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? 2 Banking and disclosure? 2016 LUGNA 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 3 Maltese foundations as alternatives to trusts 2016 LUGNA www.lugna.pt
Portugal & Madeira Portuguese nearshore 4 2016 LUGNA
Lisbon Funchal
Portugal & Madeira Madeira is a Portuguese autonomous region OECD and EU compliant jurisdiction Portugal s Tax Treaty Network > 70 6 Treaty with US and Canada 2016 LUGNA www.lugna.pt
Portuguese Holding Company 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 Foreign Shareholdings 7 Great to invest worldwide using local subsidiaries and branches 2016 LUGNA www.lugna.pt
Qualified shareholdings 10% (direct or indirect) shareholding, held for a minimum 12 month period The entity paying or receiving income is not resident in a tax haven Profits/reserves are not costs or expenses for the entity that distributes 8 The company is not subject to a tax transparency regime
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 shareholder loans 9 All principles of the EU Treaty apply to Madeira companies and their investors, allowing IBC operators to have unrestricted access to the internal European market without discrimination. 2016 LUGNA www.lugna.pt
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. 10 2016 LUGNA www.lugna.pt
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 parttime) 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. 11 2016 LUGNA www.lugna.pt
Malta Low Corporate Tax Asset Protection 12 2016 LUGNA
Valletta
Malta E.U. country Stable financial sector Low tax trading companies Asset protection using a Foundation 14
Corporate Taxation Worldwide income taxation Statutory tax rate of 35% vs Effective rate of 5% (The amount of Malta tax refunds is set at 6/7th of the Malta tax paid by the Malta company. Thus the Malta company would be subject to taxation at 35%, but shareholders would be entitled to claim back 6/7 of this tax back) Whitelisted OECD and EU compliant 15 Tax Treaty Network > 60 Treaties
Main Tax Benefits Effective corporate tax rate of 5% Tax on profits paid by the company distributing dividends is made available to the shareholder as a tax credit, to avoid double taxation on the same income (for the company and subsequently for the shareholder). 0% shareholder dividend tax Participation exemption regime 16 Absence of withholding tax on dividends, interest or royalties
Other benefits Advance Tax Rulings 5 years Absence of Transfer Pricing Rules Absence of Thin Capitalization rules No CFC rules Carry forward losses 17 Early dividend is possible
18 Refund system Tax refund to shareholders of: 100% : Participation exemption Foreign shareholders No withholding tax in Malta 6/7 : Operational income Malta Holding Co. Refund 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. Malta Co Dividends are exempt Tax @ 35% - Revenue Profits 18
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; 19 Equity investment representing a total value (date of acquisition) of 1,164,000 + held for 183 days
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%. 20
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 21 Trustees are highly regulated by the Malta Financial Services Authority ( MFSA)
Structure Protector/ Council Administrator Supervisory Protector/Council: Exercise appointment or removal of administrators Supervision over the acts of the administrators & may be vested with powers Founder Endowment Beneficiaries Duties of the administrator: 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 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 22
Commercial applications Securitisation of Assets Grant of Real or Personal Security Interests Collective Investment Schemes Employee Benefit or Retirement Schemes Security Offerings Portfolio Management Syndicated Loan Agreements Insurance Policies & Payment of Proceeds 23 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 network 24
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 25
Macau Special Administrative Region Gateway to the East 26 2016 LUGNA
Macau
Macau Gateway to China Nil to low tax Simplicity & Low cost No foreign exchange control rules in Macau SAR 28
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. 29 All income or profits earned are taxable in Macau SAR.
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. 30 Taxation of dividends and capital gains
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 any source. 31 Anti-abuse rules
www.lugna.pt 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 MOP 1,000,000 (USD 125.000) 32 15 days to incorporate
Questions? And answers 33 2016 LUGNA www.lugna.pt
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