Category: Corporate Services

Types of Partnership in Malta

A Malta Partnership offers an alternative way in which to set up a business in Malta. The Maltese jurisdiction allows two types of partnership: Partnership ‘En Nom Collectif’ (General Partnership) and Partnership ‘En Commandite’ (Limited Partnership). Regulation of these two partnerships is detailed in the Malta Companies Act.

Once the partnership is created, it has to be registered with the Malta Business Registry (MBR) and, if it is a Partnership En Commandite, the name of the partnership has to include “Limited Partnership (or LP)”.

The difference between a General and a Limited Partnership is the liability of the partners. While general partners have an unlimited liability, limited partner liability depends on how much each partner has contributed to the partnership. Nevertheless, any person who calls him/herself general partner, will have unlimited, joint and several liability with all other general partners, for the obligations established in the LP.

General Partnership (En Nom Collectif)

The Maltese law defines a General Partnership as a group of partners who act together, which is one of the most common structures. Individuals involved in this kind of partnership have collective and personal unlimited liability. This means, the Partnership En Nom Collectif can hold and/or own a property and can also be sued or sue in its own name. The main difference, in comparison to a company, is that when a partner is insolvent, retires or dies his interest in the partnership is liquidated.

Partners who receive income from the General Partnership must declare this income in their personal tax returns. The tax rate applicable will therefore depend on the individual’s personal tax rate. A partnership must have at least two partners that sign the Partnership Deed, which must then be sent to the Malta Business Registry, before the Certificate of Partnership is issued.

A General Partnership registered in Malta must have an office in Malta.

The Deed of Partnership must state; the name and address of each of the partners, the partnership name, details of the registered office in Malta, the objects of the partnership, the contribution of each of the partners, specifying the value of the respective contribution of each partner, and the period (if any) fixed for the duration of the partnership.

Limited Partnership (LP, En Commandite)

LPs have a legal personality separate to their partners and this responsibility lasts until the LP is dissolved. This means that LP’s have rights and obligations, they can hold or own property and they can sue or may be sued in their own name.

Taxation of LPs is the same as for companies, resulting in a potential effective tax rate of 5% on trading income and a potential effective tax rate of 10% on passive income, for non-Maltese resident shareholders.

The partners of an LP may either be general or limited partners. Partners are defined as “any person or body corporate”. General partners will manage the LP and be responsible for the debts, without limitation. Limited partners are not responsible for managing the LP, or for the debts of the LP. Decisions are made by the general partners, by simple majority.

In order to create an LP, three documents are needed: A ‘Partnership Deed’ signed by the initial partners, a ‘Partnership Registration Document’ delivered to the Malta Business Registry (MBR), and a ‘Certificate of Registration’, issued by the MBR.

The Partnership Deed must include; the names and addresses of the general partners, the name of the partnership, details of the registered office in Malta, the business objects, whether the capital is divided into shares or not, the period of the duration of the LP, a declaration that the Partnership Deed has been entered into and signed, and a specification of who the general partners are and who the limited partners are.

Limited Partnerships and Different Structures

An LP can be one of a number of different structures:

• Limited Partnership with Variable Share Capital. This kind of partnership must include “with Variable Share Capital (or VC)” in its name, in addition to “Limited Partnership (or LP)”. Unique features of this type of partnership, include; it cannot issue partly paid-up shares, and it may purchase or redeem its own shares directly or indirectly from its assets, as long as this is permitted in the Partnership Deed.
• Multi-Class Limited Partnership. A Share Capital Limited Partnership can be constituted as Multi-Class, when the capital detailed in the Partnership Deed is divided, or can be divided into different types of shares, class or classes of shares, without creating any sub-funds. The different share classes can be denominated in different currencies, similarly, the annual accounts may be in any one of these currencies.
• Multi-Fund Limited Partnership. A Share Capital Limited Partnership can be constituted as a Multi-Fund, when the capital detailed in the Partnership Deed is divided, or can be divided into different types of shares, creating different sub-funds. Different type of shares in different currencies are permitted in each sub-fund.

Taxation of Partnerships

Generally, a partnership is tax transparent and tax is levied at the partner level.

Malta Partnerships need to be registered for income tax purposes and the partners are required to keep partnership accounts and file a partnership tax return. Partnership income is deemed to be the income of each partner. The tax rate levied on each partner is therefore at the rate applicable to them individually, and will  depend on their country of residence and other circumstances.

Additional Information

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

Giriş

Yabancı portföy yatırımları olan Türk hissedarlara, özellikle de bu yatırımlarını İsviçre’de tutanlara, bu yatırımların mülkiyetini bir İsviçre şirketinde tutma seçeneğini değerlendirmelerini öneriyoruz.

Başlıca avantajları nelerdir?

a) İsviçre’de kâr %11,9 ila %14 aralığında vergilendirilir; Türkiye’de ise %25’lik bir kurumlar vergisi veya %40’lık bir bireysel gelir vergisi (marjinal vergi oranı) uygulanır.

b) Genel Raporlama Standardı (CRS) yönetmelikleri gereği Türkiye’ye sağlanması gereken bilgi miktarı azalır.

c) Türkiye ile İsviçre arasında 1 Ocak 2013 tarihinden bu yana yürürlükte olan bir çifte vergi anlaşması vardır.

Türkiye’deki Denetime Tabi Yabancı Şirket (CFC) Mevzuatı ve İsviçre Kurumlar Vergisi

Yukarıda açıklandığı gibi, İsviçre Şirketleri %11,9 ila %14 arası değişen (İsviçre’nin hangi kantonunda bulunduklarına bağlı olarak) kurumlar vergisi oranları ile cazip bir fırsat sunar. Bu da önemli bir avantajdır zira Türkiye’deki CFC kuralları uyarınca yabancı şirketin kurumsal vergisi %10’un üzerinde olduğunda yabancı şubelerin dağıtılmamış geliri ödenememektedir.

Yatırım Yapılan Para Birimindeki Dalgalanmalar

Yatırımlar Türkiye’deki bireysel ve kurumsal vergi mükelleflerinin mülkiyetinde olduğunda, Türk Lirasının büyük para birimleri karşısında dalgalanması vergiye tabi döviz kazançlarını tetikleyebilir. Türkiye’de, yatırım yapılan para birimindeki dalgalanmalar, reel bir kazanç sağlamasa bile vergilendirilir. İsviçre şirketleri ise reel bir kazanç elde etmedikçe yatırım yaptıkları para birimindeki dalgalanmalardan ötürü vergi ödemez.

İsviçre’de özkaynaklar satılmadıkları ve reel bir kâr sağlamadıkları müddetçe mali tablolara satın alma bedeliyle kaydedilir. 

Stopaj Vergisi

İsviçre şirketi bir Türk hissedara kâr payı dağıtırsa, bireysel hissedarlara %15, kurumsal hissedarlara ise %5 oranında stopaj vergisi uygulanır.

Türkiye’de gelir vergisine karşılık bir vergi indirimi imkanı sunulur.

Bilgi Alışverişi – İsviçre’deki Portföy Yatırımları

İsviçre ile Türkiye arasında bilgi alışverişi mevzuatı Ocak 2021’de yürürlüğe girmiştir ve 1 Ocak – 31 Aralık 2021 rapor dönemini kapsayan ilk veri alışverişi 2022’de gerçekleşecektir.

Alınıp verilecek bilgiler, İsviçre şirketinin Genel Raporlama Standardı (CRS) sınıfına göre değişecektir. İsviçre Şirketi tarafından sağlanan hizmetlere ve şirketin İsviçre’deki faaliyetlerine bağlı olarak, bu şirketler ve intifa hakkı sahipleri, CRS kuralları kapsamında nispeten şeffaf olarak kabul edilir. 

Daha Fazla Bilgi

Türk vatandaşlarının ve / veya şirketlerinin portföy yatırımlarını bir İsviçre şirketinde tutmaları hakkında daha fazla bilgi edinmek isterseniz, lütfen İsviçre’deki Dixcart ofisinden Christine Breitler veya Thierry Groppi ile iletişime geçin:  advice.switzerland@dixcart.com

Background

Many international organizations, such as the OECD, European Council and European Commission, are driving changes as to how businesses operate, with a focus on substance.  The international arena is changing, and with the implementation of Base Erosion and Profit Shifting legislation (BEPS) measures, it is becoming increasingly important to demonstrate real substance and genuine activity. Emphasis is placed on the requirement for an operation to have substance in the country or countries where activities are carried out.

Within international tax planning, substance has become an important consideration when setting up a new corporate structure and/or when restructuring an existing corporate structure.

Substance Considerations in Malta

There are no specific economic substance rules in Malta, but there are a number of recommendations that you should consider when setting up a company, to ensure that the company will remain tax resident in Malta.

• Members of the board of directors – a minimum 50% of the board members should be Maltese resident;
• The decisions of the board of directors should be taken in Malta and the minutes recorded locally through regular board meetings;
• Creation of economic substance in Malta, by renting an office and employing personnel.

Factors that Assist in Establishing Substance in Malta

There are a number of factors that assist companies to meet the recommended substance requirements in Malta:

• There is a large, well-educated pool of English speaking individuals available for employment. In recent years, in particular, there has also been an increase in affordable flexible working spaces.
• Malta’s geographical location makes it an ideal jurisdiction, as a base to travel to Europe and further afield.
• There are several financial assistance packages available to companies that set-up ‘real’ operations in Malta. A number of benefits relate to tax credits whilst other programmes reimburse successful applicants with up to 40% of their capital expenditure.

Benefits Available to Tax Resident Maltese Companies

Companies that are tax resident in Malta benefit from Malta’s full imputation system of taxation that allows generous unilateral relief and tax refunds.

• Companies operating in Malta are subject to a corporate tax rate of 35%.  However, non-Maltese resident shareholders enjoy low effective rates of Maltese tax, as Malta’s full imputation system of taxation allows generous unilateral relief and tax refunds:

• Active income – in most instances shareholders can apply for a tax refund of 6/7ths of the tax paid by the company on the active profits used to pay a dividend. This results in an effective Maltese tax rate of 5% on active income.
• Passive income – in the case of passive interest and royalties, shareholders can apply for a tax refund of 5/7ths of the tax paid by the company on the passive income used to pay a dividend. This results in an effective Maltese tax rate of 10% on passive income.

• Holding companies – the dividends and capital gains derived from participating holdings are not subject to corporate tax in Malta.
• There is no withholding tax payable on dividends.
• Advance tax rulings can be obtained.

Summary

Meeting the substance requirements increases costs for a company, but the potential risk of being challenged by the tax authorities, for a lack of substance, would definitely be far more costly and onerous, for the company to deal with.

How Can Dixcart  Help and the Dixcart Business Centre in Malta

Dixcart Management Malta Limited provides a comprehensive range of incorporation, secretarial and management services for companies registered in Malta, including companies and international companies that are managed through the Dixcart Malta office. 

Dixcart Malta has a Business Centre within our office building, and this Business Centre offers serviced offices and a productive work environment. It can be a cost-effective option for organisations with international interests, wishing to operate from Malta.

The Dixcart Business Centre is located in the prime area of Ta’Xbiex, close to the capital, Valletta. The building is iconic and has been faithfully restored to retain its boat like shape. It incorporates a delightful roof terrace and a unique and memorable bespoke chandelier in the reception area. An entire floor is dedicated to serviced offices. There are nine serviced offices in total, accommodating between one and nine people, there is a kitchen and a boardroom is available for meetings.

Additional Information

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

There are several advantages for using corporate structures, especially those registered in financial hubs such as the Isle of Man.

They can be used to help mitigate taxes, hold luxury assets, hold investment portfolios, or as part of appropriate succession planning (something Covid-19 has been a particular catalyst of).

Isle of Man companies benefit from a 0% standard rate of corporate income tax, 0% stamp duty, 0% capital gains tax and no annual filing of accounts for private companies.  

What can you do with an Isle of Man Corporate Structure?

• Own assets such as ships, aircraft and works of art.
• Hold UK or foreign property.
• Hold investment portfolios and participations in other companies. This is due to the zero rate of tax on such activities and where withholding taxes on dividend income from such companies may not apply.
• Hold intellectual property.
• Act as an employer for international workers.
• Receive international income, commissions, and royalties.
• Be part of business structuring and re-structuring.
• Convert immovable assets, such as land, into movable assets, such as shares.
• Incorporate as part of succession planning and asset protection.
• Incorporate as part of tax planning.
• Isle of Man companies wishing to borrow money from banks benefit from being in a well-regulated jurisdiction with a public register of mortgages and other charges.

Formation of Companies in the Isle of Man

Isle of Man companies can be formed and regulated under two separate Acts: the Isle of Man Companies Act 1931 and the Isle of Man Companies Act 2006. More information can be provided on request.

Dixcart in the Isle of Man can provide full management and control of companies, as well as offering advice regarding the statutory obligations for companies incorporated in the Isle of Man and compliance with substance rules requirements. 

The Isle of Man is home to businesses operating in a wide variety of sectors.  The Manx Government has actively encouraged the financial sector. Consequently, the island is extremely well served by international service providers, fully licensed and regulated banks, and insurance companies.

Dixcart provides a comprehensive incorporation service in the Isle of Man. We initiate the organisation and incorporation of companies in many locations around the world and can provide ongoing management and secretarial services to those companies. Dixcart managed companies are established with a complete corporate organisation. This includes the maintenance of statutory records, preparation and completion of financial statements and full documentation relative to the operation of the company. Dixcart can also assist with serviced office and support facilities for clients requiring a physical presence on the island. 

We have a strong network of contacts within the wider professional and commercial sectors, both on and off the island, and can introduce businesses to relevant individuals where appropriate.

If you require additional information regarding this subject, please contact Paul Harvey in the Isle of Man office: advice.iom@dixcart.com.

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

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 article, or have any other questions, please contact us: advice@dixcart.com.

Background

The Crown Dependencies (Guernsey, Isle of Man and Jersey) introduced economic substance requirements in January 2019. Together with the Channel Islands, the Isle of Man’s tax legislation requires Isle of Man tax resident companies, deriving income from relevant sector activities, to comply with the economic substance test. These requirements are effective for accounting periods commencing on or after the 1^st January 2019. 

Specific ‘relevant activities’ are defined as:

• Banking
• Insurance
• Shipping
• Fund Management (this does not include companies that are Collective Investment Vehicles)
• Financing and Leasing
• Headquarters
• Distribution and service centres
• Pure Equity Holding Company; and
• Intellectual Property (for which there are specific requirements in high risk scenarios).

How has Covid-19 affected Economic Substance?

The outbreak of Covid-19 hs caused issues for companies required to comply with economic substance. Legislation introduced in response to the Coronavirus pandemic, included significant restrictions on the movement of people. This applies not only to international travel with the closure of borders and the suspension of flights and other forms of transport, but also in relation to travel within countries themselves.

These restrictions, compounded with the practice of social distancing, or in some cases isolation, have changed the way corporate meetings have been held all over the world.

The economic substance laws and regulations have remained in place during this time, and it has been important for entities to demonstrate how they are complying with these requirements.

Companies must continue to ensure they are following the regulations as much as possible, and comprehensively record any instances where compliance might not be possible due to travel restrictions and social distancing measures outside their control.

They should maintain relevant records, showing both local regulations and their own internal policies, in respect of restrictions on travel for company officers, and the period of time for which these policies are in place.

This will ensure that companies can demonstrate that COVID-19 restriction measures prevented the company from holding an adequate number of board meetings on the island, or temporarily required meetings to be held virtually, for example; conference calls, video conferencing, Skype or similar. Normal protocols for such meetings should be observed, as far as possible.

Companies should also keep records and document, where possible, all new measures they have made to modify working arrangements, on a case by case basis.

How Can Dixcart Help?

Dixcart proactively encourages clients to demonstrate real economic substance and are ideally positioned to provide advice and assistance in relation to these matters, especially during these unprecedented times.  

We can advise companies on how to document working arrangements, board meetings and virtual meetings, for example conference calls, video conferencing, Skype or similar.

We have established extensive serviced office facilities in the Isle of Man, and we employ senior, professionally qualified staff, to support and direct international functions for our clients. These professionals are competent to take responsibility for different roles, including, as appropriate, finance director, non-executive director, industry specialist, etc. and, if needs be, can act as alternate directors and assist the affected entities with substance issues generally.

Dixcart professionals are also available to provide advice and assistance to businesses on the implications of economic substance and other Isle of Man tax related matters. 

Summary

Dixcart perceive this as an opportunity for clients to demonstrate true tax transparency and legitimacy. These measures also encourage real economic activity and job creation, in the Crown Dependency jurisdictions, moving forward.

Additional Information

Please contact us if you need advice to help you to meet economic substance requirements during this challenging time.

If you require additional information on this topic, please speak to Paul Harvey, who is based at our Dixcart office in the Isle of Man: advice.iom@dixcart.com.

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

Isle of Man Government – Economic Substance

Background

Once it has been decided that the UK is the correct location to establish a business, the next key decision is how this should be structured. One of the most popular structures is a limited company.

Recruiting high quality staff is also a priority and the availability and tax efficient nature of UK share option schemes can help achieve this objective.

Situations Where a Limited Company is Most Appropriate

Limited companies can offer a number of advantages.

They can be of particular benefit where:

• The business is being set-up with other people;
• There is a wish to incentivise staff though share schemes;
• The company will be receiving external funding;
• The company will be claiming Research and Development tax relief (R&D).

Forming a Company in England & Wales

The company formation process is relatively quick and easy.

All you need to start a company is an address within England & Wales for the registered office, at least one shareholder and at least one director (these two may be the same person). There is no minimum initial cash investment and the company can be formed in a matter of hours.

Why Use a Limited Company?

The main benefit of a limited company is the limited liability of the company’s officers and shareholders. This means that unlike the situation of a ‘sole trader’ or ‘partnership’ personal assets are not at risk in the event of a failure of the business.

Other considerations are:

• The company has a legal existence separate from its management and its members (the shareholders).
• The company’s name is protected.
• The company continues despite the death, resignation or bankruptcy of the management and/or members.
• The interests and obligations of management are defined.
• Appointment, retirement or removal of directors is straightforward.
• It is an easy process to gain new shareholders and investors.
• Employees can acquire shares.
• Companies are often perceived as more robust and more business-like than sole traders.
• Companies can provide tax advantages such as lower tax rates, R&D incentives, extraction of profits via dividends, etc.

Recruiting and/or Incentivising Employees Using Share Schemes

Finding the right calibre of staff is vital to the success of a business, wherever it is located.

Employers in the UK often use share schemes to recruit important members of staff and as a way of incentivising employees to work hard and remain with the business for the medium to long term.

There are a number of ways to do this, as detailed below. The most popular is the Enterprise Management Incentive (EMI) share option scheme as it is particularly tax efficient:

Enterprise Management Incentive (EMI)

Eligible companies frequently use an EMI share scheme, because the tax advantages are attractive. The EMI share option scheme is Government approved, tax beneficial and a very flexible way of incentivising staff.

Under the EMI scheme, options are issued over an agreed number of shares. No tax is paid when the option is granted. When the option is exercised, which means converted into shares, there is no tax to pay provided that the agreed exercise price is no lower than the market value of the shares on the day that the option was granted.

When the shares are sold, the capital gain is usually taxed at 10% in situations where ‘Business Asset Disposal Relief’ (previously known as Entrepreneurs Relief) is available.

Growth Share Scheme

Where companies cannot use EMI, a growth share scheme is often used instead. This type of scheme is not appropriate for a start-up, it is only relevant to an established company.

Under this share scheme, on the sale of a company employees benefit only from the growth in the value of the shares, not the historic value built up until the date of the share issue. This is achieved by valuing the company and then issuing shares of a different class, which only benefit from value generated above an agreed threshold.

For example, if the company is worth £10m, a growth share scheme may allow holders to share in the proceeds, only if they exceed £12m. The value of the growth share, on issue, would be low because it would not have the ‘right’ to any of the value built up previously. Income tax charged on acquisition of the shares would consequently be low.

Phantom Share Scheme

A phantom share scheme is essentially a cash bonus scheme.

This arrangement allows an individual to receive a cash payment equal to the value of shares, or the increase in value of shares, above a notional exercise price. No actual shares or share options are issued. The idea is that individuals are incentivised because the level of any payment is linked to an increase in the value of the company’s shares.

Additional Information

If you would like additional information regarding setting up a company in the UK and using a share scheme to recruit or incentivise staff, please speak to Paul Webb or Sarah Gardner at the Dixcart office in the UK: advice.uk@dixcart.com

The Dixcart office in the UK has extensive expertise in forming UK companies, establishing the most appropriate corporate structure and meeting all relevant compliance obligations. Dixcart UK is also experienced in building EMI schemes to meet specific needs and liaising with the UK tax authorities (HMRC), to gain advance approval and for the drafting of relevant share option agreements.

Is there a Real Difference Nowadays?

At first appearance, private clients and institutional clients are like chalk and cheese. As a result, the Fiduciary sector has maintained different approaches to servicing these two sets of clients. However, at Dixcart Group, we feel that this is an oversight and have noticed that private clients and institutional clients have demands and requirements that are much more alike nowadays. This is perhaps because the pressures of transparency, governance, accountability and substance are affecting private and institutional clients in the same way.

Private Client Needs

Outside the normal company and day to day administration, and dependent on whether other advisers are already appointed, there can be a varying degree of involvement by the corporate service provider.  This can range from liaising with family members and advisers and reporting to meet specific individual needs, to advising on operational procedures and providing proactive advice on structures and structural changes.

Family members often want to become board members of the company, underlining the paramount importance of proper governance, decision making and domicile of the company.

Institutional and Corporate Needs

When considering the needs of institutional and corporate groups, there are generally very specific requirements.  This is because these groups usually have advisers (inhouse or external), who will have already specified a required structure’s needs and therefore service requirements.

Service considerations range from adopting consistent, group reporting and consolidation of information requirements and liaising with group functions and auditors around shareholder information and records, to involvement in group procedures and regulations to meet specific group company secretarial procedures and corporate governance requirements.

So, is there a Difference in the Approach to Administration, Secretarial and Compliance Services?

As detailed above, each client type may have differing needs (and often different asset classes), but does this effect what the underlying services are to be provided? 

The answer is, not really, as the underlying services required by each, will effectively be very similar i.e. ensuring that each corporate entity meets its regulatory and legal obligations. This is achieved through the delivery of a complete range of administration services to ensure that substance, tax and other related planning requirements are being met, whether it be a private or institutional client.

Key services include:

• Day to day administration and company secretarial services
• Director services
• Registered office and agent services
• Tax compliance services
• Accountancy services
• Dealing with transactions, including all aspects of acquisitions and disposals

Institutional client services may also include:

• Escrow services
• Securitization services
• Exchange listing services
• Employee Benefit Schemes

In all cases, where a complete suite of services, as detailed above, is provided, this can greatly assist in the setting up of bank accounts, particularly with the banks where a service provider, such as Dixcart, already enjoys a close working relationship.

What are Private Clients Learning from the Institutional Structures?

Private clients can have a vast variety of asset types within their structures, ranging from; routine investment portfolios, real estate and holding companies through to operating companies and alternative assets such as yachts, planes, cars, art and wine.  These differing asset classes often require a variety of corporate structures under a trust or foundation, with the most common and recognised being the use of a limited company i.e. the ‘Trust and Company’ structure.

However, the influence of the corporate world is seeing an increase in the use of such structures as; Private Trust Company (PTC), General Partner and Limited Partnership (GP/LP), Protected Cell Company (PCC), and Private Investment Fund (PIF).  This is because these alternative structures to the Trust and Company’ structure can offer increased flexibility in terms of client involvement and provide elevated levels of corporate governance.

As a result, the industry is seeing an alignment in the structure types now being adopted by private clients to those of Institutional and corporate groups where the traditional Trust/Foundation structure is not providing the required flexibility and corporate governance.

Lessons are also being learnt in the other direction as well.  Institutional and corporate groups and their respective service providers are seeing the benefits of building up the long-term trusted relationship with each other that is typically found with private clients and their service providers.

Conclusion

The private client and institutional worlds do have different needs, but the underlying services and structures required (outside of regulated and listed entities), are now often not that different, as the underlying services need to meet the same regulatory and legal obligations.

There is a trend towards private clients realising that there are advantages in using alternative corporate structures to the traditional trust or foundation structures, where corporate governance, transparency and flexibility of structure is of greater importance.

For institutional and corporate groups along with their respective service providers, they now see the benefits of building up a long-term trusted relationship with each other.

Final Thought – Global Corporate Administration and Company Secretarial Services

Dixcart are experienced in providing company administration, director and company secretarial services in multiple jurisdictions.  Where private clients, family offices, institutions or corporate groups have multi-jurisdictional entities to look after, these services could be consolidated through a single Dixcart office. 

This would have the following advantages:

• provides a single and consistent point of contact
• provides a consistent high level of service and reporting standards
• can be in a time zone that is most convenient to each client team

This can be achieved by working alongside our other Dixcart offices, and in the jurisdictions, we do not have a presence, alongside our network of contacts worldwide.  This global service is to aid family offices and/or corporate secretarial teams, by taking over the burden of dealing with many different service providers, in different time zones working to different corporate governance standards, so your teams can concentrate on running the core business and operations.

Additional Information

The type and complexity of corporate services required by private clients and institutions vary from case to case.  The most important factor for both client groups is to choose a service provider with sufficient experience and professionalism to coordinate a range of services that fully meet corporate governance, efficiency and corporate objectives. 

For further information regarding corporate services, please speak to Steve de Jersey in the Dixcart office in Guernsey: advice.guernsey@dixcart.com.  Alternatively, please speak to your usual Dixcart contact.

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

Guernsey registered company number: 6512.

Guernsey – an International Financial Centre

Guernsey is a premier international financial centre with an enviable reputation and excellent standards. The Island has developed as a base from which internationally mobile individuals can organise their worldwide affairs.

Guernsey is a popular jurisdiction in which to incorporate companies, which are regularly listed on the London Stock Exchange (Main Market and AIM Market), the New York Stock Exchange, The International Stock Exchange (previously the Channel Islands Securities Exchange) and many others.

Guernsey companies can be used for a wide range of transactions, such as investment funds, private equity, structured finance and securitisation.

The Law

The Companies (Guernsey) Law 2008, reflects Guernsey’s commitment to providing a modern statutory base and flexibility for companies using the jurisdiction of Guernsey. The Law also reflects the importance placed on corporate governance.

Types of Guernsey Company

A company may be formed as a standard company or as a cellular company. A cellular company may either be a protected cell company or an incorporated cell company.

The liability of all or any of the members of an incorporated Guernsey company can be:

• limited by shares;
• limited by guarantee;
• unlimited; or
• mixed liability.

Companies formed as one type of company, may convert into a different type of company at a later date.

Tax Status of Guernsey Companies

• Generally, the rate of corporation tax payable by a Guernsey company is 0%.

There are certain limited exceptions when a 10% or 20% rate of tax apply. Please contact the Dixcart office in Guernsey, for further details: advice.guernsey@dixcart.com.

In addition, there are no capital gains taxes, capital transfer taxes, inheritance taxes, gift duties or VAT payable by, or applicable to, a company in Guernsey. No stamp duty is payable in Guernsey on the issue, transfer or redemption of shares.

Guernsey resident companies may be subject to economic substance requirements, depending on their activities. Again, the Dixcart Guernsey office can provide full details.  

Additional Advantages Offered by Guernsey Companies

In addition to the zero tax rate benefit available to the majority of Guernsey companies, they are also popular corporate entities for a number of other reasons, including:

• Single member/director companies are allowed, as well as corporate directors and corporate shareholders.
• Incorporation is very quick (24 hours standard, 2 hours or 15 minutes using the fast-track route).
• ‘State of the art’ companies registry providing a range of full on-line services for incorporation, searches, filing, information management, document requests, dissolutions and changes to company particulars.
• Integration with other entities within wider structures, such as; trusts, foundations, limited partnerships and limited liability partnerships, is relatively easy.
• The Guernsey Company Registry is confidential with limited information available to the general public. Full information on all officers and shareholders is maintained, and is available to the relevant authorities

Additional Factors to Consider Regarding Guernsey

The jurisdiction of Guernsey has extensive experience in administering a wide variety of corporate structures and asset types.

It has a well-respected judicial system, political independence and high standards of compliance and transparency. It offers a pool of experienced professionals with the appropriate legal, accounting and company administration expertise.

Geographically it is close to the UK and to Europe and is in the same time zone as the former. 

New Guernsey residents who purchase ‘open market’ property, can enjoy a tax cap of £50,000 per annum on Guernsey source income in the year of arrival and the subsequent three years. This is provided that the Document Duty paid, in relation to the house purchase, is at least £50,000.

Additional Information

Should you require additional information regarding Guernsey companies please speak to Steven de Jersey or John Nelson: advice.guernsey@dixcart.com.

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

International Travel Restrictions

Legislation introduced in response to the Coronavirus pandemic, includes significant restrictions on the movement of people. This applies not only to international travel with the closure of borders and the suspension of flights and other forms of transport, but also in relation to travel within countries themselves.

Impact on Meetings and Specifically Board Meetings

The travel restrictions detailed above, coupled with individuals being requested to practice social distancing or in some cases isolation, are having an impact on the way in which corporate meetings are being held across the world.

For the day to day management of many companies, on-line forums are replacing physical meetings.

However, this does raise the question as to whether companies will be able to meet a number of the tests specified in economic substance legislation, introduced worldwide in the past eighteen months. In particular the ‘directed and managed’ test, which requires a certain number of board meetings with a quorum and a majority of those voting, being physically present in the particular jurisdiction.

The Current Situation?

Dixcart can provide guidance on the revised obligations in light of the current circumstances, across the jurisdictions where we have offices:

• Cyprus, Guernsey, Isle of Man, Malta, Portugal, Switzerland and the UK.

Guidance from Guernsey

The Guidance from Guernsey reflects the position taken by many other jurisdictions.

The Guernsey Revenue authorities have advised, that where a company has had to implement changes in the manner in which they conduct their business as a result of Covid-19, as far as economic substance requirements are concerned, provided that:

• the changes are as a result of the outbreak and to mitigate the threats from it, and
• are on a temporary basis,

these changes, will not in themselves, cause a company to fail the relevant economic substance test.

Companies should, however, maintain relevant records, showing both local regulations and their own internal policies, in respect of restrictions on travel for company officers, and the period of time for which these policies are in place.

This will ensure that companies can demonstrate that COVID-19 restriction measures prevented the company from holding an adequate number of board meetings on the island, ortemporarily required meetings to be held virtually, for example; conference calls, video conferencing, Skype or similar.

Normal protocols for such meetings should be observed, as far as possible.

Corporate Governance

Constitutional and other governance documents should be reviewed to ensure that they allow for meetings to be held remotely (for example, by telephone, video conferencing or other platforms), rather than there being a requirement for physical meetings to take place.

How Can Dixcart Help?

Please contact us if you need advice to help you to meet economic substance requirements during this challenging time. With offices in eight jurisdictions, Dixcart is ideally positioned to provide advice and assistance in relation to these matters.

Please speak to your usual Dixcart contact or email us at: advice@dixcart.com. Alternatively, please contact one of our managers in the Dixcart Guernsey office: advice.guernsey@dixcart.com.