Category: Corporate Services

Malta launched a Malta and Africa strategy for partnership 2020 – 2025, for public consultation, at the start of 2020. This strategic approach to Africa reflects the growing importance of this continent in relation to trade, development and diplomatic objectives.

The African Continent in the Modern World

The Maltese Government views Africa as a vital strategic partner for the future. It is an emerging economic force of more than fifty countries and Malta’s strategy focuses on trade, diplomacy, development, exchange of wealth and creating opportunities between Malta and the African continent. Building Malta’s strong relationships with Africa will help to create new investment and trade which will be mutually beneficial to both countries.

Malta’s Strategy

In the opening speech at the presentation of the Malta and Africa strategy. Ex-Minister for Foreign Affairs and Trade Promotion, Carmelo Abela, highlighted the message that Africa is an emerging economic force. He remarked that Malta’s national strategy serves as a guide for the development of Malta’s relations with Africa, ensuring that Malta is not simply a passive player in a changing world, but an active contributor to solutions, and a worthy proponent of policy and opportunities for growth.

As an EU Member State, Malta has an important role to play in the formulation of EU policy leading to job creation and improved livelihoods.

Planned Trade Delegations

As a part of the Africa strategy, in 2020 the Ministry responsible for Trade Promotion will be leading trade delegations to; Ghana, Ethiopia and Ivory Coast, as well as an exploratory visit to Rwanda. The opening of the first ‘Maltese Diplomatic Mission’ in Africa, in Ghana will also take place in 2020.

Additional Information

If you would like additional information regarding the Malta – Africa collaboration please contact Jonathan Vassallo at our office in Malta: advice.malta@dixcart.com or your usual Dixcart contact.

There may be several reasons why individuals wishing to establish a company in the UK might consider the use of a Business Centre, providing not only serviced office capacity, but also substance. Business Centres can offer a productive work environment and a cost-effective option for organisations with international interests wishing to operate from a particular location.

A company establishing itself in the UK will require premises for staff, and for any company set up in the UK, management and control of the business must take place there.

Substance and Value Creation

Substance is an important factor for organisations to consider, especially international companies wanting to establish subsidiaries in other countries. In addition, measures are being implemented around the world, to ensure that corporate tax is levied where the real value creation of a business takes place.

Companies must show that the management, control and day to day decisions concerning their activities are taken in each specific foreign jurisdiction where they have a branch or subsidiary, and that the company itself operates through an establishment that provides a real presence in that location.

Tax Advantages Available to UK Companies

• The UK has one of the lowest rates of corporation tax in the western world. The current UK corporation tax rate is 19%.
• There is no withholding tax on dividends.
• Most share disposals and dividends received by holding companies are exempt from taxation.
• Controlled foreign company tax rates only apply to a narrow classification of profit.

For more information on the advantages available to companies and foreign individuals relocating to the UK, please contact: advice.uk@dixcart.com.

Why Consider Dixcart Serviced Offices in the UK?

The Dixcart Serviced offices in the UK provide high quality, flexible furnished accommodation, and sophisticated IT and communication systems.

The offices, which can accommodate 2-6 people, are all on ground floor level and offer a quiet and modern working environment with plenty of natural light. Each room is fully furnished, with telephone handsets and controlled air conditioning. There is a shared reception area and kitchen facilities specifically for serviced office clients. Meeting and boardroom facilities are available in the building and there is some on-site parking.

Location of the UK Business Centre: Dixcart House

The Dixcart Business Centre in the UK is located at Dixcart House on Bourne Business Park, Surrey. Dixcart House is 31km from central London and just minutes from the M25/M3/M4/M40. Train services from Weybridge serve central London and you can be in the heart of the capital in 30 minutes. With only a 20-minute drive to Heathrow Airport and 45 minutes to Gatwick Airport, Dixcart House is ideally placed for individuals needing to travel internationally.

Located close to extensive amenities and established Green Belt, the Business Park offers an environment of the highest quality. Situated between Weybridge and Addlestone, the Business Park benefits from close access to a wide range of restaurants, cafes and shops, together with extensive hotel and leisure facilities.

Additional Services at Dixcart House

We have 6 meeting rooms and a large boardroom, which can accommodate up to 25 people comfortably. The space can be divided into smaller meeting rooms or a theatre style seminar space, if required.

Dixcart House offers a flexible and safe office environment with 24-hour access to the serviced office for tenants. The reception area is staffed during normal business hours and the receptionists greet visitors, co-ordinate meeting room bookings and provide secretarial services, if required.

How Can Dixcart Help?

Many businesses starting operations in a new location will require additional professional support for their growing business. Professional accounting, tax and legal staff are in the same building and can offer expert advice in the following areas:

• Accounting
• Corporate and Employment Law
• Human Resources
• IT Support
• Payroll
• Tax Support and Advice

Dixcart also has established relationships with key contacts working in many other businesses in the UK and can assist with introductions to other professionals.

Summary and Substance

Increasingly, substance is a critical matter for a business, the Dixcart Business Centre at Dixcart House provides the following:

• A physical presence.
• Management, control and decision-making processes that can be demonstrated to be made in the UK.
• A company that has local employees and pays local income tax and social security contributions for them.

In addition to the Business Centre in the UK, further Dixcart Business Centres are located in Guernsey, the Isle of Man, Madeira (Portugal) and Malta.

Further Information

For further information regarding the Dixcart Business Centre in the UK please visit our website, or contact Fiona Douglas or Julia Wigram: advice.uk@dixcart.com or your usual Dixcart contact.

Why use a UK Company?

The UK Government has introduced many changes to make the UK tax system more competitive. This has led to the return of UK holding companies, the re-shoring of manufacturing and increased UK based research and development (R&D).

United Kingdom (UK) entities have a respectable international image and can be used tax efficiently for cross border trading and as international holding companies.

Examples of how UK entities can be used are detailed below:

UK Resident Companies

Since 1 April 2017 the corporation tax rate has been 19%.

There are generous allowances for investment in R&D by small and medium sized entities. The tax relief on allowable R&D is 230%. That means that for every £100 spent on R&D you can claim a tax deduction of £230.

Where a company makes a profit from exploiting potential inventions those profits may be taxed at 10% rather than at the normal corporate tax rate.

UK Controlled Foreign Company Laws have been reformed with the aim of making the UK tax system competitive for multinationals.

There are no withholding taxes on dividends paid from the UK by companies.

UK Holding Companies

The UK has a participation exemption for foreign income dividends. The conditions for this vary according to whether the company is small or large.

As a result of this exemption most foreign dividends will be exempt from UK taxation when received by UK-resident companies. Where the exemption regime does not apply, foreign dividends received by a UK resident company will be subject to UK corporation tax, but relief will be given for foreign taxation including underlying taxation where the UK company controls at least 10% of the overseas company.

No capital gains tax is payable on the disposal of a trading company by a member of a trading group, subject to minimum holding requirements. This relates to disposal of all or part of a substantial shareholding in another trading company, or the disposal of the holding company of a trading group or sub-group.

UK Limited Liability Partnerships (UK LLP)      

A UK limited liability partnership is a separate registered legal entity with an address in the United Kingdom. No personal liability falls on a member of an LLP for the contracts or debts of the LLP.

As long as the UK LLP operates in a commercially orientated manner, e.g. carries on a business with a view to generating profit, the members will be treated for tax purposes as if they are partners. A non-resident partner of a UK partnership is not liable to UK tax on non-UK source income.

Therefore if a UK LLP has non-UK partners and is involved in non-UK trading (carried out entirely outside the UK), there will be no UK taxation on its members.

Non-Resident Companies

A UK non-resident company is one that is incorporated within the UK but is deemed to be resident in another country. This occurs when the effective management and control of a company is carried out in another country which has a Double Tax Agreement (DTA) with the UK. The DTA needs to specify that the country of residence of the company is that in which the effective management and control takes place.

Valuable tax planning opportunities are presented where there are treaties with countries offering low corporate tax rates, such as Cyprus, The Netherlands, Portugal and Switzerland. Malta also provides similar opportunities due to the Maltese system of tax refunds.

UK companies which are able to obtain a Certificate of Residence from a competent authority in one of these countries are not liable to UK tax other than that due on UK sourced income.

The UK non-resident company, therefore, offers a respectable and reliable legal personality, together with low taxation, depending on the treaty country used.

Formation of Companies in the UK 

General information is detailed below, outlining the formation and regulation of UK companies, as embodied in the Companies Act 1985 and Companies Act 2006, where currently in force.

1. Incorporation

Incorporation normally takes five working days, although same day incorporation is possible for an additional fee.

2. Shares

Shares are registered and a shareholders’ register is maintained at the registered office.

3. Shareholders

A minimum of one shareholder is required for a private limited company.  There is no maximum number of shareholders.

4. Registered Office

A registered office is required in the UK and can be provided by Dixcart.

5. Meetings

There is no restriction as to the location of meetings.

6. Accounts

Annual accounts must be prepared and filed with Companies House. A company may qualify for an audit exemption if it fulfils at least two of the following criteria:

• An annual turnover of no more than £2million.
• Assets worth no more than £5.1
• 50 or fewer employees on average.

An Annual Return must be filed each year.

7. Company Name

Any name may be chosen, provided that it is not the same as, or too similar to, any other company name currently in use.  Certain words, however, such as ‘Group’ and ‘International’ require special permission.

8. Taxation

The “main rate” of corporation tax is shown in the table below.

	MAIN RATE
Financial Year to 31 March 2020	19%

If you would like additional information regarding the formation of companies in the UK and the fees charged by Dixcart, please contact advice.uk@dixcart.com

Please also see our Corporate Support Services page for further information.

Updated: November 2019

Why Use the Isle of Man?

Isle of Man companies benefit from a zero rate of tax on trading and investment income.  They are also able to register for VAT, and businesses in the Isle of Man are treated by the rest of the EU for VAT purposes as if they are in the UK.

Isle of Man companies are therefore particularly useful for:

• Holding investment portfolios and participations in other companies. This is due to the zero rate of tax on such activities and the lack of withholding taxes on dividend income from such companies.

• Moody’s Investment – London 16 November 2019 – the Isle of Man’s credit rating is Aa2 negative , the same as the United Kingdom. The negative outlook on the IoM’s ratings reflects Moody’s view that the UK’s sovereign credit trend continues to have a significant impact on the IoM’s credit profile, due to the close and material institutional, economic and financial linkages between the two jurisdictions. Moody’s noted the IoM’s credit strength is the island’s very strong public finances. Very high wealth levels provide a significant buffer against shocks, and the IoM has a long track record of strong GDP growth, with very low volatility. Fiscal policies are forward-looking and prudent, exemplified by the large fiscal buffers accumulated over many years.

• Trading within the EU. Due to the zero rate of tax on trading income and the ability to quote an EU accepted VAT number.

• Holding UK commercial property. For VAT purposes the UK and the Isle of Man are treated in the same manner.

• 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.

• The Isle of Man is a signatory to the Paris Convention on Patents and Trademarks, and therefore many intellectual property companies base themselves in the Isle of Man.

The key points above outline some of the most frequent reasons for the use of Isle of Man companies. Please note it is not a definitive list of reasons for using such companies.

Formation of Companies in the Isle of Man 

Isle of Man companies can currently be formed and regulated under two separate Acts.

This Jurisdiction Note outlines the formation and regulation of companies as embodied in the Isle of Man Companies Act of 2006 (“the Act”).  A second Jurisdiction Note is available which details companies governed by the Isle of Man Companies Act of 1931 (as amended). Please request this second note if you wish to consider both types of Isle of Man company.

1. Incorporation

Standard incorporation of a Company occurs within 48 hours of receipt of the relevant documents to the Isle of Man Registry, however for an additional fee companies can be incorporated in 2 hours or “while you wait”.

2. Company Name

The proposed name must be approved by the Companies Registry. The Company can have its name ending in any of the following:

• Corporation
• Corp
• Incorporated
• Inc
• Limited
• Ltd
• Public Limited Company
• PLC

3. Capitalisation

A company may be incorporated with a single share, which can have a par value of zero.  Therefore no thin capitalisation applies.

4. Shareholders

Companies can be incorporated with only one shareholder. Shareholders need to be recorded at the registered agent of the company.  

       5. Nominee Shareholders

These are permitted and can be provided by Dixcart.

6. Minimum Number of Directors

The minimum number of directors is one. Directors do not need to be resident in the Isle of Man. Corporate Directors are permitted. In addition a single natural person can act as a Director of a 2006 company. 

7. Secretary

There is no requirement for a company secretary.

8. Registered Agent

A registered agent is required and can be an Isle of Man licensed corporate service provider.

9. Annual Return

There is a requirement to file an annual return.

10. Annual General Meeting

There is no requirement to hold an annual general meeting. 

11. Accounts

There is a requirement to “keep reliable accounting records” which:

• correctly explain the transactions of the company; and
• enable the financial position of the company to be determined with reasonable accuracy at any time; and
• allow financial statements to be prepared.

The accounting records are to be kept at the office of the registered agent of the company or at such other place as the directors of the company think fit.  Where records are not kept at the office of the registered agent, the company must provide the registered agent with a written record of the physical address of the place where the records are kept and copies of the records at intervals not exceeding 12 months.

There is no requirement to prepare financial statements however any member or director of the company may at any time demand that financial statements be prepared where the company has not prepared statements for a continuous period of 18 months.  Any such statements prepared, should relate to the period following the end of the financial period to which the preceding financial statements relate, or if no such previous financial statements exist, since the incorporation of the company.  Originals of statements prepared must be kept at the office of the registered agent of the company.

12. Audit

A company is free to appoint an auditor however where the company’s securities are listed or admitted to trade on a securities market or exchange, the company must appoint an auditor.  Any auditor appointed must be appropriately qualified in accordance with the Act.

13. Taxation

A tax return must be prepared and filed at the Isle of Man Treasury.

All Isle of Man companies are now treated as resident companies.  Resident companies are taxed at a rate of 0% on their trading and investment income.  Income derived from land and property situated in the Isle of Man is taxed at a rate of 10% and banks are taxed on their banking business at a rate of 10%.

14. VAT

The Isle of Man has a Customs and Excise agreement with the UK. This means that for VAT, Customs, and most Excise duties, the two territories are treated as one.

For VAT purposes, trading within the EU will be subject to the same rates as the UK.

15. Beneficial Ownership Register and Nominated Officer

The Isle of Man operates a non-public Beneficial Ownership Register and a nominated officer is required for each entity, a service which can be provided by Dixcart. The register is only accessible by Isle of Man regulatory bodies and/or law enforcement agencies for a permitted purpose. It is not available to the public.

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

Updated 24.01.2020

It is possible for a company to be incorporated in one jurisdiction and to be resident in another. In certain circumstances this can generate tax efficiencies.

It is very important to always ensure that the company is properly managed and controlled from the jurisdiction in which it is resident.

The jurisdictions of Cyprus, Malta and the UK present a number of low tax trading opportunities, as detailed below.

Advantages Available to a Cyprus Company Resident in Malta

Foreign companies seeking to establish certain entities in Europe, for example a company set up for financing activities, should consider establishing a Cyprus company and managing it from Malta. This can result in double non-taxation for the passive foreign sourced income.

A company resident in Cyprus is taxed on its worldwide income. In order for a company to be resident in Cyprus it must be managed and controlled from Cyprus. If a company is not resident in Cyprus, Cyprus will only tax it on its Cyprus source income.

A company is considered resident in Malta if it is incorporated in Malta, or, in the case of a foreign company, if it is managed and controlled from Malta.

Generally foreign companies in Malta are only taxed on their Malta source income and income remitted to Malta. The exception is income arising from trading activities, which is always considered to be income arising in Malta.

• The Malta-Cyprus Double Tax Treaty contains a tie breaker clause that provides that the tax residence of the company is where its effective place of management is. A Cyprus company with its effective place of management in Malta will be resident in Malta and would therefore only be subject to Cyprus tax on its Cyprus source income.  It will not pay Maltese tax on non-Maltese passive source income not remitted to Malta.

It is therefore possible to have a Cyprus company resident in Malta that enjoys tax-free profits, as long as the proceeds are not remitted to Malta.

Advantages Available to a UK Company Resident in Cyprus

A number of foreign companies wishing to establish a trading company in Europe are attracted to the UK, for a number of reasons.  In April 2017, the UK’s corporation tax rate was reduced to 19%.

To enjoy an even lower tax rate might be an objective.

If it is not essential to manage and control a company from the UK, the tax rate can be reduced to 12.5% by managing and controlling the UK company from Cyprus.

Whilst a UK company is resident in the UK by virtue of its incorporation, the UK-Cyprus Double Tax Treaty specifies that when a person, other than an individual, is a resident of both contracting states, the entity will be resident in the contracting state in which its place of effective management is situated.

• A UK company with its place of effective management in Cyprus will therefore only be subject to UK tax on its UK source income. It will be subject to Cyprus corporation tax on its worldwide income, with the Cyprus rate of corporation tax currently being 12.5%.

Effective Place of Management and Control

The two structures detailed above rely on the location of the effective management and control being established in a jurisdiction other than the jurisdiction of incorporation.

To establish an effective location for management and control, a company must almost always:

• Have a majority of directors in that jurisdiction
• Hold all board meetings in that jurisdiction
• Implement decisions in that jurisdiction
• Exercise management and control from that jurisdiction

If the place of effective management and control is challenged, a court is likely to take into account the records that have been maintained. It is very important that these records do not suggest that the real decisions are being conceived and executed elsewhere. It is essential that management and control take place in the correct jurisdiction.

How Can Dixcart Help?

Dixcart can provide the following services:

• Company incorporation in Cyprus, Malta and the UK.
• Provision of professional directors who are suitably qualified to understand the business of each entity and to manage it appropriately.
• Provision of serviced offices with full accounting, legal and IT support.

Additional Information

If you would like additional information please contact Robert Homem: advice.cyprus@dixcart.com, Peter Robertson: advice.uk@dixcart.com or your usual Dixcart contact.

Please also see our Corporate Services page for further information.

Updated October 2018

Changes Being Introduced in April 2020

From April 2020, non-UK tax resident companies with income from UK property will no longer be charged UK income tax and will instead be subject to the UK’s corporation tax regime.

When the changes come into force, these companies will need to calculate their profits in accordance with corporation tax principles, which may represent a significant change from the current method of calculation.

We consider some of the implications in more detail below.

Timing and a Potentially Reduced Charge to Tax

For affected companies, the change will take place at the end of the 2019-20 tax year. The income tax property business will be deemed to cease on 5 April 2020, with a new corporation tax business and tax period beginning on 6 April 2020.

• Profits or losses arising in the period to 5 April 2020, will be subject to income tax (up to 20%), with any income arising from 6 April 2020 being subject to corporation tax at the rate of 19%.

Treatment of Losses 

Any pre-5 April 2020 property business losses, that the company has at the date of transition, will be carried forward to the new corporation tax business. These losses will be re-categorised as ‘income tax property losses’ (ITPLs) and will be available for offset against post-6 April 2020 UK property business profits, but not against the company’s income from other sources or against capital gains. Additionally, they will not be available for surrender as group relief.

ITPLs will be offset automatically against the relevant profit of future periods, in priority to post-6 April 2020 losses, and will not be subject to the 50% corporation tax loss cap (see below). It will not be possible to disclaim them. If the property business ceases trading, any un-utilised  losses will be lost.

Losses, suffered by the company after it comes within the corporation tax regime will be subject to the usual corporation tax loss relief rules. In general, these rules allow losses to be carried forward to be used against future profits, subject to a limit of £5million. The brought forward losses that can be offset are limited to 50% of the profits if these are above £5million. In addition, post-6 April 2020 losses can be surrendered as group relief, subject to certain conditions.

Financing Costs – the Treatment of Loan Finance

Financing is the area where some non-UK resident property companies may see the biggest impact of the new rules. Finance costs and interest will fall into the ‘corporation tax loan relationships regime’. Under these rules, profits and losses from loan relationships are calculated separately from any other income the company may have and are categorised as ‘trading’ or ‘non-trading,’ depending on the use of the loan finance in question. For property companies, they will normally be treated as ‘non-trade loan relationships’.

In recent years, there have been changes to limit the deductibility of interest for corporation tax purposes, most notably the corporate interest restriction (CIR) rules. These are designed to limit tax relief for finance costs and interest to a percentage of taxable profits.

The restriction can apply where the net tax interest expense of group companies (or standalone companies), within the charge to UK corporation tax, exceeds £2million (adjusted where a period of account is different to a 12 month period). In these circumstances, the allowable deduction will be a figure based on 30% of the companies’ earnings before interest, taxes, depreciation and amortisation (EBITDA), or a group ratio.

The CIR rules can be complex and will need to be considered, even if no disallowance of interest results. This will lead to an increased administrative burden for non-UK resident companies.

In addition, companies (or groups) with high levels of debt may find that a proportion of their finance costs are no longer deductible and there could therefore be a significant increase in the tax burden.

The Treatment of Management Expenses

Non-UK resident companies will be able to claim a deduction for management expenses related to their property income. To be deductible, the costs must be directly linked to their UK property business. No deduction will be allowed for costs related to managing non-UK property or subsidiaries.

Administration: Filing of Tax Returns and Payment of Tax Due

Companies affected by the change will need to register for corporation tax with HM Revenue & Customs (HMRC). This will apply even where companies are already registered with HMRC under the Non-Resident Landlord Scheme.

Taxpayers will need to complete a final self-assessment return in the normal way to report the proportion of income arising up to 5 April 2020. A corporation tax return will need to be filed for period commencing 6 April 2020 and for subsequent accounting periods.

Corporation tax returns will need to be filed online together with accounts (this is likely to be the case even if the jurisdiction in which the non-UK resident company is established does not require preparation and filing of accounts) and tax computations. It has not been confirmed if accounts will need to be data tagged for ‘iXBRL’ (the format in which HMRC now receive all accounts). This extra administrative burden of ensuring accounts and returns are in the correct format, could represent additional cost and complexity for some companies.

The tax payment dates for corporation tax also differ from those with which non-UK resident companies will be familiar. The due date for companies and groups with taxable profits up to £1.5million falls nine months and one day after the end of their accounting period. Those with higher profits will need to pay their tax in quarterly instalments, two of which are due before the end of the accounting period.

ATED-related Gains; Non-resident Gains and Gains on an Interest in UK Land

From 6^th April 2013 to 5^th April 2019, the ‘Annual Tax on Enveloped Dwellings’ (ATED) related gains of a non-UK resident company, in relation to high value disposals of residential property, were chargeable to capital gains tax at a rate of 28%, subject to the ATED annual charge.  From 6 April 2015 to 5^th April 2019, closely held non-UK resident companies were also chargeable to capital gains tax on disposals of UK residential property at a special rate of 20%.

• Both of the above charges were repealed from 6^th April 2019 and replaced with ‘non-resident capital gains tax’ (NRCGT), a corporation tax charge on gains on disposals of interests in UK land (including commercial and residential property), and on indirect disposals of UK land. In relation to property disposals since 6^th April 2019, companies need to register for corporation tax and may need to submit a corporation tax return to declare the disposal, within 30 days.

How Dixcart Can Help?

Dixcart can assist with reviewing existing UK property ownership structures.

Our UK tax specialists and commercial property lawyers can, if required, implement any resulting planning and restructuring recommendations. Please contact Paul Webb in the UK office: advice.uk@dixcart.com.

Dixcart Business Centres offer extensive serviced office capacity and are ideal for companies establishing themselves in a new location. Dixcart Business Centres are located in Guernsey, the Isle of Man, Malta and the UK.

Business Centres can offer a productive work environment and a cost effective option for organisations with international interests wishing to operate from a particular location. The international arena is changing and with the implementation of anti Base Erosion and Profit Shifting legislation (BEPS) it is becoming increasingly important to demonstrate real substance and genuine activity.

The Issues of Substance and Value Creation

Substance is an important factor for organisations to take into account, especially international companies seeking to establish subsidiaries in other countries. In addition new measures are being implemented to ensure that corporate tax is levied where real value creation takes place.

Companies must show that the management, control and day to day decisions concerning their activity are taken in each specific foreign jurisdiction and that the company itself operates through an establishment which provides a real presence in that location. In the event that substance and presence are not demonstrated or that no real value creation has taken place in that jurisdiction, the tax benefits enjoyed by the subsidiary company may be negated by a tax imposition in the country where the parent company is based.

The Benefits of Serviced Offices

Companies setting up for the first time in a jurisdiction will require premises for the staff and directors who manage and control the business to create value in the jurisdiction.

Dixcart serviced offices provide high quality, flexible furnished accommodation together with sophisticated IT and communication systems.

A comprehensive range of administrative support and professional services are also available. These include:

• Accounting
• Business Planning
• HR
• IT Support
• Legal Support
• Management
• Payroll
• Tax Support

The Dixcart Business Centre in Guernsey

Companies and individuals in Guernsey benefit from tax advantages, which include:

• A general zero rate of corporate tax.
• No VAT.
• A personal income tax rate of a flat 20%, with generous allowances.
• No wealth taxes, no inheritance taxes and no capital gains taxes.
• A tax cap of £110,000 for Guernsey resident taxpayers on non-Guernsey source income or a tax cap of £220,000 on worldwide income.

Guernsey is an attractive location for international companies and individuals. The Dixcart Business Centre is situated in a prime location within the island’s main financial district of St Peter Port. At Dixcart House there are nine fully furnished offices and each can accommodate between two and four staff. There is a general reception area and a shared kitchen, plus a boardroom available to hire.

The Dixcart Business Centre in the Isle of Man

Companies and individuals in the Isle of Man benefit from the following advantages:

• A zero rate of corporate tax on trading and investment income.
• Businesses in the Isle of Man are treated by the rest of the EU, for VAT purposes, as if they are in the UK and they can therefore register for VAT.
• There is no wealth tax, inheritance tax, capital gains tax or investment income surcharge.
• A standard rate of income tax for individuals of 10%, with a higher rate of 20%.
• A cap of £125,000 exists on an individual’s income tax liability for a period of up to five years.

The Isle of Man is an attractive location for international companies and individuals. The Dixcart Business Centre is situated in a prime location within the island’s main financial district of Douglas.  Due to an increasing demand for services, an additional building was acquired in Athol Street. Britannia House offers over 18,000 square feet of office space and has serviced offices on two floors. A number of suites are available, with each office varying in size and accommodating between one and fifteen staff. There is a shared reception and kitchen space, plus meeting rooms available to hire.

The Dixcart Business Centre in Malta

Malta’s full imputation system of taxation allows generous unilateral relief and tax refunds:

• Companies operating in Malta are subject to a corporate tax rate of 35%.  However, 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.

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, and there is a kitchen and boardroom available for meetings.

The Dixcart Business Centre in the UK

The UK is a popular jurisdiction for both companies and individuals:

• The UK has one of the lowest rates of corporation tax in the western world. The current UK corporation tax rate is 19%.
• There is no withholding tax on dividends.
• The majority of share disposals and dividends received by holding companies are exempt from taxation.
• Controlled foreign company tax rates only apply to a narrow classification of profit.

The Dixcart Business Centre in the UK is located at Dixcart House on Bourne Business Park, Surrey. Dixcart House is near central London and just minutes from the M25 and M3. Train services from Weybridge serve Central London and you can be in the heart of the capital in 30 minutes. It is only a 20 minute drive to Heathrow Airport and 45 minutes to Gatwick Airport.

There are 6 meeting rooms and a large boardroom, which can accommodate up to 25 people comfortably. The space can be divided into smaller meeting rooms or a theatre style seminar space if required. There is a shared reception area and kitchen facilities specifically for serviced office clients.

Summary

Dixcart Business Centres provide businesses and individuals with a range of benefits, and are available in the jurisdictions of Guernsey, the Isle of Man, Malta and the UK. These Business Centres provide organisations with the opportunity to establish themselves in an additional jurisdiction in a cost effective manner, and assist in meeting substance requirements.

Additional Information

If you require additional information regarding substance and the serviced offices offered through the Dixcart Business Centres, please visit our website, or speak to your usual Dixcart contact or to Peter Robertson at our office in the UK: advice.uk@dixcart.com.

On 30 October 2019, the Ukraine ratified changes to two Double Tax Treaties (DTAs), the treaty with Cyprus and the treaty with the UK, respectively.

Once the appropriate formalities have taken place in the reciprocal countries, these treaties are expected to come into force at the start of January 2020.

Ukraine: Cyprus Treaty 

The key changes are:

• A reduction in the withholding tax for dividends from 15% to 10% (if the paying company does not qualify for a lower rate).

• To enjoy a reduced withholding tax rate of 5% on dividends the following two conditions must now be met (previously it was only one of the two conditions):
• The company paying withholding tax holds a minimum 20% of the capital in the company distributing the dividends; AND
• The value of the investment held (directly or indirectly) is a minimum €100,000.

Ukraine: UK Treaty 

The key changes are:

• An increase from 10% to 15% on the withholding tax rate payable for dividends;
• A reduced withholding tax rate of 5% on dividends, where the company paying withholding tax holds a minimum 20% of the capital in the company distributing the dividends;
• An increase from 0% to 5% on the withholding tax rate payable for royalty payments;
• Measures to increase the exchange of tax information between the two countries.

Additional Information

If you would like additional information regarding Ukraine’s Double Tax Treaties and the opportunities that they might provide, please speak to the Dixcart office in Cyprus, the UK office or the Malta office on advice.malta@dixcart.com.

The Malta Financial Services Authority (MFSA) has published its Annual Report and Financial Statement for the year 2018. It presents an overview of the activities and work carried out by the MFSA, together with details about the industry’s performance and explains the Authority’s vision for the coming years.

Despite a challenging and highly competitive environment, in 2018, the Maltese financial services sector continued to register significant growth rates, with a growth of 9.5% over the previous year.

Financial Services in Numbers

The MFSA registered an additional 144 new entities, as an increased number of businesses decided to make Malta their jurisdiction of choice, bringing the number of entities licensed by the MFSA up to over 2,300.

The financial services industry in Malta is a key pillar of the Maltese economy, contributing around 6% of Gross Value Added (GVA) in 2018, as shown in Chart 1.

At the end of 2018, the sector employed more than 12,000 people, 1,000 of which were new jobs created during that year. This brings the share of local employment within the financial services sector to 5.3%, almost double that recorded as the average for other member states of the European Union, which stands at 2.9%.

Deposits within domestic banks grew by 6.1%. These were mainly concentrated in current account deposits, with the share of such deposits amounting to around 70.3%. The amount of bank loans and advances grew for domestic banks: 6.3% for core and 18.0% for non-core.

The total assets of the securities and investment services sector in Malta grew by 8.3%, amounting to €11.7 billion in 2018. Corporate bond trading reached €93.7 million in 2018, up 22.5% from 2017.

The aggregate net asset value of Funds Domiciled in Malta totalled €11.7 billion, up 8% from 2017 and the locally managed assets of non-Malta domiciled funds grew by 9.1%, to €24 billion.

MFSA Vision for the Future

During 2018 MFSA published over 600 regulatory notifications to guide regulated entities and to safeguard the consumers of financial services.

The Virtual Financial Assets (VFA) Act came into force in November 2018, making  Malta a pioneer in the world of distributed ledger technologies and digital asset legislation.

The MFSA also signed a Memorandum of Understanding (MoU) with the Maltese Financial Intelligence Analysis Unit (FIAU) to enhance collaboration and improve the thoroughness of ‘Anti-money Laundering’ and ‘Customer Facing Staff’ on-site reviews and inspections.

Additional Information

If you would like further information on this subject, please contact the Dixcart office in Malta: advice.malta@dixcart.com or your usual Dixcart contact.

Background

The Madeira archipelago is part of Portugal and is located in the Atlantic Ocean, 978 km southwest of Lisbon.

During the past decade, Portugal has taken several steps to enhance its attractiveness to international business and high net worth individuals. Partially thanks to the Non-Habitual Residents tax programme implemented in 2009 and the Golden Visa residency programme introduced in 2012, Portugal has become one of the main ‘start up’ centres in the world and the preferred choice for the relocation of companies and highly qualified professionals and their families.

In addition, Portugal offers the advantages available through the ‘Madeira International Business Centre’(MIBC) which was approved by the European Union (EU) when Portugal formally joined the EU in 1986.

What is the Madeira International Business Centre?

The MIBC enjoys a series of incentives, predominantly of a tax nature, which have been approved by the EU until at least the end of 2028. These incentives are very attractive for appropriate international companies.

Created more than 30 years ago, the legal framework of the MIBC continues to be an efficient and clearly defined structure regarding transparency, compliance and economic substance.

The MIBC Tax Regime

Businesses registered in the MIBC benefit from the following tax advantages:

• A reduced corporate income tax rate of 5% is applicable to active income (such as income resulting from trading activities or provision of services, etc.).
• Under Portugal’s Participation Exemption Method, Madeira companies are exempt from withholding tax on the distribution of dividends, if certain conditions are met.
• The participation exemption regime is also applicable to:
  1. capital gains received by the MIBC entity (a minimum of 10% ownership, held for 12 months, is required), and
  2. the sale of its subsidiaries, and
  3. the payment of capital gains to the shareholders, by the sale of the MIBC company.
• Exemption from withholding tax on interest, service fees and royalties paid to non-residents.
• Exemption from stamp duty, property tax, property transfer tax, and regional and municipal surcharges (subject to an 80% limitation per tax, transaction, or period).
• Application of the double taxation treaties signed by Portugal.
• Application of the investment protection treaties signed by Portugal.

Why the Madeira International Business Centre?

• Madeira is part of Portugal and therefore benefits from the advantages of being a Member State of the European Union and also of the OECD.

Companies located in Madeira operate under a credible regime, supported by the 28 EU Member States. Madeira is not considered to be a tax haven, and is therefore not included in any international black lists.

• Madeira companies are automatically given a VAT number, allowing them direct access to the EU intra-Community market;
• All EU Directives are applicable to Madeira, guaranteeing a well-regulated and modern legal system that protects investors´ interests;
• A highly skilled work force is available in Portugal and in Madeira;
• Portugal is a politically and socially stable country;
• Portugal, and Madeira, offer low operating costs compared to other European jurisdictions;
• Madeira is a region offering individuals; security, quality of life, a mild climate and a high level of natural beauty.

Companies in the MIBC: Key Conditions

Companies wishing to establish themselves in the MIBC need to meet a number of conditions, including:

• The MIBC company must apply for a Government Licence.
• The reduced corporate income tax rate on income (5%) is applicable when the income is derived from an international activity, i.e. outside Portugal, or, when in Portugal, the business relationship is with another MIBC company.
• The capital gains tax exemption (applicable to the sale of shares in the MIBC company) is not applicable to shareholders who are considered tax resident in Portugal or within a ‘tax haven’ (as defined by Portugal).
• Exemption from Real Estate Transfer Tax (IMT) and Municipal Property Tax (IMI) for properties exclusively used for the company’s business.

The International Topic of Substance

Companies with offices in different jurisdictions are increasingly being asked to meet substance requirements.

An important features of the Madeira International Business Centre regime is that the law clearly defines appropriate substance requirements that must be met for the company to obtain the relevant tax benefits. These substance requirements essentially relate to the creation of jobs.

Substance Requirements

MIBC companies need to comply with well-defined and detailed substance requirements, currently one of the few countries in the world with this precise approach. Clients can therefore be confident that they have appropriate levels of substance in place, to match the activity of the company registered in Madeira.

This is verified in two different ways, at different times:

1.After the incorporation of the company (one-off requirement):

i. within the first 6 months of activity, the company must hire at least 6 workers, OR;

ii. during the first 2 years of activity, the MIBC company must invest €75,000 in the acquisition of tangible or intangible fixed assets.

2. On an ongoing basis, the company must have at least one employee on its payroll, paying Portuguese individual income tax and social security. This employee can be the Director or a Board Member of the MIBC company.

The corporate tax rate of 5% applies to a company’s taxable income. There is an upper limit of income which can enjoy this favourable tax rate, based on the number of jobs that have been created in Madeira by the company.

These figures are detailed below:

Job Creation	Minimum Investment	Maximum of Taxable Income Reduced Tax Rate Applies to
1 – 2	€75,000	€2.73 million
3 – 5	€75,000	€3.55 million
6 – 30	N/A	€21.87 million
31 – 50	N/A	€35.54 million
51 – 100	N/A	€54.68 million
100+	N/A	€205.5 million

The total benefits granted to companies licensed to operate in the Madeira International Business Centre are, however, capped at one of the following amounts:

• 15.1% of the annual turnover; OR
• 20.1% of the annual earnings before interest, tax and amortisation; OR
• 30.1% of the annual labour costs.

How can Dixcart Help?

1. We offer advice regarding the establishment of a company in the MIBC and provide a complete range of services. These services include meeting all of the company’s day-to-day obligations, including: accounting, corporate administration, human resources, tax compliance and IT.
2. Dixcart has a strong network of contacts in the professional and commercial sectors, both on the island of Madeira and mainland Portugal, and can introduce appropriate businesses to relevant individuals.
3. Dixcart experts can assist entrepreneurs and their families in relocating to Portugal and/or Madeira and obtaining the necessary residence permits.

Additional Information

If you require further information regarding the MIBC and/or if you would like information regarding the types of company and tax frameworks available in Portugal, please speak to your usual Dixcart contact, or to Catarina Sardinha at the Dixcart office in Portugal: advice.portugal@dixcart.com.