

Another central pillar of the OECD programme proposes that multinationals pay tax on what they sell through digital channels, in the markets where they sell these services.

This is a change to current rules where profit is declared and tax paid in countries from where the digital sales are managed.

The US has supported a version of this plan which will have a significant impact on US companies. The US administration might well hope that in return, this will help win support from Europe and other countries for its minimum tax rate plan.

Commentary

It is a matter of concern that larger nations are looking to dictate tax policy to smaller nations which use their tax system to compete for inward investment.  Larger nations do however have a legitimate concern with regards to the artificial diversion of profits to low tax centres.

The combined efforts of the OECD and the US  mean that it is likely that they will use their influence to introduce a minimum international corporation tax rate.

Additional Information

Dixcart provides effective solutions for protecting wealth. For more information please contact Laurence Binge:  advice.uk@dixcart.com or your usual Dixcart adviser.

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Multi Jurisdiction

Funds – Thinking Outside The Box

Certainty/Uncertainty

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

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

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

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

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

Ethical Investing and Renewable Energy

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

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

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

Technology: Cloud Computing, Automation and Artificial Intelligence

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

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

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

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

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

Healthcare

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

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

Ongoing Uncertainty – Particularly for Certain Sectors

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

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

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

Digital Transformation of Business Services

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

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

Additional Information

This Article summarises recent influences affecting the Funds sector.

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

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Importance of having a will

Important Factors Which Impact International Company Structures

This Article identifies three important trends that need to be considered by companies operating internationally:

  • Tax structuring and the increasing emphasis on transparency and compliance
  • Global technologies and emerging markets
  • Increasing importance of the flow of information

Each of these has a significant impact on the most appropriate corporate structure to achieve long term goals.  

Tax Structuring: Tax Transparency, Compliance and Social Responsibility

Changes in the law and public opinion in recent years, have made companies recognise that their tax affairs need to be, not only transparent and compliant, but also that they need to be seen to be responsible and to be paying a ‘fair’ amount of tax.

The United Nation’s Sustainable Development Goals (SDGs) were detailed in 2012, and consist of 17 goals that focus on economic growth, social development and environmental protection for countries and their populations. These goals require significant investment and the implementation of effective tax systems to generate the resources needed. Developing countries are being encouraged to reduce tax leakage and to direct tax revenue gains towards those most in need.

International tax cooperation and enhanced exchange of information, under the automatic exchange of information standards developed by the OECD and the G20, are additional measures designed to reduce tax evasion and under reporting of tax revenue.

The move to regulate fiscal behaviour is ongoing. International government organisations and domestic tax authorities have issued rules and legislation to curb tax evasion. For example, BEPS (OECD), ATAD (EU), and a large number of institutions and regulatory bodies are putting measures in place and re-affirming this approach.

Rules on mandatory reporting of certain tax transactions was adopted by the Economic and Financial Accounts Council (ECOFIN) of the European Commission in 2018, and exchange of this information by all member states of the EU, commenced in October 2020. 

The priority for professional advisers, such as Dixcart, continues to be to  help minimise a company’s tax cost whilst at the same time ensuring full compliance with laws and regulations relating to the company’s tax affairs.

Global Technologies and Emerging Markets

Innovation has become increasingly global due to the rate and variety of technological advances. Globalisation has led to  tasks that were performed at a single location within one country, being spread across different locations and countries.

The advantages include; carrying out the work where the best expertise exists, lower costs, and potentially mitigating risk by using alternative centres for production and/or service provision.

Internationally, China and India are now major sources of global demand, each with distinct consumer needs. In addition, both countries  are becoming sources of talent for developing new products and processes.

On the customer side, many organisations have been making efforts to move faster, and make more decisions locally. Simultaneously there have been opportunities to re-assess functions such as product development and R&D, relocate them, possibly across several countries, and integrate them across the world.

The world today is far more integrated than ever before but the rising friction between China and the US could weaken this. Covid-19 has not helped either.  The pandemic has made countries inward looking, and the demand for self-sufficiency has risen especially with regard to products relevant to health.  Hopefully, this will be a momentary ‘blip’ as the costs of deglobalisation could be high.

Increasing Importance of the Flow of Information

The digital revolution and remote working, which has accelerated significantly in 2020 and 2021 due to Covid-19, mean that organisations need to place great emphasis on the efficient flow of information, and this increases the need to keep employees happy and engaged. Each employee needs to be enabled to think and communicate effectively.

Communication and collaboration are now far more important and increasingly employees are asked for their input and are involved in helping an organisation move forward, in the right direction.

Increased accountability is now expected across the employee spectrum and there is a deeper appreciation that communication and organisational structure is central to a businesses’ success, as well as to its culture and values.

Summary and Additional Information

If you would like to discuss any of the matters raised in this Information Note, or have any other questions, please contact Laurence Binge at: advice@dixcart.com.

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Private Wealth Trends as we Navigate Towards the New Normal

Background

As we start 2021, the Covid-19 pandemic remains prevalent across most of the world. Measures are starting to be put in place, in particular the introduction of vaccination programmes, that will hopefully bring the pandemic under control.

Behaviours and lifestyles have had to be dramatically altered. This has impacted on private wealth management, as much as almost every other sector of our lives. Some of these changes are likely to remain with us post pandemic. 

What are the New Wealth Management Trends?

  • Modified Perception: What is Wealth?

We are witnessing a re-assessment of key priorities.

The importance of family and health have been elevated significantly as have self-fulfilment and happiness. Financial gain naturally remains an important goal for wealth management but this is being balanced against priorities, many of which have been elevated to much greater importance during the past year.   

  • Increased Importance of Business Continuity for Family Wealth Management Planning

Contingency plans for business continuity and wealth management now need to take into account widespread country and regional lockdowns and quarantines, travel disruptions, and significant general disruption to businesses and communities.

Continuity plans need to be assessed and strengthened, where necessary, to build  capabilities now and in anticipation of recovery. These plans and contingencies need to be communicated to key internal and external stakeholders to enhance trust and transparency, and to help mitigate against potential  damage to the preservation of family wealth in the future.

  • Investor Preference for Lower Cost and More Passive Strategies

In general, there has been movement towards less risky and more ‘steady’ investment strategies. In a time of crisis, upheaval and volatility this is to be expected.

  • Client Preference for Less Risk and Additional Planning for the Future

Clients generally have a reduced risk appetite.

Covid-19 has also emphasised people’s mortality and there has been an increased  emphasis on succession planning and the sharing or moving on of responsibilities to the next generation.

As part of this process, clients have been drafting wills and/or reviewing and amending current wills.

  • Increasing Moves Towards Holistic Financial Planning and Philanthropy as a Key Objective

Dixcart has long believed in the advantages of holistic financial planning, by assisting with the management of our clients’ assets as a whole. Increasingly this is being recognised as the most effective way for the future, with a trusted adviser knowing the family members and appreciating and understanding their goals and the nuances of their specific wealth management plan.

In the post-pandemic world it is likely that there may be an increased desire by individuals to spread wealth to those less fortunate than others.

Philanthropy is increasingly becoming an objective for private wealth clients. Individuals can give directly to charity (‘chequebook philanthropy’) or more formal structures can be put in place, to provide an organised platform for giving, as well as offering important tax-planning benefits. It is important that this topic area is discussed with clients and accurately reflected in any wealth management plan.

  • Interaction with Clients Digitally – Rather than Face to Face

In many cases the only way to ‘meet’ the majority of clients has been on-line. This requires a different approach and discipline and an investment in appropriate and secure technology by professionals working with wealthy individuals and family offices, to retain relationships and maintain required support levels.

Whilst previously the older generation had, at times, been reluctant to adopt new technology, Covid-19 has provided a real incentive to embrace change. The inter-generational divide, in terms of technology use, is generally not as great as it was pre-pandemic.

Key business workflows are being ‘digitialised’ to accommodate changes in both client behaviour and employees working remotely. This trend is likely to evolve further and lead to the use of more interactive planning and performance reporting tools, initially in a virtual setting and, in the future, for in-person meetings.

With the increasing reliance on technology, the importance of cyber-security has been elevated to a much higher level. The training of family members and of staff to identify potential breaches, is becoming even more critical.

  • Collaboration Software is Changing the Way People Work

This trend is evident across a number of sectors, including private wealth.  

Wealthy families, as well as the professionals providing wealth management services, have needed to develop new methods of sharing resources across; families, teams and markets.

The new imperative is to provide access to expertise through a variety of different means, other than solely through geographic proximity and physical interaction.

The use of ‘secure team software’ is likely to continue. This applies to wealthy families with individuals located in a number of counties/locations as much as to Family Offices and private wealth managers.

Summary and Additional Information

As we slowly emerge from the recent upheaval and we move to the next ‘normal’, as in the past, the success of wealth management will depend on the ability of professional advisers to listen to clients and adapt to their changing needs. Wealth management specialists will also need to ensure that they are digitally intelligent, in terms of embracing revised means of keeping in touch with contacts and adopting more flexible wealth management operational systems.

  • Dixcart is well placed to meet these challenges. Getting to know our clients and really understanding their objectives, has consistently been our key priority. In addition, we embrace new technology and have our own IT department. The IT team works on projects across the Group, and has helped ensure that we have solutions in place, to communicate with each client in a meaningful manner, and in a way that is most appropriate to them.

If you would like to discuss any of the matters raised in this Information Note, or have any other questions, please contact John Nelson or Steve Doyle at: advice@dixcart.com.

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Trusts and Foundations: A Q&A

A Changing World

Particularly, in light of the recent Covid-19 pandemic, many individuals are considering how they can best protect their family health and their family wealth, across future generations.

Many have already set up family offices and use Trusts and/or Foundations as wealth preservation vehicles within these.

This Article is intended for those considering taking such steps.

Dixcart has offer 45 year of experience in helping establish Trust and Foundation vehicles and providing Trustee services. We are licensed to offer these services across the six jurisdictions of; Cyprus, Guernsey, Isle of Man, Malta, Saint Kitts & Nevis and Switzerland.

What will be most appropriate, depends on your circumstances and we strongly advice that you take professional advice: advice@dixcart.com.

Questions and Answers

What is the History in Relation to each Vehicle?

Trusts have been used in common law countries for many hundreds of years, for a variety of reasons. With the development of international business, international tax and estate planners were quick to realise the benefits of using offshore trusts in mitigating tax liabilities and assisting in the flow of family wealth through the generations.

Historically, clients from civil law countries have been more familiar with the concept of the Foundation. However, now they are becoming increasingly aware of the benefits of Trusts, and it is the same in terms of common law countries and Foundations.  

How Can a Trust or Foundation Help Preserve Wealth Across Future Generations?

It is a legal arrangement where the ownership of the ‘Settlor’s’ assets (such as property, shares or cash) is transferred to the ‘Trustee’ (usually a small group of people or a trust company) to manage and use to benefit the ‘Beneficiaries’, a third person, or group of people, under the terms of a Trust Deed.

A Foundation creates a separate legal entity with its own legal personality, distinct from the ‘Founder(s)’, who transfers assets into the Foundation, the ‘Council’ manage the Foundation and the ‘Beneficiaries’, benefit from it.

Charitable foundations are the most common and the majority are set up to exist in perpetuity. This means that control over the foundation and its assets can be passed to countless generations of the family.

Are Trusts and Foundations ‘Private’?

In most jurisdictions, no requirements currently exist to register a Trust or for any document or information in connection with the Trust to be placed in the public domain, and the arrangement may therefore be kept completely private.

Limited information in relation to Foundations will be publicly available, but there is currently no requirement that the identity of the Founder, Beneficiaries or purposes of a Foundation should be made publicly available.

Trusts and Foundations can, therefore, both be private arrangements under current rules.

What are the Key Differences Between a Trust and a Foundation?

A number of the key differences are outlined below:

  • A Trust is not a legal entity; a Foundation is a registered legal entity.
  • The ownership of the assets in a trust rests with the Trustee whilst the Foundation owns the property concerned directly.
  • by its Charter and Articles or regulations.
  • Potentially, a Foundation provides more certainty than a Trust and it is less likely to be treated as a potential ‘sham’, particularly in civil law jurisdictions.
  • information and they generally do not have any equitable or other forms of ownership of foundation assets.
  • Trusts are intrinsically more flexible than Foundations.
  • A Trust can be used for commercial purposes but Foundations, except under limited circumstances, cannot be so used.

What are the main Reasons for having a Trust or a Foundation, in addition to Wealth Preservation?

In addition to the preservation of wealth, selected distribution of assets and favourable tax treatment, Trusts and Foundations are used to achieve the following:

  • Circumvention of forced heirship laws
  • Asset protection
  • Confidentiality
  • Continuity on death
  • Philanthropy

Dixcart Offices Regulated to Provide Private Client Services:

Dixcart has six offices with extensive expertise in providing Private Client Services, including the provision of Trusts and Foundations:

  • Cyprus: Dixcart Management (Cyprus) Limited is regulated and holds a full fiduciary licence under the Cyprus Securities and Exchange Commission.

Email: advice.cyprus@dixcart.com.

  • Guernsey: Dixcart Trust Corporation Limited is regulated and holds a full fiduciary licence under the Guernsey Financial Services Commission. Dixcart Trust Corporation Limited is a member of the Guernsey Association of Trustees. Email: advice.guernsey@dixcart.com.
  • Isle of Man: Dixcart Management (IOM) Limited holds a full fiduciary licence and is regulated by the Isle of Man Financial Services Authority. Dixcart Management (IOM) Limited is a member of the Association of Corporate Service Providers.

Email: advice.iom@dixcart.com.

  • Malta: Elise Trustees Limited Dixcart House is regulated and holds a full fiduciary licence under the Malta Financial Services Authority.

Email: advice.malta@dixcart.com.

  • Nevis: Dixcart Management Nevis Limited is regulated and holds a full fiduciary licence under the Financial Services Regulatory Commission.

Email: advice.nevis@dixcart.com.

  • Switzerland: Dixcart Trustees (Switzerland) SA is a certified member of Swiss Association of Trust Companies (SATC). Dixcart Trustees (Switzerland) SA is affiliated to “Association Romande des Intermédiaires Financiers (ARIF)” a Swiss self-regulatory organization (SRO) officially recognised by Swiss Federal Financial Market Supervisory Authority (FINMA).

Email: advice@switzerland.com.

Summary and Further Information

Trusts and Foundations can be used to achieve many objectives. The choice of jurisdiction for a Trust and/or Foundation is important and is generally governed by the specific circumstances of each family/family office.

If you would like additional information, please speak to your usual Dixcart contact,  one of the Dixcart offices above, or email: advice@dixcart.com.

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The Benefits of Appointing a Non-Executive Director (NED)

What is a ‘NED’?

Non-Executive Directors (NEDs) can play an important role within a business. They sit on the board of a company but are not part of the executive team and can therefore bring an impartial view without the conflict of having to manage the day to day operations of the company.

NEDs can monitor the executive directors, become involved in strategic policy making and, of course, act in the interest of the company’s shareholders.

What are the Benefits of Having a NED on the Board?

  • Add an impartial view to the day to day running of the business.
  • Help ensure that the Executive Directors are operating as efficiently as possible.
  • Contribute to the strategic plan of the company.
  • Monitor the performance of the company and offer constructive ideas and solutions, if required.
  • Act in the best interest of the shareholders.
  • Add additional experience and credibility to the company board.
  • Expand the intellectual and strategic resources of the company.

What Type of Person Acts as a NED?

A Non-Executive Director is typically chosen based on their experience, reputation and understanding of the business. This individual is likely to be professionally qualified, with a strong background in corporate governance and risk. They have usually worked at a ‘C-suite’ level in at least one other previous company.

Other Legal and Regulatory Aspects to Consider

All directors, including NEDs have legal responsibilities to conduct their duties in an appropriate manner and they need to have an understanding of the requirements of the jurisdiction that they work in, as well as a reasonable knowledge of the other jurisdictions in which the company operates. If these individuals do not comply with their duties, they may be liable to civil and/or criminal proceedings and may be disqualified from acting as a director.

A NED must act in good faith and in the best interest of the company and they must not delegate their overall responsibility. Any potential conflict of interest should be fully and properly disclosed to, and approved by, the company to ensure that no conflict exists in relation to the company’s constitution.

Summary

A Non-Executive Director on the board of a company can offer a number of positive benefits. Care should always be taken to ensure that such an individual is appropriate and has the necessary experience and skill set to join the board in this capacity. The appointment of the ‘right’ NED can bring a plethora of additional attributes to the company.

Dixcart have a number of senior managers who have extensive experience acting as NEDs, across a wide variety of industry sectors.

Additional Information

If you require further information regarding Non-Executive Directors, please speak to your usual Dixcart contact or email: advice@dixcart.com.

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