Chairman: Milton Grundy
13-15 June 2018
Corporations are taxed at 25%. Partnerships are transparent. Taxation is based on residence. Income and capital gains are taxed at the same rate. Domestic dividends paid to a company are not taxed. There are participation privileges, and exemption on foreign portfolio income. R&D have a 14% premium exemption. There are provisions for group taxation and anti-avoidance rules. CFC rules are foreseen. Dividends and royalties (but not interest) suffer 20 to 27.5% withholding tax, subject to treaty relief. Rulings are available for some areas. Personal tax rates rise to 50% (55% in excess of €1m). A distinction is made between transparent and non-transparent trusts. There are special incentives for new residents with desirable skills. Austria complies with EU and international obligations, has a wide treaty network, VAT and several minor taxes, including a tax on documents, but no estate or gift tax or diverted profit tax. The Private Foundation serves private, non-charitable purposes. Contributions suffer a 2.5% tax. Income is taxed at 25% and distributions at 25%.
There are no tax-breaks or special tax advantages for football players. Unlike other sportsmen (golfers, tennis players), the newly introduced Italian res/non-dom regime is not applicable.
An inbound transfer may cause tax consequences for the player, depending on whether he is considered a resident in Italy or not. If he is a resident in Italy, credit is given for taxes paid in the state of origin. As a non-resident, he is taxable only on income arising from activities in Italy.
An intermediary fee paid by an Italian club suffers 30% withholding tax, subject to treaty relief. If the club discharges a player’s liability to pay a fee to an agent, that might be treated as a fringe benefit to the player. Proper drafting will serve to demonstrate what activity was conducted for the benefit of the club and what was for the benefit of the player. The agent with no permanent establishment will be able to claim treaty benefit.
Many factors – from the climate to the economic stability and experience in fund management, gaming and fintech industries – serve to attract new residents and new investments. The Individual Investor Programme offers citizenship but has no minimum physical presence requirement. A contribution (of €650,000 for the main applicant) to the social Development Fund, the purchase of a property and an investment of €150,000 are required. The Residence and Visa Programme offers permission to reside in Malta. There are requirements for minimum income and health insurance, and a €250,000 investment, a €30,000 contribution and property purchase or rental requirements. The Global Residence Programme offers a tax registration number and a tax rate of 15% on foreign income remitted (with a minimum annual tax of €15,000). There are language, qualifying property and residence requirements.
Personal income tax is dependent on residence. The non-domiciled resident pays tax on the source and remittance basic (with a minimum annual tax of €5,000 in certain instances). A tax residence certificate is available upon satisfaction of certain documentary evidence being provided to the tax authorities.
Companies are taxed at 35%, imputed to dividends, with 6/7th refund available to non-residents. The amount of tax refund varies depending on the source of income. Foreign companies resident in Malta by reason of their management and control, pay tax on a source and remittance basis only. The refund advantage may be utilised in various ways.
The purpose of the Twins Trust is that the beneficiaries should receive capital and not income. The beneficiaries are in two classes. In one trust, the income is accumulated for the ultimate benefit of class A, while class B beneficiaries receive benefits from the capital of the trust fund, and vice-versa is the other trust. It may be onshore or offshore. For offshore trusts with the UK beneficiaries the structure bypasses the “Section 720” provisions.
The Fortress Trust is an offshore discretionary trust with offshore beneficiaries. Members of an onshore family purchase the interests of the offshore beneficiaries and cause the trust fund to be invested in assets of their choice. While the purchased interests taken together have a value equal to the value of the trust fund, each of them is of no significant value, and accordingly the purchasers enjoy protection from creditors, wealth tax and inheritance tax.
The Managed Investment Platform is an offshore trust with a single principal beneficiary, also offshore, with power to surrender portions of its future interest from time to time for a cash sum. An onshore individual purchases the interest of the offshore principal beneficiary and from time to time assigns a portion of the future interest to a local bank for a capital sum.
The “sky-hook” is an offshore trust which takes advantage of its zero-tax status to –e.g.- to issue offshore bonds to onshore investors.
The impact of GAAR and disclosure requirements were considered.
A social security contribution is a payment levied on earnings, payable by the employer or employee or both. In the UK, there are possible ways of reading? NIC – e.g. by paying certain benefits such as mobile phones or employing certain people as apprentices. Rates vary widely between countries, as does the percentage of tax raised by social security contributions. The direction of travel is one of increasing rates, rising retirement age, more international agreements and greater transparency.
In planning, the questions to be considered are – Who is the employer? How is the employee paid? What is the status of the individual – employed or self-employed? The geographical status of the employee/the employment? Bilateral or multilateral agreements may be relevant. The UK/USA Reciprocal Social Security Contributions Agreement and the multilateral agreement with the EEA are the most commonly encountered.
Change and greater transparency are features of the last decade, in the field of international tax. FATCA, CRS and registers of beneficial ownership have already given governments a huge amount of information about taxpayers. In the EU, the next event will be the Fifth Money Laundering Directive. In the UK, a register of ownership of real estate is on its way.
Recent UK legislation purports to require register of beneficial ownership requirements to be extended to the overseas territories. There has been a general trend towards invasion of privacy and a perception that privacy conceals wrongdoing and that the ‘offshore’ label automatically denotes tax non-compliance. In the UK, the Criminal Finances Act 2017 targets banks and professional advisers.
The response has to be a flight to quality. Service providers cannot afford to have non-compliant clients. The reporting consequences of planning need to be taken into account: there are still many jurisdictions who do not have CRS, and thresholds vary from one jurisdiction to another. Cayman, Hong Kong, Singapore, the UAE and New Zealand have various advantages. Reputation is an important consideration.
Change of residence is now easier and no-tax-residency is possible.
The Civil Law Notary is not the same as a notary public; he is the link between the state administration and the population. The common law is sometimes said to be law made by gentlemen for gentlemen. It is derived from the concept that the individual search for happiness is a fundamental right. The continental law is a social contract between the state and its population. The difference is manifest in the way a house is bought and sold.
Public notaries are state-commissioned officials with narrow witnessing duties. Civil law notaries have a broad legal education, but are not advocates or solicitors, and, unlike them, are impartial. The notary has knowledge of the law and is bound by professional secrecy. He cannot refuse to draw up a deed. He has obligations of truthfulness, of clarity, to inform the parties and of impartiality. The notary holds the state seal and is subject to state supervision. His fee is decided by the State. He is not allowed to advertise.
The authentic act insures the authenticity of the contract and confers enforceability of the deed, which is designed to limit the number of disputes between parties. Disputes are significantly lower in civil law countries, where there are fewer than 0.003% of claims, as supposed to 6.1% of claims in the USA. The scope of the notary is fixed by law. His fee is generally an ad valorem charge. He calculates and levies estate tax and capital gains tax and transfer tax on real estate.
The law is linked to different cultures, and for this reason one says that, in legal systems, “One size does not fit all”.
Blockchain is the underlying technology behind Bitcoin. It is decentralised. It is freely accessible. The user creates a public address and private key – like a bank account and password. It is anonymous and there are no gatekeepers. Blockchain keeps track of transactions and shares the information with all parts of the network. The miner consumes a lot of computer power. Every ten minutes 12.5 new Bitcoin come into existence. The number is limited to 21 million.
Blockchain acts as a currency. Presently, it is too volatile, but this expected to decrease. Decentralisation is an essential feature: there is no country or company controlling it. And it cannot be controlled by anyone. Anonymity and privacy are valued but controversial aspects of Bitcoin. They are available to everyone. Some countries have made access illegal or subject to regulatory consent. Some banks accept crypto-currencies and some do not.
A very small percentage of crypto-currency gain is declared for tax. The exceptional efficiency of crypto-currencies is expected to ensure of their future. There are already a number of businesses which use crypto-currency and dispense with bank accounts and even with companies.