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Malta: A Package Deal Catering For Everyone

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valletta

It is well known that for decades Malta has been a jurisdiction of choice for the shipping community. However, the ongoing changes to the domestic and international legislation have made Malta all the more prominent, even outside the shipping industry.

The truth of the matter is that Malta has worked for some time now at placing itself in a position where it is considered to be a financial hub, with a range of financial services that goes beyond shipping. Today Malta’s financial services industry includes many sectors such as aviation, corporate structures, i-gaming, funds, tax advisory, residency and citizenship together with all the ancillary services. Whilst mention of the financial services industry does not necessarily bring to mind services such as residency, the truth of the matter is that each and every one of these sectors has an innate and intricate financial aspect which has become the main driver for opting for Malta.

Yet Malta has gone further. It is all well and good to promote Malta as a safe country with a mild climate all the year round and a relatively low cost of living but we all know it takes a lot more to attract the brightest and finest to relocate. It is with this constantly in mind that legislative incentives are being implemented in Malta. Reference to a ‘holistic approach’ has been used to often in various industries that it has lost its importance. However the fact of the matter is that Malta has become such an attractive jurisdiction due to a holistic approach being taken in all industries. It is the sum of many Governmental policies and legislative enactments being developed over two decades, with one clear goal in mind that has led to this point.

From a personal income tax perspective, Citizenship and Residency programmes have been setup to compliment corporate tax incentives already in place and in effect for years. Ultimately the goal is to entice companies and their people to relocate to Malta lock, stock and barrel. Granted some people may only relocate for a few years but the fact of the matter is that for that period of time those persons are subject to tax in Malta and the effective place of management of the company they work for is Malta.

The Citizenship programme (known as Individual Investor Programme or ‘IIP’) was inaugurated in 2013 by Identity Malta, the authority set up by the Government to oversee the programme, and has seen since a significant influx of applications. The acquisition of Maltese citizenship, which is possible only via an Accredited Agent, is an attractive option for third country nationals as, upon naturalization, they are granted with the right to live, work and study in any of the 28 EU countries and Switzerland and gain visa-free access to 166 countries, including the EU and Canada. These advantages are further enhanced by the substantial tax benefits, both on corporate as well as individual level, envisaged under the Maltese regulatory status quo.

There are also various residency programmes to speak of but just to mention two; I will make reference to the Highly Qualified Persons (HQP) Rules and the Global Residence Rules. Given the expansion and modernisation of Malta’s economy, the conscious decision was taken by the Government to attract knowledgeable and experienced personnel in industries such as the financial services sector where expertise was either in short supply or lacking. This gave rise to the Highly Qualified Persons Rules aimed at attracting highly qualified persons to occupy ‘eligible office’ with certain types of companies. ‘Eligible office’ comprises employment in positions such as, Actuarial Professional; Chief Executive Officer; Chief Financial Officer; Chief Commercial Officer; Chief Investment Officer; Head of Investor Relations; amongst others. In essence, individual income from a qualifying contract of employment in an ‘eligible office’ is subject to tax at a flat rate of 15% as long as the requirements are satisfied.

On the other hand, the Global Residence Rules were implemented to allow an individual who has been granted special tax status in accordance with the these Rules, to be subject to a rate of tax of 15% on any income that is received in Malta from foreign sources.

When the effective rate of tax of a company can be brought down to 5% and the company’s personnel have the potential of being subjected to a rate of tax of 15%, all within the bounds of EU legislation, the whole package becomes very attractive. It offers the much needed stability to those stakeholders that face uncertain economic times. It also becomes an attractive jurisdiction for those stakeholders attempting to tap not only the EU but also the Commonwealth market (with the combined gross domestic product of the latter’s member countries being predicted to reach US$14 trillion by 2020). It becomes a cost effective, less bureaucratic yet well-regulated entry point into the EU. Therefore, the question that bids an answer is not ‘why Malta’ but rather ‘why anywhere else other than Malta?’

Disclaimer: The content of this article is intended to provide a general guide to the subject matter and should in no way be construed as advice. Specialist advice should be sought about your specific circumstances.

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Isle of Man: The Final Piece in the Private Client Jigsaw

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The Isle of Man continues to be recognised as an international finance centre of excellence, no more recently than during the Professional Advisor International Fund and Product Awards 2015 where they won ‘Best International Finance Centre’, fending off strong competitors like Jersey, Guernsey, Dublin and Luxembourg.

Having successfully encouraged diversification of its economy over the years, the Island is currently home to a number of high performing sectors, one of the most successful being its financial services industry. This is due to having a proactive government, a robust regulatory framework and the ability to recognise that engaging with its stakeholders and forming positive relationships with professional service providers, such as Abacus, helps for a successful business environment in which all can flourish.

Abacus is one of the Island’s longest established and reputable service providers currently celebrating 40 years of excellence in providing a range of financial and professional administration services. Delivering value through the provision of corporate, trust, funds and tax solutions, our longevity and success is predominantly due to our underlying principles of integrity, independence and insight.

However, some of our success can be attributed to being ideally located in a jurisdiction that is home to a politically stable and proactive government, a robust regulatory framework and evolving industry sectors – one of its biggest and most successful being Financial Services, a sector which offers all of the pieces in the Private Client jigsaw…well almost!

What does a Private Client jigsaw look like…? Firstly, there is no ‘typical’ private client – anyone working in the financial services industry knows that each and every client has bespoke needs and requirements. However for the purpose of this piece, a private client could be an ultra-high net worth individual who has acquired his wealth through the family business which is involved in UK property development; he owns a private jet and is currently looking to purchase a yacht.

So which pieces of the jigsaw does the Isle of Man have to offer? And where does Abacus fit in?

Firstly, the Isle of Man is the perfect jurisdiction for the establishment and operation of property holding structures, offering efficient and cost-effective arrangements for all types of property acquisition through various vehicle types, ranging from private wealth structures to collective investment schemes that can facilitate a commercially effective pooling of investor capital and a convenient reporting mechanism. With the right advice and structuring it can be a tax effective solution, particularly for UK non-resident and non-domiciled individuals.
At Abacus, we establish and administer property holding structures designed to meet our client’s individual objectives and requirements and provide a range of support services to ensure that the structure is correct and runs efficiently.

Secondly, the Isle of Man is a one-stop shop for private global aviation business. Not only does it have an aircraft register which has been voted the best in the world in a survey of leading aviation lawyers from around the globe, it offers owners a neutral nationality registration prefix, a secure mortgage register and a professional infrastructure with experience in aviation finance. The Isle of Man Aircraft Registry is renowned for its high customer service ethos and its focus on safety and service…what more could you want for your aircraft?

With strong relationships across the Island’s aviation industry, we assist owners and their representatives in understanding the diverse requirements associated with owning and operating an aircraft, whilst providing tax efficient ownership structures that facilitate aircraft operation on a private and/or commercial basis.

Jigsaw-Puzzle

Thirdly, is the Island’s strong history and heritage in shipping – it has one of the fastest growing ship registers in Europe and a Registry that provides a high quality and fast response customer service with a low cost scale of charges. It is also favourably on the much sought after ‘White List’ of the Paris Port State Control Memorandum of Understanding and has been a popular register for yachts, with a significant number currently waving the Isle of Man Ensign.

As a highly experienced corporate service provider, Abacus has significant experience in a wide range of international ownership structures and administration services for yacht owners, making us well placed to assist with the complexities of yacht ownership. We work with our clients to ensure that custody and management of their prized vessel stays on an even keel, from establishment of the structure through to its ongoing administration. We also offer yacht registration services but understand that choosing a flag for a vessel is very much a personal choice and that the Isle of Man may not always be the most practical or effective place for a client. It is here that our office in Malta, a jurisdiction which is growing rapidly in popularity amongst the yachting industry, can offer a full range of yacht ownership, registration and administration services in an alternative EU jurisdiction.

Another is that the Isle of Man is a cost effective alternative for private clients and their investment, fund management and administration requirements. With a well-established fund sector, supported by a range of professional service providers including investment managers, fund administrators, legal firms, custodians, auditors and fiduciaries, the Island offers a compelling and cost-effective alternative for the domicile of investment funds.

As an established fund services provider, Abacus offers a fully cross-border administration solution to fund managers and intermediaries establishing and operating fund structures for clients internationally. We deliver support by providing market leading technology customised to provide added value and improve our client’s relationship with shareholders, promoters and other service providers. Our proposition includes an efficient and effective cost base coupled with a client service ethos designed to add speed, quality and flexibility to the fund administration service.

As we come closer to completing the puzzle, we come to the Island’s Residence and Citizenship opportunities. The UK Tier 1 (Investor) Visa is aimed at High Net worth Individuals and their families who are looking to obtain alternative residence and citizenship by making a qualifying investment into the Isle of Man. An applicant must meet the eligibility and due diligence requirements and complete the application process but if successful can obtain British citizenship.

With understanding and experience of citizenship programmes, we are able to advise and assist individuals and their families wishing to apply for citizenship in an alternative EU jurisdiction. We can help clients choose an appropriate programme and country of residence (we can also offer three Maltese residence and citizenship programmes) and guide them through the application process to ensure that preparation and submission of their application is correct and processed in an expedient manner.

So now the picture is near complete, what is Abacus’ part in the puzzle? Simply, we are the final piece…we utilise the Island’s capability and apply our knowledge and experience to develop and provide solutions that keep pace with change and ever more sophisticated tax planning, to ultimately assist private clients in the effective structuring and management of their wealth. We are the piece that holds it all together and make the Private Client jigsaw complete!

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Why Would You Choose A Second Citizenship?

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visa Process

While it may once have been the domain of brave and glamorous spies looking to make a quick getaway with suitcases stashed with cash and multiple passports, these days it isn’t secret agents who are longing for a second start in a foreign land, but instead a growing tide of ‘economic citizens’.

It’s estimated that every year, several thousand people now collectively spend €1.5bn to add a second, or even third, passport to their collection – an option growing in popularity, especially amongst the wealth generators of China, Russia, the Middle East and other parts of Asia.

In an increasingly turbulent and politically unstable world, it’s easy to see why there are plenty of prosperous people in the market for a perfectly legitimate ‘Second Citizenship’. The chance to escape an authoritarian regime, where there are restrictions on personal liberty, where the safety of one’s family is threatened, where commercial activity is discouraged or blighted by corruption, for many is a price worth paying.

For those with cash to splash, the promise of a new life in a safe haven, providing visa-free travel, a secure environment in which to bring up children, the chance to build a successful business and to take advantage of a plethora of investment opportunities – these are all compelling reasons to up sticks.

Welcoming them with open arms are a growing number of jurisdictions willing to provide sanctuary and a permanent home for those with money to invest.

Also called ‘citizenship by investment’, this is usually the fastest and easiest way to get a second passport. The process is straightforward: a country will confer citizenship upon you, in exchange for a business investment or purchase of real estate in that country.

There’s nothing especially new about second citizenship, but given the uncertain world we live in, the concept is now very much on an upward trajectory.

The idea of a citizenship-by-investment programme (CIP) surfaced in the early eighties, when the Caribbean Islands of St Kitts and Nevis became the first country worldwide to introduce a CIP, largely as a means of stimulating investment in their local economies. In return for citizenship, the Island authorities request a $250,000 non-refundable donation to a public charity supporting their sugar industry, or a minimum $400,000 investment in real estate in the country. Neighbouring islands, like Grenada and Dominica, have followed suit.

At the other end of the economic spectrum, the United States allows foreigners to obtain a green card under the EB-5 visa if they invest $500,000 in a ‘targeted employment area’ and create 10 jobs. Since 1990, foreigners have ploughed in more than $6.8bn and the US has given out 29,000 visas through the EB-5 programme, although there is a yearly cap of 10,000.

But now attention has switched across the Atlantic. European jurisdictions have warmed to the theme, actively encouraging direct citizenship by investment, or at least offering a route to citizenship for wealthy investors.

Today, HNWIs are spoilt for choice as to where they can put down new roots. There is growing competition – especially amongst a number of well-regulated, tax friendly offshore jurisdictions in close geographical proximity to the continent of Europe – to attract successful foreign entrepreneurs to their shores.

 

Malta, Cyprus, the UK, and Isle of Man

As an example, the low-tax regime of Malta provides a citizenship programme which includes visa-free travel to 166 countries and territories including the United States, Canada, the entire European Union and the Schengen Area. Initially costing around €900,000, Malta provided the cheapest legitimate economic citizenship in the European Union. After pressure from EU officials, however, the rule was changed, requiring potential passport holders to reside in Malta, for a year and raising the inward investment level to €1.15m

Cyprus is another EU nation offering a direct citizenship-by-investment route. An active member of the European Union, with a high-income economy and a business-friendly environment, Cyprus has the lowest corporate tax rate in the entire European Union – currently standing at 10%. For those seeking a new life, their minimum investment level in a Cypriot business stands at €2m.

Although the UK is not an offshore jurisdiction, it does run a well-known Tier 1 Investor and Entrepreneur Visa programme which enables investors to live and work there for varying amounts of investment into the local economy. Visas are granted for an initial period of 40 months, after which a 24 month extension can be applied for. After five years, a successful applicant can plump for indefinite leave to remain and, a year later, apply for full citizenship.

The Isle of Man, a UK Crown Dependency, operates the same Tier 1 Visa programme for foreign nationals looking to live and work on the Island, but comes with the added benefit of taxing most Isle of Man resident companies at zero percent and offering an attractive alternative route to UK citizenship.

To qualify for indefinite leave to remain in the Isle of Man, an individual must spend a minimum of 185 days in the Isle of Man, the Bailiwicks of Jersey or Guernsey or in the UK each year over a five year period. The scope of investment opportunities available to Investor visa applicants is also potentially much wider than those applying through the UK. But, for those granted indefinite leave to remain, a British passport can be obtained.

 

What does Second Citizenship mean?

Fundamentally, the idea of having a second passport is that no government should have the sole power over your life or your assets. If you are the citizen of only one country, as most people are, you are essentially at the mercy of your government. Legally, ‘citizenship’ indicates the relationship between an individual and a nation state. Normally, the individual is conferred protection by the state, in return for fulfilling certain obligations owed by the individual to the state – like paying tax.

In a benign democracy, most people wouldn’t normally feel compounded to leave. But if the government is corrupt, prone to confiscating assets and throwing its subjects in jail, then that’s when things can start getting difficult.

 

What lies ahead?

Nevertheless, in this day and age, it’s not difficult to understand why affluent, hard working men and women would opt for “a new life”. Protecting and nurturing one’s estate for future generations is a basic human instinct which, perhaps more than anything, explains the increasing popularity of second citizenship programmes. If there’s a choice of remaining in a land rife with fear and danger, or relocating to a country providing peace and prosperity – to many it’s a step worth taking.

Given the number of welcoming, business-friendly jurisdictions offering the incentive of affordable investment opportunities and fast-track citizenship processing – you could say it’s a classic case of supply and demand being in perfect harmony.

And so, with the continued anticipated growth over the next 10 years from applicants from the Middle East and Far East, including China, jurisdictions that have already introduced second citizenship programmes look set to be the huge beneficiaries. They’re well and truly open for business – that’s for sure!

It’s all a far cry from the clandestine exploits of those Cold War era spies!