Category: Corporate Services

Setting Up a Business in Switzerland

Posted on | by Charlotte McGonigle

Switzerland is a friendly place to start a business, with many international companies having their headquarters in the country. Companies both large and small are attracted to Switzerland for its stability, the strength of its currency and some of the lowest corporation taxes in Europe.

So you have decided to start a business in Switzerland? You have a business plan and are ready to get started.

Legal Structure

Entrepreneurs can choose from several legal structures when setting up a business in Switzerland, including:

  • Sole Proprietor: A business structure where a single individual owns and operates the business, assuming full personal liability for its obligations.
  • Partnership: A legal form where two or more individuals share ownership and responsibility for a business, with options for general and limited partnerships.
  • Limited Liability Company:  A legal business entity that combines elements of partnership and corporation, providing limited liability to its owners while maintaining operational flexibility.
  • Branch: A business extension of a foreign company in Switzerland, operating as a dependant part of the parent company and subject to Swiss regulations.

Each structure has its advantages and implications for liability, taxation and governance, so it is crucial to select the most suitable option based on the nature and scale of the business.

Registration Process

The registration process varies depending on the chosen legal structure. However, in general, the following steps are involved:

  1. Choose a business name and verify its availability.
  2. Open a bank account with a Swiss bank to deposit the share capital.
  3. Prepare the necessary documentation.
  4. Founders Meeting with a Public Notary.
  5. Register the business with the relevant commercial register and tax authorities.
  6. Obtain any required permits or licenses based on the industry and activities of the business.

Once you have chosen your Legal Structure and started the registration process, important next steps are to understand your accounting requirements and tax considerations.

Accounting and Reporting Requirements

Swiss companies are required to maintain and file accurate accounting records in accordance with established financial standards ensuring compliance with the regulatory requirements.

Tax Considerations

Switzerland offers a competitive tax environment for businesses, with varying rates between cantons. Key aspects of taxation include:

  • Corporate tax: businesses are subject to federal, cantonal, and municipal taxes and it is essential to understand the tax implications based on the location and nature of the business activities.
  • Value Added Tax (VAT): Businesses with annual turnover exceeding CHF 100,000 or more a year must register for VAT and charge VAT on their goods and services. Value-added tax is a general tax levied on the distribution, import, export and sale of a product or service by any company in Switzerland. 
  • Double Taxation Treaties: Switzerland has double taxation treaties with numerous countries to avoid double taxation of income in multiple jurisdictions.

Employment Regulations

Switzerland’s employment laws are characterised by flexibility and employee protection. These considerations include:

  • Employment Contracts: Written contracts outlining terms of employment, including wages, working hours and benefits are standard practice.
  • Work Permits: Foreign nationals working in Switzerland may require work permits, which are subject to specific conditions depending on the individual’s nationality and qualifications.
  • Minimum Wages: While Switzerland does not have a statutory minimum wage at the federal level, certain cantons and industries may have minimum wage regulations.

Compliance and Regulatory Matters

Switzerland has a well-established regulatory framework governing various aspects of the business operations, covering:

  • Company Law: Compliance with Swiss company law, including corporate governance, shareholder rights and disclosure obligations.
  • Anti-Money Laundering Regulations: Implementation of AML compliance programmes to combat money laundering and terrorist obligations.
  • Data Protection: Adherence to data protection regulations, ensuring privacy and security of personal data.
  • Regulatory Authorities: Oversight by regulatory bodies specific to industries or activities, such as FINMA for financial institutions.

Advice and Additional Information

Dixcart has had an office in Switzerland for over twenty-five years and is well placed to provide advice regarding the establishment of companies here. Please contact Christine Breitler at the Dixcart office in Switzerland: advice.switzerland@dixcart.com.

Minimum Global Tax on Multinational Businesses

Posted on | by Charlotte McGonigle

As of 1 January 2024, Pillar 2 (BEPS 2.0) came into effect, as recommended by the OECD, where multinational companies are subject to a global minimum tax of 15% which will apply for the first time for certain large economies – agreed by more than 140 countries under the OECD Inclusive Framework.

In the digital age and face of globalisation, the global economy has transformed – with countries facing pressure to lower their corporate income tax rates to offer incentives to compete for capital and investment. Building on BEPS actions and placing a floor under tax competition, the OECD, together with member countries, have addressed the collective action problem for the so-called race to the bottom.

A series of interlocking rules apply to companies taxed below the 15% rate in one country (with the possibility of other countries being able to apply a top-up tax), which is summarised below in six steps:

Step 1: Determination of Multinational Groups in Scope

The following steps apply in determining which multinational groups are in scope:

  1. Internationally active groups – determination as to whether the group has entities or permanent establishments in more than one jurisdiction, is required;
  2. Groups with annual revenue of €750 million or more, in at least two out of the four prior years immediately preceding the fiscal year being tested; and
  3. Identify excluded entities from the application of the Pillar II rules (but note that these are not excluded from the revenue threshold calculation above).
    1. Public interest entities, such as governmental and non-profit organisations, tax-neutral entities (such as pension and investment funds), and certain asset-holding companies are excluded.

Step 2: Allocation of Income to Constituent Entities on a Jurisdictional Basis

The multinational group needs to determine the income (abbreviated as FANIL for Financial Accounting Net Income or Loss – determined by accounting standards for financial reporting) and the location of each constituent entity, to identify the respective local tax treatment.

Step 3: Calculation of GloBE Income

Global Anti-Base Erosion (GloBE) income is calculated by making adjustments to FANIL to align the tax base for the global minimum tax with those that are typically applied for local tax purposes. Types of adjustments include:

  1. Adjustments to financial accounting income to better align with taxable income – net taxes, dividends (avoid double counting profits within a group), equity gains and losses (unrealized – no impact for GloBE; realized – may need adjustments for timing differences between accounting and tax), asymmetric forex gains and losses (differences in treatment between accounting and tax require reconciliation to align with taxable income), pension expenses (use of tax accounting principles), stock-based compensation (portion deductible for tax added to GloBE income);
  2. Correct allocation of income between jurisdictions is adjusted for – such as transfer pricing adjustments and intra-group financing;
  3. Policy-based adjustments – such as the disallowance of illegal payments such as bribes, or payments of fines and penalties (only allowed to a maximum of €50,000).

Step 4: Determination of Adjusted Covered Taxes

For each constituent entity, the GloBE income or loss is calculated. The tax associated with the income must then be calculated using the following steps:

  1. Determination of covered taxes – the current tax expense as shown in the financial accounts (includes incomes taxes, but does not include non-income-based taxes such as indirect taxes, payroll and property taxes);
  2. Adjustment to covered taxes – to consider taxes that are not recorded in the tax line of the profit or loss statement and exclude taxes not related to GloBE Income or Loss, addressing of temporary differences as well as tax credits;
  3. Cross-border allocation – adjustment to allocate certain cross-border taxes to the proper constituent entity (like taxes imposed under a CFC regime, distribution taxes, withholding tax on dividends paid, or other taxes paid);
  4. Post-filing adjustments – in the case of post-filing adjustments, generally an ETR recalculation is required for the relevant fiscal year (examples include audit or transfer pricing adjustments).

Step 5: Computation of ETR and Calculation of Top-Up Tax

GloBE income or loss and covered taxes (steps 3 and 4 above) from the same jurisdictions must be added together to determine the jurisdictional effective tax rate (ETR).

Note an exemption applies for multinationals that have limited operations, namely, below the de minimis thresholds of €10m for revenue and €1m for income.

From GloBE, a substance-based income exclusion is deducted to reduce the potential burden on multinationals with genuine operations and investments in a jurisdiction. A percentage of tangible assets and payroll expenses is applied for the purpose of the substance-based income exclusion.

The top-up tax percentage is due on the difference between the 15% minimum rate and the ETR in the jurisdiction – the delta which is applied to the GloBE income or loss in the jurisdiction, after deducting a substance-based income exclusion.

Each constituent entity, with GloBE income, is subsequently allocated top-up tax.

Step 6: Charge the Top Up Tax under QDMTT, IRR, or UTPR

A member jurisdiction has a liability towards a top-up tax for a multinational group under three types of provisions, in the following agreed rule of order:

  1. If your domestic tax already hits the global minimum, you won’t be hit with extra “top-up” taxes from other countries – referred to as the Qualified Domestic Minimum Top-Up (QDMTT);
  2. If the jurisdiction where the low-taxed constituent entity is located does not have a domestic minimum top-up tax, the ultimate parent entity, in proportion to its ownership interest, might collect the top-up tax under IRR (Income Inclusion Rule);
  3. If the ultimate parent entity is in a jurisdiction that has not implemented a domestic minimum top-up tax, then the top-up tax will be levied on the next entity in the ownership chain that is located in a jurisdiction with an IRR following a top-down approach;
  4. Where IRR does not apply, the Under-Taxed Payment Rule (UTPR) becomes applicable. UTPR acts as a back-up to the IRR, ensuring a top-up tax payment within jurisdictions applying this rule.

Specific Rules for Each Jurisdiction

Members will need to implement the GloBE rules in a way that is consistent with the outcomes provided in the agreed rule order, to ensure transparent and predictable outcomes across jurisdictions. Note that the legislative draft GloBE rules accommodate a wide range of multinational groups and tax systems. The OECD have recommended Pillar 2 rules to become effective in 2024.

Conclusion

The implementation of Pillar 2 marks a significant step towards creating a more level playing field and addressing tax challenges arising from the digital economy. Ultimately, Pillar 2 represents a critical step towards a more equitable and sustainable global tax system. Its impact will depend on effective implementation, addressing potential concerns, and continuous evaluation to ensure it meets its intended goals.

Additional Information

If you would like to discuss any of the matters raised in this Article, please contact Lionel de Freitas, a director of our Dixcart office in Portugal: advice.portugal@dixcart.com.

Offshore Discretionary Trusts: The What, How and Why

Posted on | by Megan Raguro

Trusts offer a tried and tested fiscal vehicle for those seeking to split the legal title and equitable rights to defined assets for specific purpose. The versatility of Trusts has meant that they have been utilised for over a thousand years in one form or another, continuing to this day; Once of the the most commonly utilised offshore is the Discretionary Trust.

Establishing a Trust in a foreign jurisdiction can offer additional benefits under the correct circumstances. In this short article, we take a look at the what, how and why of offshore Trusts.

What is a Trust?

It is important to understand that a Trust does not have separate legal personality and does not benefit from limited liability. A Trust is simply a Fiduciary arrangement.

A Fiduciary relationship is characterised as one of trust and confidence between two or more parties, where the Fiduciary is obligated to act in the best interest of another party.

The Trust Deed sets out all of the key details of the Trust, including the three main parties:

  • Settlor: The individual or entity that transfers assets into Trust and which make up the Trust Fund.
  • Trustee: The Fiduciary appointed by the Settlor can be an individual or incorporated entity. The Trustee holds the legal title to the Trust assets and administers them in accordance with the Trust Deed.  The role of Trustee can be demanding and incur legal liability, so choosing the right Trustee is vital. You can read more about the choice between Lay Trustees and Professional Trustees here.
  • Beneficiary: Specific Beneficiaries or classes of Beneficiaries must be clearly identified within the Trust Deed. This party holds the equitable rights to Trust assets as defined within the Trust Deed. They are entitled to enforce any rights they have under the Trust against the Trustees.

You can read more in our introduction to Trusts here.

There are pitfalls to avoid when it comes to Trusts, but many of these can be avoided by appointing a good quality Professional Trustee. You can read more about best practices and some of the most common pitfalls here.

Offshore Discretionary Trusts

There are many types of Trusts used in offshore planning, but the Discretionary Trust is by far the most commonly utilised. The Discretionary Trust’s defining features include:

  • The Settlor can only select Beneficiaries or classes of Beneficiaries (e.g. children of the Settlor), that have the potential to benefit from the Trust. Beyond this, they have no control over how, when, or to whom distributions are made.
  • The Settlor can provide a Letter of Wishes throughout their lifetime, which provides the Trustees with additional insight into the Settlor’s intentions. This can be updated regularly. For instance, setting out how they would like the Trust Assets to be distributed. It is important to note that the Letter of Wishes is persuasive but not legally binding.
  • As broad classes of Beneficiary tend to be named, and none have fixed entitlements, Trustees can exercise a wide discretionary power, so that they can consider additional Beneficiaries, such as future generations.
  • The Trustees have complete discretion regarding distributions. This empowers the Trustees to consider Beneficiaries’ personal circumstances e.g. to manage tax liabilities, protect vulnerable Beneficiaries, provide for education or medical treatment etc.
  • It is important to understand that whilst the Trustees have complete control over the Trust assets, the income generated and distributions, their actions must still be compliant with the Trust Deed and in line with their duties e.g. to always act in the best interests of the Beneficiaries.

These qualities make the offshore Discretionary Trust a mainstay for Estate and Succession planning and asset protection, for instance, where HNWI’s and their families are moving to the UK or another Common Law jurisdiction.

You can read more about the types of offshore Trust available here.

Why are Offshore Discretionary Trusts Used?

Discretionary Trusts are used for a huge variety of purposes. Settlements can include any number of asset types settled, including Cash, Property, Shares, Land etc. Often the Discretionary Trust forms part of planning for:

  • Asset Protection
  • Estate Planning
  • Succession Planning
  • Wealth Management
  • Family Affairs e.g. Provision of School Fees or for vulnerable Beneficiaries
  • Corporate Structuring e.g. Employee Benefit Trusts or Pension Vehicles
  • Tax Planning e.g. UK Prearrival Planning
  • Privacy
  • Charitable or Philanthropic Objects

Appointing Dixcart as the Trustee of your Offshore Discretionary Trust

Dixcart Management (IOM) Ltd is licensed and regulated in the Isle of Man, a jurisdiction that is globally renowned for leading Trust and Corporate Services. Further, Dixcart has delivered Isle of Man Professional Trustee services to clients and their advisers since 1989. You can read more about why the Isle of Man is a jurisdiction of choice, here.

Our team includes professionally qualified Trustees, Accountants, Governance and Compliance Specialists and more. Their knowledge combined with great service standards mean that Settlors and their advisers can rest assured that their objectives are our highest priority and can be supported at every stage.

Contact Us

If you are considering establishing an offshore Trust or changing service provider, please get in touch with Paul Harvey at Dixcart: advice.iom@dixcart.com

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

Dixcart’s Corporate Comparison Guide- a Successful Start to Planning

Posted on | by Charlotte McGonigle

In our continuous commitment to providing valuable tools for our clients, we are excited to introduce the all-new ‘Corporate Comparison Guide’ on our website. This interactive and user-friendly feature empowers clients to efficiently compare key corporate information across the seven jurisdictions where we operate. From corporate tax rates to filing requirements, this guide offers an in-depth analysis of crucial factors for informed decision-making. There are many considerations when deciding where might be the best jurisdiction in which to establish a company. Dixcart’s Corporate Comparison Guide can assist in this process by detailing key information regarding corporates in a number of jurisdictions. 

Key Features:

Comprehensive Comparison:

User-Friendly Interface:

We understand the importance of simplicity and efficiency. Our user-friendly interface ensures a seamless experience, enabling users to navigate effortlessly through the comparison guide. Accessible dropdown menus, clear categories, and intuitive design make the process smooth and enjoyable.

Quick Comparison and Analysis:

Users can compare up to four jurisdictions at a time, streamlining the fact gathering process. This feature is particularly valuable for businesses considering expansion or investors exploring opportunities in multiple locations.

Multi-Platform Accessibility:

Access the Corporate Comparison Guide seamlessly across multiple platforms. Whether you’re using a desktop, tablet, or smartphone, our responsive design ensures a consistent and optimised experience.

Explore our Corporate Comparison Guide here and take the first steps towards understanding more about corporates across diverse jurisdictions.

Before any final decision is made, we recommend that professional advice should always be taken. Dixcart Group has a corporate department in each of our offices and would be delighted to help: advice@dixcart.com

Swiss Regulation: 2023 Overview and What to Expect in 2024

Posted on | by Charlotte McGonigle

The Reputation of Swiss Companies

Even by the end of January 2024, Switzerland had already introduced new regulations, which will influence various aspects of business operations, demanding attention, and adaptation from enterprises both large and small.

Notable changes for 2024 include:

A. Increase of Swiss VAT rates:

Effective January 1, 2024, The VAT on goods and services has experienced an increase, climbing from 7.7% to 8.1%. Similarly, the reduced rate has undergone an increase, moving from 2.5% to 2.6%.

B. Multinationals Minimum Corporate Tax:

In a global context, Switzerland aligns itself with the evolving international tax landscape by implementing the Multinationals Minimum Corporate Tax. In adherence to the OECD/G20 directives, large multinational entities find themselves subject to a baseline tax rate of 15%.

C. Abolition of Swiss Import Duties:

Notably, the year 2024 sees the abolition of Swiss import duties. The elimination of industrial tariffs not only streamlines the Swiss tariff structure but also places Switzerland in a competitive situation with other global economies.

2023 Overview

Please see below a detailed overview of the key developments, that took place in 2023:

A. Treaties

Switzerland and the UK signed a bilateral treaty on 21 December 2023 for mutual recognition in financial and insurance services. This treaty is based on mutual recognition of the equivalent respective national laws and regulations. It aims to enhance competitiveness and collaboration between these two major European financial centres, both operating independently from the EU. Common standards will be used for cross-border financial services in areas such as; insurance, banking, asset management and capital markets.

B. Data Protection Law (FADP)

The Federal Act on Data Protection, effective since 1 September 2023, aligns Swiss regulations with EU standards. FADP ensures the free movement of data with the EU, keeping Swiss companies highly competitive.

FADP introduced several obligations for companies, whether Swiss or international, that provide goods or services to Swiss citizens and processes their sensitive data. These include:

  • Communicate individuals’ rights and data collection to users and act according to their privacy preferences. Users must consent to the utilisation of their data.
  • Maintain updated records of processing activities.
  • Conduct Data Protection Impact Assessments.
  • Foreign companies must appoint a Swiss representative for data-related matters.
  • Train employees on data protection and privacy.
  • Notify users, the appropriate authorities, and shareholders of data breaches.
  • Companies can be fined up to CHF 50,000.
  • Wilful breaches may lead to fines of up to CHF 250,000.

C. Corporate Law Reform

Swiss Corporate Law changed significantly offering more flexibility in various areas, outlined below:  

  1. Share Capital
  • Companies can denominate their share capital in EUR, USD, GBP or JPY, provided the respective currency is the functional and financial reporting currency.
  • Minimum nominal value of a share can be any low fraction, as long as it is greater than zero.
  • Share capital can be increased/decreased within a predefined bandwidth of up to 50%, during a maximum period of five years, with potential tax benefits.
  1. Interim Dividends

Companies can pay interim dividends out of the current year’s earnings based, on an interim balance sheet.

  1. Audit Requirement

Companies must have their financial statements audited by an external auditor, if their net assets no longer cover half their nominal share capital and the portion of the statutory capital and profit reserve, that is legally restricted or reserved for specific purposes.

  1. Shareholders and Board Resolutions

Various meeting formats, including physical, virtual, multi-location and circular resolutions, have been introduced to accommodate modern communication methods. Read more about these obligations here Swiss Director Obligations: Why It Is Important to Get It Right (dixcart.com)

  1. Minority Shareholder Protection

The reforms strengthen minority shareholder protection by; simplifying procedures and expanding their rights, increasing transparency, and promoting efficient/electronic communication: 

  1. Lowered thresholds for requesting Shareholders General Meetings and adding agenda items.
  2. Elimination of certain thresholds.
  3. Right to request company information (10% share capital/votes), and inspect records (5%).
  4. Board of Directors must respond within four months.
  5. Modernised annual report communication with electronic accessibility.

This simplified summary highlights the main changes introduced by Swiss Corporate Law Reform. For further information, please refer to our article Swiss Corporate Law Reform: The Key Changes (dixcart.com)

D. Anti-Money Laundering

Since 1 January 2023, any association which primarily collects or distributes assets abroad for charitable, religious, cultural, educational, or social purposes must be registered with the Commercial register. Registered associations must maintain a member list and have a Swiss-domiciled representative.

The compliance deadline is 30 June 2024.

Additional Information

The Dixcart Office in Switzerland can provide a detailed understanding regarding Swiss corporations, their incorporation, management, and administration. We can also detail the obligations that need to be met.

If you need further information and/or require guidance regarding completion of a Swiss corporate tax return, please get in touch: advice.switzerland@dixcart.com.

The UK Economic Crime and Corporate Transparency Act 2023 – The Proposed Changes to Companies House Explained

Posted on | by Charlotte McGonigle

What is the purpose of the Act and who will it affect?

On 26th October 2023 the Economic Crime and Corporate Transparency Act 2023 (ECCTA) passed into UK law, marking the most significant change to Companies House since its inception. Its leading principle is that Companies House will be afforded greater powers in a bid to tackle economic and financial crime and address other abuses of the register.

The changes will bring added responsibilities for new and existing directors, persons of significant control (PSCs) and any agents who file on behalf of a company, as Companies House will be able to impose sanctions for incorrect or misleading information, or if the company fails to comply with the new registration requirements.

Companies House plans to introduce measures from March 2024 onwards affecting the following entities:

  • private limited companies
  • public limited companies (PLCs)
  • limited liability partnerships (LLPs)
  • limited partnerships (LPs)
  • community interest companies (CICs)
  • overseas companies

Companies House published guidance in its blog on 22 January 2024 regarding the first set of changes coming into effect on 4 March 2024: Get ready for changes to UK company law – Companies House (blog.gov.uk)

What are the changes?

  1. Confirmation statements and registered office addresses – from March 2024

Every company, including dormant and non-trading companies, will need to file a confirmation statement at least once a year, even if there have been no changes during the review period.

Furthermore, to ensure information on the register is accurate and up-to-date, companies will need to provide an appropriate address for the registered office to which correspondence will be received by a representative of the company. Companies will no longer be able to use a PO box as a registered office address, and Companies House will have powers to query and challenge addresses it believes to be inaccurate and, more widely, information it suspects to be incorrect. The enforcement tools at its disposal include:

  • Financial penalties
  • An annotation on the company’s record
  • Prosecution
  • Strike companies off the register
  1. Statement of lawful purposes – from March 2024

When incorporating or registering a company, subscribers of that company will be asked to provide a statement confirming that the purpose of formation is for a lawful purpose, and that future activities will also be lawful.

  1. Identity verification – date of introduction TBC

Another significant change is the future introduction of identity verification for all PSCs and directors of a company, including companies already on the register. To deter those setting up companies for illegal purposes, verification will need to be done either directly with Companies House or by using an Authorised Corporate Service Provider (ACSP), such as solicitors or accountants. For LPs, this must be done solely through ACSPs to ensure that information is from a trustworthy source.

Companies House has confirmed there is not yet a date of introduction and more information is to follow. For PSCs and directors of existing companies, there will be a transition period once introduced to allow reasonable time for adjustment to the new requirements.

The Dixcart UK Legal department is an Authorised Corporate Service Provider (ACSP) and can assist with verification.

  1. Higher fees – date of introduction TBC

Companies House fees will be increasing in 2024 to cover the costs of the enforcement powers, although we await further guidance on what these fees will be.

  1. Software-only filing – date of introduction TBC

Over the next 2 – 3 years, Companies House plans to shift towards a system of filing by software-only, applying to directors who file accounts themselves as well as third party agents like solicitors.

  1. “Failure to Prevent Fraud”

Significantly, the ECCTA includes a new criminal offence which makes companies and partnerships liable for failing to prevent fraud by employees or representatives for the benefit of the organisation. Those who hold a position within the organisation of “senior manager” or higher will be liable for conviction if an economic crime is committed.

Further guidance is expected from Companies House as to when we can expect all measures to be implemented and updates will be released accordingly. For additional details see the gov.uk website.

For more information from us, or if you wish to discuss using an ASCP, please use our enquiry form or email us at advice.uk@dixcart.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

What is an Isle of Man 2006 Act Company?

Posted on | by Charlotte McGonigle

The Isle of Man Companies Act 2006 (CA 2006) introduced what is commonly referred to as the New Manx Vehicle (NMV). Companies incorporated under the Isle of Man Companies Act 2006 provide a more modern and dynamic form of corporate entity than those constituted under the more traditional Isle of Man Companies Act 1931.

Whilst the NMV has been with us for almost 20 years, clients and their advisers often ask about the CA 2006 Company’s features and when they offer a more appropriate solution. We hope that this short overview offers a starting point, but always welcome any questions clients and advisers may have.

Why Incorporate your Company in the Isle of Man?

The Isle of Man is ‘whitelisted’ by the OECD in recognition of the Island’s commitment and leadership in improving transparency and establishing effective exchange of information in tax matters. The Island is globally regarded as a well-regulated offshore financial centre and enjoys strong relationships with all major banking institutions. Further, the Island offers a blend of business-friendly and politically agnostic government, enduring legislation, reliable Case Law and a very beneficial tax regime. Headline rates of taxation include:

  • 0% Corporate Tax
  • 0% Capital Gains Tax
  • 0% Inheritance Tax
  • 0% Withholding Tax on Dividends
  • The Isle of Man is in a customs union with the UK, and Isle of Man companies can register for VAT in the UK

For more a quick overview of the Isle of Man as a jurisdiction and why it is a great choice for incorporating your international Corporate Structure, please see the video below:

Features of the Isle of Man 2006 Act Company

The Isle of Man Companies Act 2006 offers an administratively streamlined corporate vehicle that significantly reduces the bureaucratic burden of operating an Isle of Man Company. For instance, the Act only requires simplified reporting and minimal meetings to sanction certain actions.

Isle of Man CA 2006 Companies also allow for greater flexibility in their Corporate Governance, for example, there may be a single individual or Corporate Director and there is no requirement for a Company Secretary. However, a Registered Agent must be appointed at all times, which you can read about here.

Further, you can now re-register an Isle of Man CA 2006 Company to a CA 1931 Company.

Common uses for NMV Companies

The CA 2006 Company’s Objects are not restricted, and therefore the entity can undertake any lawful activity required, subject to the Risk Appetite of the selected Trust & Corporate Service Provider.

Whilst the Company can pursue any activity, there some common uses of the NMV:

  1. Equity Holding
  2. Private Investment
  3. Luxury Asset Holding e.g. Superyachts
  4. Real Estate Holding

You can read more about Isle of Man Companies here.

How can Dixcart Assist?

Choosing the right Trust & Corporate Services Provider is vital to the success of your structuring. Dixcart Management (IOM) Ltd is a well-established Trust & Corporate Services Provider that is Licensed and Regulated on the Isle of Man and is a member of the Dixcart Group. The Dixcart Group remains proudly privately owned by the same family after more than 50 years.

Our long-standing industry presence underscores our proficiency in navigating the complexities of corporate management and governance.

Contact us

If you require further information regarding the use of Isle of Man Corporate entities or Trusts, please feel free to get in touch with Paul Harvey at Dixcart: advice.iom@dixcart.com

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

Offshore Trust Solutions for HNWI’s Moving to the UK

Posted on | by Megan Raguro

Reforming the UK’s Non-Domicile tax regime is an objective contained within the Labour Party’s policy platform. An incoming Labour Government is a distinct possibility at the next General Election, which is due to be held no later than 28th January 2025, but is widely expected to be held during 2024.

Labour have regularly discussed the intention to scrap the current Non-Domicile regime in favour of a modernised scheme for people genuinely living in the UK for short periods.

So, what do High-Net-Worth-Individuals (“HNWIs”) coming to the UK need to be aware of, and what structuring opportunities do they currently have open to them?

In this article, we take a brief look at how Offshore Trusts can be utilised to protect and grow the non-UK wealth of non-UK HNWIs coming to the UK to live and work. We’ll consider:

  1. An Overview of the Non-Domicile Regime
  2. What is an Offshore Trust?
  3. Offshore Trust Solutions for Non-Domiciled Individuals
  4. How Dixcart can Support Offshore Trust Planning?

1. An Overview of the UK Non-Domicile Regime

Domicile is a foundational Common Law concept recognised within countries such as Australia, Canada, India, USA and the UK. Domicile goes beyond nationality, residence or ethnicity and is defined by where the individual is considered to have their permanent home or have a substantial connection to.

An individual can only have one Domicile at any one time, which has relevance in determining the territorial law applicable to various matters such as those relating to areas of taxation, for example,  UK Inheritance Tax.

A UK Domiciliary is subject to UK taxes on their worldwide assets, income and capital gains on an Arising Basis; a system of taxation found in many other countries. In the UK, a person can acquire a UK Domicile in five broad ways, but the three most common are:

  1. Domicile of Origin
  2. Domicile of Choice
  3. Deemed Domicile

Non-Domiciled individuals that move to the UK will remain Non-Domiciled for so long as they have not acquired a Domicile of Choice or become Deemed Domicile.

Whilst the individual remains Non-Domiciled, there is no exposure to UK Inheritance Tax (“IHT”) on non-UK situs assets. Further, those who have a Non-Domiciled tax status can opt to be taxed on a Remittance Basis, which may provide tax efficiencies depending on the individual’s circumstances and in accordance with professional tax advice received.

As such, those Non-Domiciled persons have an opportunity to utilise a respected tax neutral jurisdiction, like the Isle of Man, to structure their non-UK affairs in an efficient manner​​​​ and optimise any potential returns.

As noted previously, the current Non-Domicile regime is likely to be subject to reforms in the medium to long term. For the time being, however, the tried and tested structuring options are available for Non-Domiciled persons to utilise and may be pertinent under any shortened or revised system going forward.

A mainstay of pre-arrival planning for Non-Domiciled HNWIs is the Offshore Trust.

2. What is an Offshore Trust?

A Trust is a fiduciary arrangement whereby an individual (the “Settlor”) transfers legal, but not beneficial or equitable, ownership of property/assets to a person or persons (the “Trustee”) to hold for the benefit of their chosen beneficiary or a class of beneficiaries (the “Beneficiaries”).  

The term, Offshore Trust, refers to a Trust that is settled and managed in a separate jurisdiction from the Settlor’s home country. In the instance of an Offshore Trust for a UK Non-Domiciled individual, this involves the settlement of a non-UK jurisdiction Trust and the appointment of non-UK Trustees. This renders the Trust subject to a foreign legislative, regulatory and/or tax regime, normally providing the Settlor and the Beneficiaries of the Trust with efficiencies.

You can read more about Offshore Trusts here.

The Trustees, often professionals, own and manage the Trust assets in accordance with the Settlor’s wishes and ordinarily for a specific purpose such as family wealth preservation, asset protection or tax optimisation. The Trust Deed details the arrangement and parties, acting as the constitutional document of the Trust.

You can read more about choosing your Professional Trustees here.

Importantly, Trusts are not incorporated entities i.e. they do not possess limited liability or separate legal personality like a company or corporation. For instance, it is the Trustees, and not the Trust, that can sue or be sued, contract with third parties and/or create charges.

3. Offshore Trust Solutions for Non-Domiciled Individuals

According to suitably qualified tax professionals, it is often advisable for High-Net-Worth, Non-Domiciled individuals to defer their UK tax Residency to allow for appropriate wealth planning to be implemented. Ideally, this means that any pre-arrival planning needs to take place prior to the start of the first tax year of UK Residence.

The concept of Clean Capital is particularly important with regards to the Non-Domiciled individuals’ pre-arrival planning. Among other things, Clean Capital describes income and gains received whilst non-UK Resident that can be remitted to the UK post tax residency without a tax charge. After the foreign Domiciliary becomes UK Resident, foreign income and gains arising are not considered Clean Capital and may be taxable on remittance to the UK.

In practice, the individual has a number of options open to them regarding the protection and investment of their non-UK assets, one of the most flexible that we regularly assist clients with, is the establishment of a Protected Trust, which can play an integral role in both pre-arrival planning and for those nearing deemed domicile status.

Protected Trusts

Introduced in 2017, a Protected Trust is a Trust settled by a Non-Domiciled individual before becoming Tax Resident in a new country. The main aim of such a Trust is to protect the foreign Domiciliary’s overseas assets from the tax regime of their new country of Tax Residence.

This structure normally involves the incorporation of an underlying Holding or Investment Company to undertake the active management of those settled assets.

It is common for the Trust to be settled with a nominal amount of cash initially, and for the remainder of the Clean Capital to be loaned to the Trustee by the Non-Domiciled individual. Thereby allowing the Trust Fund to be invested in non-UK situs assets and the foreign Domiciliary to receive loan repayments of Clean Capital without a tax charge on remittance. This is also true of any growth or income derived from these assets, which is also considered Clean Capital.

Further, provided that UK-source income is avoided, income and gains within the Protected Trust can compound free of tax, whilst the Trust falls under the Protected Settlement Regime. In principle, this will continue for so long as the Settlor remains Non-Domiciled, and the Trust Fund is not tainted.

If you would like to find out more about the nature and scope of Trusts, and common pitfalls, we have created a series of helpful notes on Isle of Man Trusts for your reference:

  1. Offshore Trusts: An Introduction (1 of 3)
  2. Offshore Trusts: Types and Uses (2 of 3)
  3. Offshore Trusts: Misunderstandings, Pitfalls and Solutions (3 of 3)

There is also this companion video presentation:

4. How Dixcart can Support Offshore Trust Planning

The Dixcart Group have been serving international clients for over 50 years and the Group remains proudly, privately owned by the same family. Our office in the Isle of Man has been in operation for over 30 years, reflecting our expertise and experience as professional Trustees and Corporate Service Providers.

The Isle of Man is a highly regarded OECD whitelisted jurisdiction with a long running track record in fiduciary and professional services. The Island is a centre of excellence for Private Client structuring and is particularly well suited to establishing Protected Trusts for people moving between jurisdictions, including moving to the UK.

At Dixcart Isle of Man, we specialise in services for HNWIs seeking to establish Trusts. Our approach to business is focused on maintaining high-quality, long-term client relationships, prioritising bespoke service over the quantity of clients we have.

Our Isle of Man team comprises of qualified Trust professionals and experienced senior staff, who are tax aware and always on hand to offer comprehensive support in actioning your Trust planning at every stage.

Get in Touch

If you would like to discuss how our Isle of Man office can support your Trust and Corporate planning, please get in touch with Paul Harvey or Glenn Blevins via: advice.iom@dixcart.com

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

Guernsey

What Benefits do Guernsey Companies Offer for Family Offices and HNWI’s?

Posted on | by Charlotte McGonigle

Guernsey, as an independent, self-governing jurisdiction, is a premier international financial centre, with an enviable reputation and excellent standards. It is one of the leading jurisdictions providing international corporate and private client services and has developed as a base from which internationally mobile families can organise their worldwide affairs through family office arrangements.

Factors contributing to and enhancing the status of Guernsey include:

  • A general rate of tax payable by companies of zero.
  • There are no wealth taxes, no inheritance taxes, no withholding taxes on dividends, no capital gains taxes and no VAT.
  • Individuals relocating to the Island can effectively elect to pay tax on their Guernsey source income only, capped at £150,000, or on their worldwide income capped at £300,000.
  • The Companies (Guernsey) Law 2008, the Trusts (Guernsey) Law 2007 and the Foundations (Guernsey) Law 2012, reflect Guernsey’s commitment to providing a modern statutory basis and increased flexibility for companies and individuals using the jurisdiction of Guernsey. The laws also reflect the importance placed on corporate governance.
  • Guernsey’s Economic Substance regime was approved by the EU Code of Conduct Group and endorsed by the OECD Forum on Harmful Tax Practices in 2019
  • Guernsey is home to more non-UK entities listed on the London Stock Exchange (LSE) markets than any other jurisdiction globally. LSE data shows that at the end of December 2022 there were 105 Guernsey-incorporated entities listed across its various markets.
  • Legislative and fiscal independence mean that the Island responds quickly to the needs of business. In addition the continuity achieved through the democratically elected parliament, without political parties, helps deliver political and economic stability.
  • A wide range of internationally respected business sectors: banking, fund management and administration, investment, insurance and fiduciary. To meet the needs of these professional sectors, a highly skilled workforce has developed in Guernsey.

FORMATION OF COMPANIES IN GUERNSEY

General information is detailed below outlining the formation and regulation of companies in Guernsey, as embodied in the Companies (Guernsey) Law 2008, as amended.

  1. Incorporation

Incorporation can normally be effected within twenty four hours.

2. Minimum Capitalisation

There are no minimum or maximum capital requirements. Bearer shares are not permitted.

3. Directors/Company Secretary

The minimum number of directors is one. There are no residency requirements for either directors or secretaries, but substance requirements should be considered.

4. Registered Office/Registered Agent

The registered office must be in Guernsey. A registered agent needs to be appointed, and must be licensed by the Guernsey Financial Services Commission, or there must be a Guernsey resident director.

5. Annual General Meeting

Members can elect not to hold an Annual General Meeting by Waiver Resolution (requiring a 90% majority).

6. Annual Validation

Each Guernsey company must complete an Annual Validation, disclosing information as at 31st December of each year. The Annual Validation must be delivered to the Registry by 31st January of the following year.

7. Audit

Members can elect for the company to be exempt from the obligation to have an audit by Waiver Resolution (requiring a 90% majority).

8. Accounts

There is no requirement to publicly file accounts, although they are required to be filed with the Guernsey corporate tax return. Proper books of account must be maintained and sufficient records must be kept in Guernsey to ascertain the financial position of the company at no greater than six monthly intervals.

9. Taxation

Resident corporations are liable to tax on their worldwide income. Non-resident corporations are subject to Guernsey tax on their Guernsey-source income.

Companies pay Guernsey corporate tax at the current standard rate of 0%. Income derived from certain Guernsey based businesses, such as utilities and financial services, may be taxable at a 10% or 20% rate.

Additional Information

If you would like additional information regarding the formation of companies in Guernsey and the fees that Dixcart charge, please contact: advice.guernsey@dixcart.com

Dixcart Trust Corporation Limited has a Full Fiduciary Licence granted by the Guernsey Financial Services Commission

A Comprehensive Guide to Company Re-domiciliation: Exploring the Legal Framework and Benefits in Cyprus

Posted on | by Megan Raguro

Introduction

In today’s globalised economy, businesses often seek favourable environments to expand their operations and optimise their corporate structures. Cyprus, known for its strategic geographical location and business-friendly regulations, has emerged as an attractive destination for company re-domiciliation. Through its accommodating legal framework and a host of advantageous provisions, Cyprus has positioned itself as a preferred jurisdiction for businesses aiming to relocate.

This article examines the intricacies of the re-domiciliation process in Cyprus, highlighting the key legal considerations and eligibility criteria. In addition, it sheds light on the array of benefits that await companies opting to make Cyprus their new home, including: its favourable tax regime, extensive network of Double Tax Treaties, and robust infrastructure of support services.

Legal Framework

The Republic of Cyprus is included in the list of jurisdictions that allow the re-domiciliation process including, the transfer of legal ‘seat’ of foreign companies in and out of Cyprus, according to the Companies Law, Cap. 113.

The re-domiciliation process does not involve the company’s dissolution but instead the company remains and is considered to be the same legal entity, albeit governed by the laws of the new jurisdiction.

Re-domiciliation into Cyprus

Eligibility

  • The Laws of the country in which the foreign company is registered must permit the re-domiciliation process and allow the foreign company to exist as a company registered in Cyprus;
  • The documents of incorporation of the foreign company (Articles or Memorandum of Association) must contain a continuation provision that allows the foreign company to exist under the legal regime of another jurisdiction. If no such provision of re-domiciliation exists, then the M&AA Memorandum and Articles of Association must be amended to include such provision;
  • If the foreign company carries out a licensed activity in the foreign jurisdiction, it will need to produce evidence of the license and satisfy the local licensing criteria for the relevant activity in Cyprus;
  • Cyprus Law does not recognise bearer shares, therefore the authorised share capital of the foreign company, after it’s transfer-in to Cyprus, will have to be registered shares;
  • The name of the foreign company under which it will continue in Cyprus, needs to end with the word ‘’Limited’’. Therefore, possible names will need to be chosen with which the foreign company will be able to continue to exist once re-domiciled to Cyprus. An application needs to be made, in advance, to the Cyprus Registrar of Companies to obtain approval of the proposed name/s. The approval will be valid for 6 months from  issue.

Benefits

  • Cyprus has a corporate tax rate of 12.5%
  • Simple tax regime that is fully EU and OECD compliant
  • The following sources of income (subject to conditions) are exempt from corporate income tax:
    • Dividend Income        
    • Interest income, excluding income arising in the ordinary course of business, which is taxed under corporation tax.          
    • Foreign Exchange (FX) gains, with the exception of FX gains arising from trading in foreign currencies and related derivatives.
    • Gains arising from the disposal of securities.            
  • Additional tax incentives for equity financing/debt restructuring and IP qualifying profits that can reduce corporation tax up to 80%
  • Well drafted laws on Corporate and Commercial matters
  • Cyprus has concluded more than 65 Double Tax Treaties with other countries.
  • Excellent advanced infrastructure of services with highly skilled professional support such as, legal and accounting services.

Additional Information

For further information about the attractive tax regime for individuals in Cyprus, please contact Charalambos Pittas or Katrien de Poorter at the Dixcart office in Cyprus: advice.cyprus@dixcart.com.