Archive for January, 2018

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Portugal: Tax changes for 2018

In on January 23, 2018 by NEWCO

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The State Budget for 2018, approved via Law no. 114/2017 of 29 December, has brought some changes to taxation that have led to a degree of stability in the Portuguese tax system, a characteristic which is essential to attracting foreign investment. Below, we highlight the changes that may have an impact on the companies of the International Business Centre of Madeira (IBCM):

Corporate Income Tax:

  • Gains resulting from the onerous transfer of shareholdings or similar rights in companies or other entities (not residing in Portugal) are now considered to have been obtained on Portuguese territory when, at any time during the preceding 365 days, the amount of these shareholdings or rights originates, directly or indirectly and by a proportion of more than 50%, from real estate or real rights over real estate property located on Portuguese territory, with the exception of real estate property allocated to an agricultural, industrial or commercial activity that does not consist of buying or selling real estate;
  • Regional Surtax is the tax applicable to taxable profit that exceeds €35M and it is now 9%; in this regard, we would point out that the companies established at the IBCM as of 2015 will benefit from an 80 % reduction with respect to Regional Surtax in terms of income obtained within the scope of the IBCM and taxed at a rate of 5% (corporate income tax); with this change the respective rate at the IBCM has gone up from 1.4% to 1.8%;
  • Following the previous change, Additional Payments on Account, which are obligatory whenever taxable profit for the previous taxation period exceeds €1.5M, have increased from 6.5% to 8.5% in cases of taxable profit that exceeds €35M; with this change the respective rate at the IBCM has gone up from 1.3% to 1.7%;
  • If no income tax return is submitted (Mod. 22 form), payment shall be made no later than 30 November of the year that follows the year it pertains to or by the end of the sixth month that follows the end of the time period for submitting said return, based on the largest of the following amounts:
    • The taxable amount that is determined on the basis of the information held by the tax authorities, in accordance with the rules of the simplified framework and applying a coefficient of 0.75;
    • The total taxable amount for the closest taxation period that has been determined;
    • The annual amount of minimum monthly remuneration;
  • For the purpose of determining taxable profit attributable to each stable establishment located outside of Portuguese territory for a taxpayer with head office or permanent administration located on Portuguese territory, the taxpayer must adopt proportional calculation criteria that are suitable and duly justified in order to distribute costs, losses or negative changes in assets that are related to taxable operations or assets allocated to a stable establishment or related to other operations or assets of the taxpayer;
  • Agreed remuneration from shareholder capital: When determining taxable profit, an amount corresponding to the agreed remuneration from shareholder capital may be deducted, calculated by applying the rate of 7%, limited to each financial year, to the amount of entries made up to a ceiling of €2M, not only through deposits of cash, conversion of shareholder advances or loans, but now also by converting credits or using profits from the year, when establishing the company (subject to certain requisites being fulfilled);
  • Should the company be dissolved, it must submit two tax returns (Mod. 22 form), one no later than the last day of the 5th month following that of the dissolution and pertaining to the period from the beginning of the taxation period during which the dissolution took place up to the date of the dissolution; and another return no later than the last day of the fifth month following the date of the end of the taxation period, relative to the period from the day after the dissolution up to the end of the taxation period in which the dissolution took place (period when the liquidation took place);

Personal Income Tax:

  • Capital gains resulting from onerous transfers of shareholdings or similar rights in companies or other entities are now considered to have been obtained on Portuguese territory when, at any time during the preceding 365 days, the amount of these shareholdings or rights originates, directly or indirectly and by a proportion of more than 50%, from real estate or real rights over real estate located on Portuguese territory (with the exception of real estate allocated to an agricultural, industrial or commercial activity that does not consist of buying or selling real estate);
  • The amount of the meal allowance exempt from personal income tax has been increased to €4.77;
  • Guaranteed Minimum Monthly Income: The amount of the Guaranteed Minimum Monthly Income in 2018 in the Autonomous Region of Madeira will be €592;
  • Termination of the temporary framework for payment of holiday and Christmas bonuses in monthly instalments;
  • A Tax Representative may, under generally applicable terms, resign their position, subject to sending written communication to the represented party at the latter’s last known address, and notifying the Tax Authorities in order for the resignation to be considered effective.

VAT:

  • Taxpayers may now recover VAT when insolvency proceedings have ended due to lack of assets or after final distribution resulting in non-payment of credits; this possibility is also provided for when there is a delay in the ruling for the approval of the insolvency or recovery plan that provides for non-payment of credits;

Stamp Duty:

  • It is now possible to be compensated for taxes paid in situations of cancelation of operations or reduction of the taxable amount (except lessors and sub-lessors); the compensation ceases to obligatorily refer to the same amount of the General Table and can relate to any subsequent tax payment; the compensation time period has also been extended;
  • Taxpayers are now obliged to submit a monthly statement itemized according to each applicable amount of the General Table, no later than the 20th day of the month that follows the one in which the tax obligation was created.

NEWCO is entirely at your disposal to answer any questions regarding these developments or to enlighten you regarding the impact that these changes may have on the companies of the International Business Centre of Madeira.

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MALTA: Register of Beneficial Owners

In on January 15, 2018 by NEWCO

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On 20 December 2017 legislation was published in Malta regarding the transposal of Directive EU 2015/849 of the European Parliament and of the Council of 20 May 2015 regarding the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, i.e. by creating the Register of Beneficial Owners.

In this regard, a Register of Beneficial Owners was created, with legislation published regarding Trusts and Trustees, Foundations, Associations and companies/corporations. In relation to the latter, the changes are made pursuant to the Companies Act and we shall address them below.

As of the date of its coming into force (1 January 2018), whenever a new company is established, in addition to all the documentation that must be submitted to the Registrar, a declaration signed by the company Directors must be submitted containing the following information regarding the Beneficial Owners (UBOs) of the company: name, date of birth, nationality, country of residence, number of the official identification document, and indication of the type of document and country of issue, along with the nature and extension of their interest.

This requirement also applies to companies that have redomiciled to Malta.

Similarly, whenever a change is made to the UBOs, a transfer of shares, reduction or increase in capital, or any restructuring of share capital, or a change in the company voting rights, a declaration containing updated information regarding the UBOs shall be submitted to the Registrar.

All Maltese companies must have an internal UBO register at all times, containing adequate, updated and precise information regarding the respective UBOs.

Companies that already exist in Malta must comply with these obligations within a maximum period of six months, starting from the date when this legislation came into force. In fact, they must submit a declaration to the Registrar containing information regarding the respective UBOs on the anniversary of their registration or when there is any change to their beneficial owners or, at the latest, six months after the date when this legislation came into force.

Annually, all companies shall submit a declaration to the Registrar signed by a Director or by the Secretary with the aforementioned information regarding the UBOs and dates of any changes in that respect.

The company, its governing bodies, shareholders and beneficial owners shall be held responsible for failing to comply with the aforementioned rules. Fines may be imposed and a prohibition may be applied making it impossible to make any entries in the Register regarding the company.

It should be pointed out that access to the Register of Beneficial Owners in Malta is limited to the Financial Intelligence Analysis Unit, the national taxation authority and to any other competent national authority within the scope of preventing money laundering or terrorist financing. This access occurs without restriction and without notification or prior notice given to the respective company.

It is also possible to allow access to people or entities that wish to undertake due diligence in accordance with the applicable legislation against money laundering or terrorist financing.

Lastly, it is also possible for any person or entity to gain access subject to a written request that denotes a legitimate interest that must be duly demonstrated as being specific and uniquely related to the prevention, detection and elimination of money laundering or terrorist financing.

NEWCO is entirely at your disposal to answer any questions you may have regarding the impact of this new legislation on Malta companies.

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