Archive for March, 2016

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Portugal: State Budget for 2016

In on March 31, 2016 by NEWCO

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The State Budget for 2016, which has just been published in the Official Gazette, introduces several changes to the Portuguese tax system, some of which are relevant to the International Business Centre of Madeira (IBCM).

We would like to emphasise the following most relevant changes.

INCOME TAX

  • Legislative Authorisation/Regime for Non-Habitual Residents – In an effort to simplify the system, legislative authorisation has been attributed to the government to change the way that taxable persons register as non-habitual residents, implementing an electronic process for this purpose.

CORPORATION TAX

  • Participation exemption system increase from 5% to 10% of the percentage of required participation for the purposes of applying regimes for the elimination of double taxation for distributed profits and for the exclusion from taxation of capital gains for the onerous transfer of equity instruments, offset by a reduction in the minimum period of shareholding from 24 months to one year.
  • Exemption from corporation tax on the distribution of profits and reserves – the minimum shareholding percentage was also increased to 10% and the minimum period for holding these was reduced to 12 months for the purposes of applying the exemption on profits and reserves distributed to partners resident in another member state of the European Union or the European Economic Area or a state with which an agreement to avoid double taxation has been signed. It should be noted that, in the case of companies licensed to operate in the IBCM from 1st January 2015, the exemption applies both to corporate partners and individual persons, independently of the percentage and period of holding the respective shares, provided that these people are not residents in Portugal or in tax havens.
  • Tax losses the reporting period for tax losses has been reduced from 12 years to 5 years, except for companies certified as Small to Medium Sized, in which case the 12-year period will still apply. This new period of 5 years will be applicable to tax losses ascertained in taxation periods that begin on or after 1st January 2017.
  • “Exit Tax” in the event of transfers from a company with its headquarters or effective management on Portuguese soil to another member state of the European Union or the European Economic Area that is bound to administrative cooperation in the area of taxation, equivalent to that established within the scope of the European Union,  capital gains and losses ascertained for the purpose of this transfer are not subject to taxation if the requirements for the applicability of the participation exemption regime are fulfilled.
  • Transfer prices/Financial and tax information on multinational groups – a new declaration of financial and tax information by country or tax jurisdiction has been introduced, which is applicable to companies operating as part of a group with companies that have a tax residence or permanent establishment in distinct countries or jurisdictions (country-by-country reporting), thus complying with the guidelines of the OECD within the scope of the BEPS project (Base Erosion and Profit Shifting).
  • Legislative authorisation / Patent box – legislative authorisation has been granted to the government to make changes to the partial exemption regime for income from patents and other intellectual property rights, in order to guarantee that the benefits granted only cover income relating to activities of research and development of the benefiting taxable person in question.
  • Profits of permanent establishments not on Portuguese soil relative to the possibility of exclusion from taxation on profits and losses for permanent establishments not on Portuguese soil, the period of applicability has been reduced for the regulations for the recapture of benefits granted from 12 to 5 taxation periods, which limits the amount from which tax losses or taxable profits of these permanent establishments can or cannot contribute to the formation of taxable profit. This change is also only applicable to taxation periods that start on or after 1 January 2017.

STAMP DUTY

  • Supplies – exemption from stamp duty on loans with supply features will now only be applicable in cases where supplies are provided by shareholders to companies in which they have a direct shareholding of no less than 10% and provided that ownership has been maintained for one full year, or since the formation of this company, provided, in this case, that the shareholding was maintained during this period.

TAX INCENTIVES

  • Capital gains made by non-residents – the exemption from income tax and corporation tax applicable to capital gains made with the onerous transfer of shares and other securities issued by companies resident on Portuguese soil, by non-resident entities or individual persons without a permanent establishment in Portugal to which they are attributable, will now apply even if more than 25% of such entities is directly or indirectly held by resident entities, provided that the transferor meets the following conditions (cumulatively):
    • They are resident in another member state of the European Union or the European Economic Area, which is bound to administrative cooperation in the area of taxation, equivalent to that which is established in the European Union, or they are resident in a state with which Portugal has a valid agreement to avoid double taxation that foresees the exchange of information;
    • They are subject to and not exempt from a tax referred to in article 2 of Directive 2011/96/EU, or from tax of an identical or similar nature to corporation tax, and provided that the applicable rate for this company is no less than 60% of the normal rate of corporation tax;
    • They have a direct or indirect shareholding of no less than 10% in the share capital or voting rights of the company subject to divestment;
    • The shareholding in question has been held, uninterrupted, for the year before divestment;
    • It is not part of a construction, or series of constructions, artificial or artificial, having as main objective or as one of the main purposes, that of obtaining a tax advantage.

If you are interested in finding out more about the International Business Centre of Madeira or the impact of any of these measures on the IBCM’s tax regime, or if you wish to discuss any particular structure, please do not hesitate to contact us.

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Malta “Residence and Visa Program” launched in China

In on March 30, 2016 by NEWCO

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Malta’s Secretary of State for Competitiveness and Economic Growth, José Herrera, has launched the “Residence and Visa Program” at a conference attended by some 400 people in Shanghai, China, as a way of attracting foreign investment to Malta.

The legal framework for this program was created in 2015 and it is one more investment incentive that involves regular and controlled immigration, requiring international investors who wish to have access to the advantageous program to spend half a million euros in the purchase or rental of property, invest in government securities and financially contribute to “Identity Malta,” the entity that issues the certificates.

For the government of Malta, this is a “credible program for credible and respectable people.” It complements a framework of other initiatives and investments that seek to create jobs and wealth, and improve the overall standard of living on the island, as is the case with the “Individual Investor Program,” which has already taken in one billion euros and was considered to be the best citizenship-by-investment program in the world by the 2015 report on Global Residence and Citizenship Programs. This fact becomes more significant in an increasingly globalized world that has a growing number of internationally mobile entrepreneurs and investors, and in which there continues to be considerable disparity between countries in terms of freedom of travel.

The first agreement for concession, promotion and advertising for the “Residence and Visa Program” was signed in China with the company “Shanghai Overseas Chinese Exit-Entry Service Co Ltd.,” thereby strengthening relations between the two countries. China is a strategic market for Malta because in addition to being one of the most attractive economies in terms of growth (the second largest economy in the world, behind the US), last year it became the third largest exporter of direct foreign investment. When visiting the US in 2015, Chinese president Xi Jinping said that while Asia’s wealth continues to grow Chinese investors will continue to look at foreign opportunities, which should result in investment of 1.25 billion dollars over the next decade.

The truth is that this has been the result of an ambitious reform project on the part of Malta’s government. In 2015, the country grew at an unprecedented rate, having recorded the second largest economic growth rate (6.3%) in the EU, not to mention the third lowest unemployment rate, a relatively low youth unemployment rate and other favourable economic indicators, such as a rise in pensions for the first time in twenty-five years and a drop in income tax for the third consecutive year.

Download our guide “Living in Malta” to find out more about this and other residence programs.

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Interview: Madeira’s IBC is credible and safe for international investments

In on March 28, 2016 by NEWCO

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NEWCO has been supporting companies through the IBCM almost since it was created. With 25 years of experience, there is no doubt that this has always been and continues to be a good investment.

In this interview originally published in the economic newspaper OJE, Frederico Gouveia e Silva, managing partner at NEWCO, offers a current description of the International Business Centre of Madeira (IBCM), providing details about the advantages that the centre offers companies and how this can make a difference in their internationalization plan.

1 – Why is IBCM still currently a good idea?

IBCM is an excellent platform for internationalizing companies, thanks to a very beneficial taxation and operating framework that allows companies to optimize their operations, freeing up the financial resources that are indispensable for any internationalization process. The major advantage of the IBCM is the fact that, from the start, it has offered a very attractive tax regime (5% corporate income tax on profits from international activities, in addition to other exemptions and reductions on other taxes). All of this in a very transparent and regulated manner and entirely integrated into Portuguese and European Union legislation. It is a regime that has been previously approved by the European Commission, having always complied with all the guidelines and principles of harmful tax competition as defined by international organizations like the OECD. As such, the IBCM is not only efficient insofar as it allows companies to optimize their operations, but it is also a safe and credible regime because once approved, it is guaranteed for its entire application period and it is not seen by tax authorities of other countries as a tax haven or offshore region, which are increasingly subject to anti-abuse regulations.

2 – How would you describe the companies that contact you? What are their needs and goals?

The IBCM regime can be used by any company no matter what size because it is not a matter of granting benefits on a case-by-case basis or in a negotiated manner with individual companies. Any company with international activities can operate within the scope of the IBCM, provided that the savings it will derive from this will offset the underlying costs and provided that the business activity performed is part of the authorized sectors. Who wouldn’t want to pay 5% corporate income tax at the end of the year instead of the general tax rate of 21%? As such, our clients include both small start-ups and well-known multi-nationals that seek to benefit from this IBCM regime in the certainty that they are fully complying with Portuguese and European Union legislation, along with all the basic principles of international taxation.

3 – How does NEWCO benefit these companies?

Firstly, we gain an understanding of each client’s goals and their international business to make sure that they are eligible and that they will in fact be able to benefit from the IBCM regime and to determine the best way to do so; then we provide all the necessary consulting and advice for setting up and managing their business within the scope of the IBCM, not only from a taxation point of view, but also from an accounting and operating point of view. There are basic requirements to meet, namely in terms of job creation and investment, and the IBCM companies are subject to all applicable legal and accounting obligations, as with any other Portuguese company, without exception. However, because we are dealing with international operations, companies must also comply with the legislation of other countries and with the various rules created by international organizations like the European Union and OECD, in order to fight abusive tax practices. All of these frameworks must be taken into account in order to ensure that IBCM is the safe and effective choice. NEWCO always keeps abreast of national and international developments in order to properly advise its clients during all stages of their operation.

This interview was originally published in the online edition of the newspaper OJE

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Happy Easter!

In on March 24, 2016 by NEWCO

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Due to Easter holidays our offices will be closed as from the 24th March (inclusive) until  the 27th March, reopening on Monday, 28th.

We wish you a Happy Easter!!

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Recording of webinar “Trusts in Malta”

In on March 17, 2016 by NEWCO

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The recording of our webinar “Trusts in Malta” is now available.

Whether it is for tax planning purposes, inheritance planning, shareholdings or protection of assets, trusts are becoming increasingly popular and they are an interesting instrument in many aspects. Malta is one of the few civil jurisdictions that has developed its own legal system regarding trusts. In the European Union, Malta trusts maintain the Anglo-Saxon concept of a trust and benefit from an extremely competitive tax regime, within a highly regulated, reliable and safe environment.

In this webinar, Frederico Gouveia e Silva explained:

  • What trusts in Malta are;
  • What they are used for;
  • The advantages and applicable tax regime.

Click here to view the webinar recording.

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    Double Taxation Treaty between Portugal and Senegal

    In on March 17, 2016 by NEWCO

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    Notice no. 5/2016 was published in the Portuguese Official Gazette, which confirms that the internal constitutional formalities have been completed for the approval of the Agreement between the Portuguese Republic and the Republic of Senegal for the Avoidance of Double Taxation and Prevention of Tax Evasion concerning Income Tax, signed in Lisbon on 13 June 2014. Under the terms of article 31 of the Agreement, this agreement comes into force on 20 March 2016.

    This Agreement follows the Model of tax agreements concerning income and assets of the OECD (Model Convention of the OECD) and applies to people resident in one or both of the contracting states. It means that any person is considered a resident if, by virtue of the internal legislation of this state, they are subject to tax due to their domicile, their residence, their place of management or any other criteria of a similar nature. In the case of double residency, the tiebreaker criteria will be as defined in the Model Convention of the OECD, both with regard to individual persons (permanent home/ centre of vital interests/ habitual place of residence/ nationality) and corporate bodies (effective management).

    The definition of the concept of a ‘permanent establishment’ does not deviate from the guidelines of the Model Convention of the OECD, with two particularities: the first is that, in order to be considered as a permanent establishment, a construction or assembly site that a company from one contracting state keeps in the other contracting state, as well as supervision activities carried out there, must be maintained for a period of nine months; the second particularity is that the provision of services, including consultation services, by a company from one contracting state in the other contracting state, will be considered as a permanent establishment of such a company in this other state, if such activities are carried out in the other state during a period or periods that total at more than 6 months in any period of 12 months.

    Dividends, interest and royalties paid by a company resident in one contracting state to a resident of another contracting state can be taxed in the state of residence of the company that pays them but, if the effective beneficiary is a resident of another state, the tax cannot exceed:

    • Dividends: 10% of the gross amount of dividends, or 5% if the shareholding is equal to or greater than 25% of the share capital of the distributing company;
    • Interest: 10% of the gross amount of interest;
    • Royalties: 10% of the gross amount of royalties.

    Profits arising from the exploitation of boats or aeroplanes in international traffic, as well as profits from the divestiture of boats or aeroplanes exploited in international traffic (including moveable goods engaged in their exploitation) can only be taxed in the contracting state in which the effective management of the company is based.

    It should be noted that the Agreement includes a benefit limitation clause, which allows each contracting state to apply the anti-abuse provisions set out in their domestic legislation, as well as refraining from granting the benefits set out in this agreement if a resident of one state is deemed not to be the effective beneficiary of the income obtained in the other contracting state, or if it is deemed that the creation of a structure solely for the purpose of taking unfair advantage of the benefits of the Agreement is at hand. A proper analysis of the level of substance that companies must have if they intend to benefit from the terms of this Agreement is essential.

    The Republic of Senegal is an independent African country with a democratic government, which has been seeking to modernise and diversify its economy by attracting foreign investment for different sectors of activity. A very ambitious economic development plan has been created with the goal of increasing the rate of growth of the country’s gross domestic product to 7.1% between 2014 and 2018. To this end, the government is implementing reforms in the energy sector, in education and in the rural property system in order to make the country more attractive to foreign investors. There is also a big push for the development of road and port infrastructure, with a view to transforming the country into a regional centre for logistics, services and industry.

    With the coming into force of this Agreement, Portugal has become one of the few European countries on the network of agreements signed by Senegal for the purpose of avoiding double taxation (the others are Belgium, France, Italy, Norway and Spain). Portugal is also one of the most competitive countries for investment management in Senegal, considering the benefits available through the International Business Centre of Madeira (IBCM), particularly a 5% tax rate on company income (corporation tax), a participation exemption regime applicable on a global level for dividends, reserves, capital gains and capital losses, exemption from withholding tax for the distribution of dividends to partners and the payment of interest to partners and other forms of payment for supplies, bonuses or capital advances, among other advantages. Additionally, Madeira offers excellent infrastructure and very qualified human resources with skills in several foreign languages (including French) at very competitive prices, factors that are indispensable when we take into account the current need for substance.

    NEWCO has supported its clients with the management of their international activities through the IBCM for more than 25 years. Contact us to analyse and find out how to implement the best way to structure and manage investment operations in markets such as Senegal, benefitting from the advantages set out in the scope of the IBCM and the Agreement that has now come into force between the two countries.

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    Malta and Portugal among the EU countries that have progressed the most in the digital sphere

    In on March 10, 2016 by NEWCO

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    The European Ranking Table for the Digital Economy places Malta and Portugal in 11th and 14th place respectively, classifying both as being among the EU countries that have progressed the most in the digital sphere. The data comes from the European Commission’s Digital Economy and Society Index (DESI), which aims to evaluate the competitiveness of digitalization in the countries of the EU.

    In the 2016 issue, Portugal obtained a final score of 0.53 points (on a scale of 0 to 1), 0.04 more than on the 2015 DESI and slightly above the EU average (0.52 points). Malta achieved a final score of 0.56 points, 0.02 more than in 2015. This fact places them in the group of countries that, having above-average results, are also those that show greater progress in the digital sphere, on par with Austria, Germany, Estonia and the Netherlands.

    The countries at the top of the DESI general ranking all come close to 0.7 points; they are Denmark (0.68), the Netherlands (0.67), Sweden (0.67) and Finland (0.67). At the bottom of the table are Bulgaria, Greece and, lastly, Romania, which came in 28th with a score of 0.35 and was once again was the least developed country.

    The classification attributed to each country takes into account five indicators: connectivity, human capital, use of the internet, integration of digital technology and digital public services.

    Portugal’s best scores are for connectivity (12th place), due to the good broadband coverage (fast internet is available to 91% of homes), the sophistication and high level of use of online public services (Portugal took 8th place in this category) and also the good performance in terms of the integration of digital technologies by businesses (9th place).

    Malta is also particularly strong for the indicators relating to connectivity (9th) and for the use of internet services (11th). For this latter indicator, Malta is above the EU average, which can be explained by the enormous involvement of Maltese people in a broad variety of online activities, such as: reading the news (85%); social media (78%), online games, music and films (56%) and voice and video calls (45%). For online shopping and online banking too, Malta exceeds the EU average.

    With respect to the European Union, and despite the more advanced countries competing with the best in the world, the results do not leave much room for celebration, as the EU is progressing but not at a very desirable speed. For Günther Oettinger, Commissioner for the Digital Economy and Society: “We are lagging behind Japan, the United Arab Emirates and South Korea, and measures are needed to help us catch up. We will be presenting concrete recommendations in May based on today’s index to help the EU countries improve their national development. With these recommendations and with the work that we are developing to create a Single Digital Market, I am sure that both the EU as a whole and its member states will improve their performance significantly over the next few years.”

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    Portugal and Malta: some of the least complicated jurisdictions for business

    In on March 7, 2016 by NEWCO

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    Portugal and Malta are among the 30 least complicated countries for companies, taking the 67th and 83rd spots respectively on the ‘Global Benchmark Complexity Index’, an annual ranking table from the TMF Consulting Group, which covers 95 countries and measures the complexity that multi-national companies encounter in complying with local legislation and regulations.

    It is the first time that Portugal has been included on the ranking table, and it has come off better than some of its European counterparts like neighbouring Spain (64th), Greece (58th), Belgium (48th) and Austria (23rd).

    Malta, which occupied the 66th spot in 2014, having risen 17 places on the index (from 83rd), is ahead of countries like the Netherlands (68th place), Bulgaria (69th), Denmark (70th), Cyprus (72nd place), the United Kingdom (74th), Germany (75th), Luxembourg (76th) and Slovenia (79th). Ireland (95th) is considered to be the jurisdiction with the least complicated legal framework for companies, in large part due to its common law structure, stable political environment, solid political structure and favourable attitude towards businesses.

    At the other end of the scale, Argentina tops the list for the third year running of the most complicated countries for businesses from the point of view of regulations and conformity, followed by Indonesia, Colombia, the United Arab Emirates, China, Mexico, Bolivia, Lebanon, Thailand and Brazil. The political instability of some of these countries, associated with the high levels of bureaucracy and limited investment in regulating structures and necessary conformities, places them among the most complicated countries in the world in which to do business.

    Portugal, through the International Business Centre of Madeira, and Malta are two clear examples of success in attracting foreign investment with modern and diversified economies based on international business, particularly by providing well-regulated and modern legal systems that protect investors’ interests, as well as the simplification of procedures and reduced bureaucracy in legal, statistical, fiscal, licensing and other areas.

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    New webinar: Trusts in Malta

    In on March 2, 2016 by NEWCO

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    Thursday, 17th of March at 3 pm

    Whether it is for tax planning purposes, inheritance planning, shareholdings or protection of assets, trusts are becoming increasingly popular and they are an interesting instrument in many aspects.

    Malta is one of the few civil jurisdictions that has developed its own legal system regarding trusts. In the European Union, Malta trusts maintain the Anglo-Saxon concept of a trust and benefit from an extremely competitive tax regime, within a highly regulated, reliable and safe environment.

    Since it became a European Union Member State in 2004, Malta has made significant investments in the development of its legal and regulatory framework, adapting its legislation and tax regime to make it a truly attractive and effective jurisdiction for establishing and managing Trusts.

    In our Webinar of March 17th, you’ll learn:

    • What trusts in Malta are;
    • What they are used for;
    • The advantages and applicable tax regime;

    Register now.

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