corporate structures for internationally mobile people · •group a companies’ tax is assessed...

Corporate Structures for Internationally Mobile People

Panama City, Panama

October 2016

© 2016 LUGNA

Topics to consider

• Should I use a corporate vehicle to trade?

• Is my offshore corporate vehicle appropriate?

• Should I diversify?

• Banking and disclosure?

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http://www.lugna.pt/


Opportunities to think about

• Portugal and the E.U. – holding companies

• Madeira – 5% Tax rate

• Malta - 5% Corporate Tax Rate

• Macau – 0% Corporate Tax

• Maltese foundations as alternatives to trusts

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Portugal & Madeira Portuguese nearshore

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Lisbon Funchal

© 2016 LUGNA www.lugna.pt



Portugal & Madeira

• Madeira is a Portuguese autonomous region

• OECD and EU compliant jurisdiction

• Portugal’s Tax Treaty Network > 70

• Treaty with US and Canada

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• Swift and reasonable priced to incorporate

• Tax benefits for qualified shareholdings (participation exemption)

• No tax on inbound or outbound dividends (and foreign branch profits)

• No tax on capital gains derived from the sale of Portuguese or ForeignShareholdings

• Great to invest worldwide using local subsidiaries and branches

Portuguese Holding Company

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Qualified shareholdings

• 10% (direct or indirect) shareholding, held for a minimum12 month period

•The entity paying or receiving income is not resident in atax haven

• Profits/reserves are not costs or expenses for the entitythat distributes

•The company is not subject to a tax transparency regime

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Madeira International Business Centre• Portuguese Participation Exemption

• Corporate Tax Rate of 5%

• No withholding tax on royalties, services and interest paid to third parties

• No withholding tax on interest and other forms of payment for shareholderloans

• All principles of the EU Treaty apply to Madeira companies and theirinvestors, allowing IBC operators to have unrestricted access to the internalEuropean market without discrimination.

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Madeira International Business Centre

• International services - Trading, advisory, technical services, holding of assets.

• Industrial free trade zone

• International shipping register - Maritime transportation, registration of ships, oil rigs and commercial or pleasure yachts.

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Madeira International Business Centre

• Government of Madeira license (IBC)

• Must begin trading within six months of the date of licensing (one year for shipping activities);

• Have at least one paid employee or director (full-time or part-time) on its payroll; and

• If the company employs fewer than 6 employees during the first two years of activity - must make a minimum investment of Euro 75.000 in the acquisition of tangible or intangible fixed assets.

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MaltaLow Corporate TaxAsset Protection

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Valletta




Malta

• E.U. country

• Stable financial sector

• Low tax trading companies

• Asset protection using a Foundation

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Corporate Taxation

• Worldwide income taxation

• Statutory tax rate of 35% vs Effective rate of 5% (The amount ofMalta tax refunds is set at 6/7th of the Malta tax paid by theMalta company. Thus the Malta company would be subject totaxation at 35%, but shareholders would be entitled to claim back6/7 of this tax back)

• Whitelisted – OECD and EU compliant

• Tax Treaty Network > 60 Treaties

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Main Tax Benefits

• Effective corporate tax rate of 5%

• Tax on profits paid by the company distributing dividends is made availableto the shareholder as a tax credit, to avoid double taxation on the sameincome (for the company and subsequently for the shareholder).

• 0% shareholder dividend tax

• Participation exemption regime

• Absence of withholding tax on dividends, interest or royalties

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Other benefits

• Advance Tax Rulings – 5 years

• Absence of Transfer Pricing Rules

• Absence of Thin Capitalization rules

• No CFC rules

• Carry forward losses

• Early dividend is possible

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Foreignshareholders

Refund system

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Tax @ 35% - Revenue

Malta Holding Co.

Malta Co

Dividends are exempt

Profits

No withholding tax in Malta

Tax refund to shareholders of:

100% : Participation exemption

6/7 : Operational income

5/7 : Passive income

Amount of the refund depends on the nature

of the distributed profits and if these have

benefited, or not, of any double taxation

relief mechanisms.

Refund




Qualifying holdings

• Qualifying participating holdings

• 10% shareholding with two of the following rights:

(i) right to vote;

(ii) profits available for distribution; and

(iii) assets available for distribution on a winding up; or

• Option to acquire the shares + other special equity rights

• Entitled to sit on the Board or appoint a person to sit on the Board of that company as a director;

• Equity investment representing a total value (date of acquisition) of €1,164,000 + held for 183 days

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Participation exemption

• Dividend income from a participating holding may be exempt provided that the company in which the participating holding is held meets the requirements:

it is resident or incorporated in the EU;

it is liable to foreign tax at a rate of at least 15%; or less than 50% of its income is derived from passive interest or royalties

• Or if both the conditions below are satisfied:

the equity shares held in the non-resident company do not represent a portfolio investment

and the non-resident company or its passive interest or royalties have been subject to tax at a rate which is not less than 5%.

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The Maltese Foundation

• Based on UK’s Jersey legislation

• For private individual use or as a commercial entity

• Allows the holding of property irrespective of nationality or residence

• The laws of any jurisdiction other than Malta may govern the trust

• Low minimum capital requirements

• Trustees are highly regulated by the Malta Financial Services Authority (‘MFSA)

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Structure

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Founder

Administrator

Beneficiaries

Protector/ Council

Endowment

Rights of the founder:

• Founder may exercise supervision

over administration of the

foundation, obtain copy or copies of

accounts, inventory & descriptive

notes of property

• May intervene in court proceedings

concerning the appointment of

administrators or the disposal of

assets

The founder may be a beneficiary

during his lifetime, but cannot then act

as sole administrator of the foundation

Duties of the administrator:

• Responsible for maintaining possession & control of the property of the

foundation

• Safeguarding such property & ensuring compliance with the deed of the

foundation & the law

• Bound by fiduciary obligations stipulated in the Civil Code

Supervisory Protector/Council:

• Exercise appointment or removal of

administrators

• Supervision over the acts of the

administrators & may be vested with

powers




Commercial applications

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Securitisation of Assets

Grant of Real or Personal Security Interests

Collective Investment Schemes

Employee Benefit or Retirement Schemes

Security OfferingsPortfolio Management

Syndicated Loan Agreements

Insurance Policies & Payment of Proceeds

Foundations must not be actively trading, but may hold trading assets




Tax

• Where no beneficiaries are resident in Malta• Tax transparent – 0%

• Opt to be treated as a company for tax purposes: • Taxed at 5%

• Participate in tax treaty network24




Liquidation

• Permissible to terminate a Private Foundation before its term, if:

• All beneficiaries demand

• If the Founder is still alive his consent is also be required

• Founder may in the Deed exclude such a right of the Beneficiaries

• Deed may determine how the assets remaining in the Foundation

are to be distributed on termination

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Macau




Macau

• Gateway to China

• Nil to low tax

• Simplicity & Low cost

• No foreign exchange control rules in Macau SAR

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Tax regime for companies

• Corporate profits exempt up to MOP 600,000 (around USD 75.000,00)

• Any profits in excess of this threshold are taxed at a 12% flat rate.

• Residence has no general relevance for tax purposes, as no distinction generally exists between residents and nonresidents.

• All income or profits earned are taxable in Macau SAR.

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Basis of assessment

• Taxpayers are divided into Group A and Group B.

• Group A companies’ tax is assessed based on the income disclosed in their tax return (companies that have maintained proper accounting books and records, with capital of MOP 1,000,000 and above or average assessed annual taxable profits in the past 3 years of more than MOP 500,000);

• While Group B tax is assessed on deemed profit basis.

• Taxation of dividends and capital gains

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Treaties & Withholding tax

• Only 4 Tax Treaties, but one is with Portugal…

• Portugal - Participation exemption valid

• No withholding taxes on income paid to nonresidents from anysource.

• Anti-abuse rules

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Company law & compliance

• Limited Company by Quotas (2 shareholders)

• Minimum capital requirement of MOP 25,000 (USD 3,100)

• Limited Company by shares (3 shareholders)

• Minimum capital requirement is currently MOP1,000,000 (USD 125.000)

• 15 days to incorporate

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Questions?And answers…

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Lisbon OfficeRua Rodrigo da Fonseca nº 9 – 3º B

1250-189 Lisboa

Portugal

Tel.: +351 21 131 04 08

Fax.: +351 21 131 04 08

E-mail: [email protected]

Web: www.lugna.pt

© 2016 LUGNA




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