THE SCHMIDT OFFSHORE REPORT
(Vol 2, no 3)
Contents
THE TAX CONSEQUENCES OF MOVING ABROAD
- Cyprus
- France
- Gibraltar
- Greece
- Guernsey
- Ireland
- Isle of Man
- Italy
- Malta
- Monaco
- Portugal
- Spain
- Switzerland
NEWS
- Arafat’s Money Found Offshore
- US Citizens Abroad Suffer Extra Tax Burden
- Ireland Targets Super Rich
- Samoa
- Australian Tax Office Employ Extra 180 People
- UK Multi-nationals Can Now Reclaim Tax
- UK Residents With Overseas Property Face Investigation
- Hiscox And Catlin Quit UK
- UK Accountants Brace Themselves For Anti-avoidance Rule
- EU Tax Officials Set Sights On Asia
- UK Treasury In Money-laundering Crackdown
- EU Attack Luxembourg’s Holding Regime
- Malta To End Favourable Tax Status For ITCs
- Zero-10 Go Ahead In Guernsey
- Uruguay Ends Tax-free Regime
THE TAX CONSEQUENCES OF MOVING ABROAD
Has it always been your dream to move – perhaps retire – abroad? Are you tempted by thoughts of a warmer climate, tastier food, more relaxed lifestyle, higher standard of living and better health care? Obviously, you don’t want to select your new country of residence solely on the basis of its taxation levels. Nevertheless, if you don’t plan properly, you could find the price of emigration somewhat higher than you had anticipated. This is especially true within Europe, where the tax treatment of foreigners differs dramatically.
This article summarises the tax position for someone planning to retire to the more popular EU destinations. Its purpose is to give you an overview of the situation in each country. Of course, before making any decision to move, you should take detailed advice both from your UK accountant and from an adviser familiar with your proposed destination.
When considering the relative tax merits of any EU country, it is worth remembering that there are various different areas of taxation which could affect you. These are:
- taxes on personal income
- taxes on property
- taxes on businesses
- taxes on goods and services (VAT and other duties)
- taxes on deceased estates (inheritance tax or death duties).
Cyprus became part of the EU in 2004, but long before then the Cypriot Government have implemented favourable policies designed to attract foreigners to the country.
You are considered resident in Cyprus if you spend more than 183 days a year in the country.
Personal tax rates
Taxable income |
Tax rate |
Cyprus pounds (CYP) |
% |
0–10k |
0 |
10k–15k |
20 |
15k–20k |
25 |
Over 20k |
30 |
There are various useful deductions, but the real benefits flow from the generous tax exemptions. These include:
- interest
- dividends
- lump sums received as a result of retiring
- capital sums accruing from any payments to approved funds (i.e. provident funds)
- profit from the sale of shares, bonds, debentures, options etc.
There is, however, a special tax called ‘special defence contribution tax’ imposed on certain forms of income received by Cypriot residents. This is charged at between 3% and 15%.
Foreign pensions are taxed at 5%, but there is an annual exemption of CYP2000. Thanks to double-taxation treaties with over 32 countries, including the UK, it is usually possible to arrange to pay tax on, say, a UK pension at the Cyprus rate.
With regard to capital gains tax (CGT), it is only really applicable to immovable property (including shares in companies that own immovable property) in Cyprus, at which point 20% is levied. It is not payable on the sale of shares listed on any recognised stock exchange.
There is no inheritance tax (IHT) and no wealth tax. However, there is a property tax, which runs at 0% (properties under CYP100,000 in value) to 4% (for properties worth over CYP500,000).
The standard rate of VAT is 15%.
If you are not Cypriot, you can dispose of your estate freely through the use of a will.
Personal tax rates in France are high and, as if this were not bad enough, the system is extremely complicated.
This year (2006), the higher rate of income tax has fallen from 48.09% to 40%. This higher rate is applicable on taxable income above €49,624. In addition to income tax, taxable income is subject to the ‘social contributions tax’ (broadly similar to the UK’s national insurance) at a flat rate of 11% on income (dividends, interest, capital gains etc.), 8% on wages and 6.6% on pensions.
Personal tax rates
Taxable income |
Tax rates |
Euros |
% |
Under €5,515 |
0 |
€5,515–€11,000 |
5.5 |
€11,001–€24,432 |
14 |
€24,433–€65,500 |
30 |
Above €65,500 |
40 |
French residents also suffer local taxes in respect of their main residence, and wealth taxes. However, the total amount due in tax cannot exceed 60% of total income.
The rate of tax may be affected by age and marital status. A foreign private pension will be taxed in France but, thanks to double-taxation treaties, may be free of tax in its country of origin.
Wealth tax is applicable to any French resident’s worldwide assets and will be charged at between 0% (assets under €750,000 in value) up to 1.8% (assets over €15,530,000). There is also a real-estate tax (taxes foncières), which is set each year by local government. If you rent a home, you will also be liable for housing tax (taxe d’habitation), which is also set annually.
CGT is levied on residents of France on sales of securities at the rate of 16% (whenever total sales of securities in a tax year exceed €15,000), added to which there must also be paid the social contribution tax at the rate of 11% – making a total of 27%. Property gains are subject to CGT at a flat rate of 27%, although a main residence will be exempt. It is not wise to hold French residential property through a company or trust (with a few exceptions), as this will usually increase the amount of CGT paid. There is little that can be done to reduce tax exposure through offshore vehicles. Indeed, the use of offshore vehicles generally exposes one to a higher tax rate.
French inheritance and gift tax may be charged at a rate of up to 50%. The rate is at its lowest between spouses, who enjoy a €76,000 reduction together with a €50,000 specific basis reduction. However, surviving spouses may still pay up to 40% in IHT.
It is to be noted that French law contains various rules relating to how an individual may dispose of his or her estate.
The standard rate of VAT (TVA) in France is 19.6%.
What can be done to reduce the tax bill in France? Pre-immigration planning can produce some reductions. You should look at creating an irrevocable discretionary trust in a foreign but onshore jurisdiction, such as the United States. If properly designed, this may help with wealth tax, IHT and income tax. It may also avoid being caught up in the French forced-heirship rules. Life-insurance policies may also be of some assistance. It is wise to sell business and other investments prior to moving to France so as to reduce CGT on arrival.
One of the big advantages of Gibraltar is that it’s never imposed any CGT or wealth tax of any sort. Furthermore, there has been no IHT since 1998. Indeed, the only tax of any relevance is income tax. This is charged on residents at graduated rates starting at 17% and rising to 45%. However, the liability to income tax can be significantly reduced if certain conditions are met. Basically, if you become resident in Gibraltar (either by being present for 183 days in a single year or an average of 90 days over a period of five years) and you don’t become employed in the jurisdiction, you could qualify for Category II Individual Status. This specifies that, provided you have a net worth of two million pounds, you will only pay income tax on the first fifty thousand pounds of taxable income. This applies irrespective of all worldwide income whether remitted to Gibraltar or not. As a Category II individual, the minimum income tax you will have to pay is £14,000 and the maximum is £20,000.
There are few other taxes in the dependency. A property stamp duty of between 1.26% and 2.5% may be applicable on the purchase of a property. There is no sales tax, but there is an import duty of between 0% and 12%. There is double-taxation relief, too, which helps to mitigate tax liabilities incurred overseas.
Although there are plans in Greece to drop the higher level of income tax to 25%, it is currently 40%. Furthermore, the higher rate of income tax is applicable on all income (with the exception of that derived from shipping) over and above €23,600.
On the plus side, the CGT regime is relatively mild. There is a 5% CGT from the sale of shares in companies and a 20% CGT on property. IHT is extremely complicated as the rate varies according to the relationship between the deceased and the beneficiary. For parents, children or a spouse, the IHT rate will vary between 5% and 20%. More distant relatives could pay as much as 30%, and non-relatives could pay 40%.
There is no wealth tax, but there is a property tax – though for a couple it only applies to properties over €486,000 in value. The rate is between 0.3% to 0.8%.
Sales tax (VAT) is charged at 19%.
The use of offshore trusts, companies and other offshore vehicles in order to reduce your exposure to tax is not allowed. An extensive range of tax treaties exists ensuring that, for instance, a private pension paid in one country to a resident of another country is taxable in the place of residence. This means that UK tax rules would be applicable to a UK-sourced pension.
Guernsey has, for many years, worked hard to secure for itself a reputation as being a highly tax-efficient residence for foreigners. The standard rate of income tax in Guernsey is 20%, although there are personal allowances of between £8,250 and £19,500, which may lessen the effect of this rate. Worldwide income is all subject to income tax in Guernsey, and if you retire to the island you will have to pay UK tax on a UK-sourced pension.
On the plus side, there is no CGT in Guernsey; nor is there IHT or wealth tax. You will have to pay local rates, and property speculation is not possible as a dwellings-profits tax charges such profits at the punitive rate of 100%! dwellings-profits tax, however, is not payable on owner-occupied properties. There is no sales tax (VAT) in Guernsey.
As you may have read in the media, Guernsey will be reforming its income tax specifically to attract high-net-worth individuals. As a result, the amount of income tax will be capped to make Guernsey competitive with other retirement options, such as the Isle of Man and Gibraltar.
If you move to Ireland and become resident, you can expect to pay income tax and CGT at the same rates as an Irish-born resident. Irish income tax is levied at the standard rate of 20% and at a higher rate of 42%. CGT is charged at 20%. There is no wealth tax. VAT is charged at 21%, and annual property taxes are tiny or non-existent. Stamp duty, on the other hand, is quite high and may be as much as 6%.
However, despite this apparently unfriendly tax regime, so far as foreign retirees are concerned, there are a number of rules that make the situation considerably better. Basically, a foreign retiree who, while resident in Ireland for the purposes of Irish income tax remains domiciled in his country of origin, will be subject to Irish income tax to the extent only that he receives that income in Ireland. Put in plain English, retirees will only be subject to tax on a remittance basis – income and capital gains not brought into the country should escape taxation.
The remittance basis opens up enormous opportunities for those interested in substantially reducing their income and CGT liabilities. However, to take advantage of these rules does require considerable flexibility. The rules are so complicated that it is impossible to even summarise them here. If you’re serious about moving to Ireland, it is, therefore, recommended that you find an Irish accountant familiar with dealing with foreign retirees and consult with them regarding your best course of action.
If you don’t mind living on a relatively small island in the middle of the North Atlantic, the Isle of Man – from a tax perspective – could be the ideal place to retire to. For many decades, it has worked hard to be at the forefront of attractive low-tax jurisdictions. To begin with, there is no such term as ‘residence’ or ‘ordinary residence’ in Manx law. Furthermore, ‘domicile’ is not applicable with respect to income tax. Generally speaking, if you visit the island over a period of four consecutive years for an average of 90 days a year, you will be regarded as resident. However, if you wish to be resident, you can, almost certainly, visit the island for shorter periods of time as far as the Manx Government are concerned. Therefore, provided you are not caught as a resident anywhere else, the Isle of Man makes it easy for you to be tax-resident there.
To be tax-resident in the Isle of Man is advantageous for a number of reasons. To begin with, income tax is capped at an income of £100,000 per individual. The rate is 10% on the first £10,500 of taxable income and 18% on the rest. This means that an individual moving to the Isle of Man can usually keep their annual tax bill to below £20,000.
There is no CGT on the Isle of Man; nor is there IHT or wealth tax. Sales tax (VAT) is charged at 17.5%, and there is a local property tax that – compared to the UK – is relatively small. The Isle of Man is very keen to attract new residents, and the tax authorities are extremely helpful and approachable. This makes it easy for someone moving to the Isle of Man to pre-agree their tax liability before arrival.
The Italian income-tax system is positively Byzantine in its application. The amount of tax you pay will be determined by your residence, domicile and the actual source of income. There are different rates according to whether your income is from real estate, capital, employment, independent work, a business or some other source. Rates are progressive and range from 23% to 39%, with a 4% surcharge tax on any income over €100,000.
The treatment of pensions depends on the source of the pension. Private pensions are charged at one level, whereas public pensions (basically, those received by anyone who worked for the Government) are charged at another level. Generally speaking, you’ll be charged at the Italian rate on a UK pension.
The taxation of income derived from capital other than dividends is 12.5%, while the tax on dividends runs at 40%. CGT is generally charged at 40%. However, on the plus side there is no IHT (although a 3% land transfer tax may be applicable). Nor is there wealth tax. However, you should familiarise yourself with the property tax system, since anybody who owns property in Italy is subject to both income and local tax. If it’s your main home, this tax can be avoided. What can’t be avoided is the imposta comunale sugli immobili (ICI). This is a local property tax that can be charged at up to 7%.
If you are planning to immigrate to Italy, pre-immigration planning is highly advisable. You should attempt to reduce your income exposure on certain categories of income – especially dividends, interest and capital gains. The use of an offshore structure may well be advisable.
Malta, which is now part of the EU, has a tax-friendly approach to anyone who wishes to retire there. Providing you don’t become employed locally, but instead take up residence as a ‘permanent residence permit holder’, you should be able to keep your total income tax liability to 15%. Furthermore, this will only be applicable to such income as you remit to Malta. In other words, your worldwide income should remain tax-free.
There is no property tax in Malta, no wealth tax and no IHT. There is, however, a stamp duty applicable to immovable property or shares in Maltese property. Sales tax (VAT) is imposed at between 5% and 18%. Note, if you remit capital to Malta, this can normally be received tax-free.
In order to be resident in Malta you must “retain sufficient links with Malta to signify that any absence from the Island during a particular period of time is occasional”. In other words, you will not have to observe the same sort of strict ‘day count’ that you would have to do in many other jurisdictions.
As with the Isle of Man, the Maltese tax authorities are only too keen to attract new residents to the island, and you will find them to be both approachable and flexible.
Residents of Monaco are in the happy position of not having to pay income tax, CGT, wealth tax or – in most instances – IHT. Instead, the country raises its money through something called business profits tax, which does not apply to residents.
The State is not party to any standard double-taxation agreements, so anybody who retires there will still be subject to any taxes that the source country levies. In this regard it is, obviously, difficult to reduce any liability on your UK pension.
The real problem for anyone wishing to move to Monaco is obtaining resident status. This is not automatic, even for UK citizens, as Monaco is not part of the EU. Nevertheless, the application process for any EU citizen is relatively easy. Property prices, on the other hand, are high. Furthermore, if you purchase a property, you can expect to pay an extra 9% in additional duty and taxes.
Monaco remains a fantastic location to live, from a tax perspective, providing you are sufficiently wealthy to afford the property. The only pre-immigration tax planning you may wish to consider is postponing any possible disposals of assets until you get there.
The charms of Portugal as a retirement destination go beyond its culture, climate and beauty.
Income tax starts at 10.5% and rises to a maximum of 42% on income over and above €60,000. Interestingly, the total income of a married couple will be divided into two and then taxed. The income-tax rules themselves are fairly complicated, and the same rules apply to capital gains. There is no IHT and no wealth tax – though there is some tax on certain expenditure such as that on cars, boats and houses. The sales tax (VAT) is high at 21%. There is property tax, and in particular a property-transfer tax.
Although the system may sound somewhat unattractive from these brief notes, it is possible, with careful planning, to reduce one’s liability. In particular, if you’re moving from the UK, the UK/Portugal double-tax treaty will work to your advantage, and so will the rules allowing you to split your income if you’re married. There are, also, generous allowances.
The taxable position of someone moving to Spain is as follows. If you live in Spain for more than 183 days a year, you will be liable to income tax and must pay this on your worldwide income, plus if you own assets over and above €108,000 you will also be liable to CGT on any capital gains. The maximum income-tax rate from 2007 will be 43%, and it kicks in for all annual income over and above €46,818. However, there are special provisions for those aged 52 and over, which help to bring down the income-tax costs. CGT is charged at 15%, which is anticipated to rise to 18% from next year. However, the sale of your own home, if you’re over 65 years old, is usually exempt. If you live in Spain, your estate will be subject to IHT – but this is set by the local regional authorities and is relatively low. A property tax, again local, exists and there is also a wealth tax, which is levied at between 0.2% and 2.5% – depending on your capital worth. It is anticipated that the wealth tax will be withdrawn in the near future. Sales tax (VAT) is levied at between 4% and 16% and is also applicable to the sale of new property at 7%.
The Spanish tax system is not particularly friendly to foreigners. However, it’s possible to convert the annual return of assets into capital gains and thus reduce the income-tax bill. The effect of this is that if you received an annual pension of, say, €150,000 you could probably get your tax bill down to below €60,000.
If you become resident in Switzerland, the amount of tax you pay will be determined largely by where you are resident. This is because tax is levied at three different levels: federal, cantonal and community. Most of this tax is payable to the canton and the local community, with only a tiny percentage going to the national government. If you choose to live in the lower-taxed cantons, such as Zug, you will pay substantially less tax than if you live in a higher tax canton, such as Zurich. In Zurich, for instance, you could pay up to 41% income tax. In Zug, on the other hand, you could expect to pay just 25%.
However, one highly attractive tax option in Switzerland is to pay a pre-agreed lump sum. If you do this, you’ll be taxed on expenses rather than on your income and wealth. Usually, taxable income is taken to be five times the rental value of your house or flat. For example, if the rental value of your home is SF20,000, the taxable income will be SF100,000 – no matter how much income you have or how high your net worth. Pensions, by the way, are only taxable in your country of residence.
Capital gains on private wealth are normally tax-exempt, and the rate of IHT depends on your relationship to the beneficiary. In most cantons, there is no tax on inheritances for spouses or children. There is a tax, however, on the gains from the sale of a property depending on how long you’ve held it. There is also a tax that can vary from 0% to 0.67%. There is a sales tax that can be up to 7.6%. There are all sorts of possibilities for reducing your tax exposure in Switzerland, including the use of offshore vehicles.
NEWS
Long before he died, there were rumours of Yasser Arafat’s incredible wealth. Forbes Magazine estimated it at US$200 million, while US and Israeli intelligence believe it to be closer to US$6 billion. From 1965 onwards Arafat set up offshore bank accounts in places as diverse as Switzerland, Austria, Luxembourg and the Cayman Islands. The level of corruption instigated or endorsed by Arafat was enormous. For example, in 1998 the EU found that US$20 million – earmarked for low-income housing – had actually been used by Arafat to build a luxury apartment complex for top Palestinian Authority officials. Between 1995 and 2000, the International Monetary Fund found that Arafat had diverted US$900 million of public Palestinian Authority funds into his own accounts. That was the year that Internet hackers reportedly managed to break into Arafat’s computer system and found details of more than US$5 billion stashed in secret accounts. Anyway, the new Palestinian Authority have been launching their own investigation and is starting to retrieve money stashed by Arafat and his widow, Suha.
US Citizens Abroad Suffer Extra Tax Burden
US citizens residing abroad are to be retrospectively taxed on their worldwide income. It is estimated that over the coming decade an additional US$2.1 billion will be raised as a result of the recently passed legislation. Basically, the new law effectively forces the majority of US citizens into a higher tax bracket.
The Irish Revenue Commissioners are completing a lengthy investigation into over 60 individuals and companies believed to be engaging in large-scale tax evasion. Last year, the Revenue obtained 24 convictions for serious tax and duty offences, three of which led to prison sentences. Following on from this success, it is now targeting an increasing number of individuals. In addition to looking at offshore accounts, the Revenue are chasing down individuals who took out single-premium policies.
Samoa’s offshore finance centre receives very little publicity, and as a result the Samoan Minister of Finance, Niko Lee Hang, has embarked on an international tour in order to promote it. His first stops were Singapore and Hong Kong, where he was accompanied by the Governor of the Central Bank and the Chief Executive Officer for the Samoan International Finance Authority. If you are looking for an unlikely tax haven, Samoa could be perfect for your needs.
Australian Tax Office Employ Extra 180 People
The Australian Taxation Office will employ an extra 180 people over the next four years to join their 93-member High Wealth Individual Task Force. In the coming year, this department will target a thousand individuals with personal wealth of at least A$30 million. Tax Office figures for 2005 showed that revenue collected from high-income earners has dropped by as much as 70% since the year 2000. The ATO believe that one of the reasons for this is that rich Australians are now making much greater use of international financial service centres.
UK Multi-nationals Can Now Reclaim Tax
As a result of the Cadbury Schweppes case, recently heard by the European Court of Justice, the UK’s controlled foreign company (CFC) rules will now be changed. Basically, this means that it is acceptable for a UK company to establish a CFC in a low-tax jurisdiction in order to benefit from the savings that this will bring. UK companies that have suffered UK CFC tax charges in the past should also consider claims to reclaim tax paid.
UK Residents With Overseas Property Face Investigation
UK residents who own holiday homes and other property overseas should be prepared for investigations by HMRC following the recent decision in their favour by the Special Commissioners of income tax. As has already been reported in earlier editions of TSR, Barclays Bank have been forced to reveal details of customers with UK addresses holding non-UK accounts. As one newspaper reports:
“Anyone who holds an offshore account or property and who comes to the notice of HMRC is likely, to say the very least, to receive an enabling letter from HMRC inviting them to disclose what they hold and how they acquired it, and to consider whether any UK tax arises from its possession.
“In many cases, the Inspector assumes from the outset that an overseas property has been purchased from untaxed funds, and that it is rented out. A taxpayer who has purchased an overseas property may be required to produce bank records going back several years to satisfy the Inspector that no rents had been received from letting the property. The Inspector is likely to require to see copies of all mortgage documents to check the level of income declared to get any loan, as well as the completion documents and all other legal paperwork.
“The exchange of information and mutual assistance treaties with overseas authorities enables the Inspectors to check information provided for accuracy. If the records to justify the investment or purchase of the property don’t exist, because of the passage of time, the taxpayer may be assessed to tax on the cost of the property or investment if the Inspector has a reasonable belief that you didn’t have the means to buy it from your declared UK income and can’t prove otherwise.
“Some British buyers have used overseas companies to buy property overseas to protect them from the host country’s wealth and property taxes. Those arrangements are increasingly being challenged by both overseas’ authorities and HMRC; and care also needs to be taken that unwary purchasers do not cause themselves real problems with tax resident issues in both jurisdictions, and profits and gains may have to be declared and may be liable to tax in the host country and the UK.”
Two of the UK’s leading insurers are leaving the UK in order to relocate to Bermuda. Hiscox, one of the largest insurers at Lloyd’s of London, have agreed with HMRC to transfer their base to Bermuda – a move that will mean a substantial increase in their profitability. They are joining their rival, Catlin, which moved there earlier this year. Catlin are now only paying 11% of profits in tax compared to nearly 30% being paid by Hiscox. Both insurers were said to be alarmed at the UK Finance Minister’s tax policy.
UK Accountants Brace Themselves For Anti-avoidance Rule
News has emerged that HMRC have launched a review looking into how countries such as Australia, New Zealand, Canada and Spain use general anti-avoidance tax laws. The current UK Government have been attempting to introduce an anti-avoidance rule for some time. However, the last time it was proposed, it was dropped after extensive opposition from UK businesses. Many UK tax advisers now believe that the introduction of anti-avoidance legislation is inevitable.
EU Tax Officials Set Sights On Asia
The European Union have named Hong Kong and Singapore as possible targets in their drive to tax wealthy citizens who have moved hundreds of billions of euros in savings offshore. Laszlo Kovacs, EU Tax Commissioner, wants to bring the booming Asian financial centres into Europe’s tax net, amid signs that tax avoiders are looking for more distant shelters for their money. Tax officials from the EU’s 25 member states have been considering the plan to extend the EU’s Savings Directive. But, although Mr Kovacs may receive a mandate to open talks with Hong Kong and Singapore, both of these two Governments are likely to resist any move that could damage their private-banking industry. Interestingly, the Monetary Authority Singapore say reports of massive in-flows have been exaggerated.
UK Treasury In Money-laundering Crackdown
Bureaux de Change and thousands of other businesses specialising in cashing cheques, transmitting money or converting currency have been facing tougher regulations designed to curb money-laundering and combat the financing of terror. The Treasury have recently outlined plans to beef up their policing of a sector that embraces 3,200 companies operating from 32,000 premises. The police have long worried that lightly regulated money services businesses are the weak link in Britain’s battle against money-laundering and terrorist financing. The new rules include a licensing system that will bar people with criminal records and unsuitable individuals from operating money-service businesses. With the licensing in place, HM Revenue & Customs, which regulate the sector, plan to bolster their policing of unlicensed operators. They will also insist that financial records be written in English to allow auditors to investigate companies suspected of turning a blind eye to criminal activity.
EU Attack Luxembourg’s Holding Regime
The European Commission have decided that the preferential tax regime in favour of Luxembourg’s Exempt, Milliardaire and Financial Holdings of 1928 violate EC Treaty State Aid rules. Under this legislation, exemptions from direct business taxation are granted to Luxembourg holding companies providing certain financial and capital-intensive services to related and unrelated business entities within a multinational group. The Luxembourg Minister of Justice announced that the Government would comply with the decision and would be proposing alternative tax structures for private-wealth and asset-management purposes.
Malta To End Favourable Tax Status For ITCs
The Maltese Government have agreed to amend their preferential tax treatment of international trading companies (ITCs) and companies with foreign income (CFIs) by the end of 2010. This is because the European Commission have deemed these tax regimes to be in violation of the State Aid rules of the European Union. It is anticipated that in the near future the Maltese tax system will become non-discriminatory and both residents and non-residents will be treated in the same way.
Guernsey’s Parliament have approved new taxation rules that include a ‘Zero-10’ corporate tax regime and the capping of personal tax at £250,00. Wealth taxes such as IHT and CGT will not be introduced. The main measures will come into effect from 1st January 2008. Basically, company profits will be untaxed, except for specific banking activities, which will be taxed at 10%. Guernsey residents will continue to pay tax at 20% on assessable income, but this will be capped at £250,000.
The Uruguayan Government plan to end their favourable treatment of financial investment corporations (SAFIs - Sociedad Anonima Financiera de Inversion also called the "Uruguayan holding company"), which currently enjoy a single tax of 0.3% on their fiscal equity. Under new proposals, SAFIs would cease to exist and in their place all non-resident entities would be taxed at a rate of 10% on their profits. Under the same proposals, a new dual rate personal income-tax system would be introduced, with progressive rates of tax from 10% to 25% on earned income, and a 10% flat rate on capital gains.
It is our intention to be as accurate in fact, detail, analysis and comment as possible. However, publishers and their representatives cannot be held responsible for any error in detail, accuracy or judgement whatsoever. The Schmidt Offshore Report is sold on this understanding. The Schmidt Offshore Report is commissioned and published by Wentworth Publishing Ltd, 17 Fleet Street, London EC4Y 1AA. Email: wentworth@online.rednet.co.uk Tel: 020 7353 6606. © Wentworth Publishing Ltd 2006. All rights strictly reserved. This publication may not be lent, hired, reproduced (in any way whatsoever) or re-sold. This information is authorised for personal consumption only.
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