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Pension

Expat Pensions & Divorce

1024 680 Strategic Wealth Management

pensions

If you have a client that has left the UK to live in another country, no doubt they will accept that its laws will apply to their day to day life. Often the complexities of foreign property purchase laws are their first introduction to its legal system.

However, they may not necessarily expect local rules to apply to their personal status – such as the recognition of marriage, or divorce, or their obligations arising from a divorce. To a surprisingly large extent, many clients often assume that they carry the law of their country of origin along with them.

Even within Europe, different countries’ approaches to divorce and family law can vary significantly. The extremes range from Malta, which has no divorce, through to the highly egalitarian Scandinavian approach that simply assumes that other than in special cases, each party can simply get on with their lives without further obligations. Different countries have different criteria as to how one can apply for divorce. Residence is of course the main basis, but certainly not exclusively so.

There is a rule between EU countries that says that the first country of filing takes priority – which simply means the first person to file for divorce wins the “race” for jurisdiction. This was meant to simplify matters. Instead, it has added to complexity, and the outcomes can be very different. A recent attempt to harmonise financial settlements across borders ended in more or less complete failure.

Clients that have left the UK and live abroad need to take specialist advice regarding the pension sharing options in divorce. A court order in one country may not be enforceable in the UK and there is a risk of incurring an Unauthorised Payment Charge of up to 55% if a pension fund is shared with a spouse based on a Court Order issued outside the UK. Offsetting cold be a solution, in return for specified assets the claimant gives up a claim on the spouses pension.

At Strategic Wealth Limited we work with professional advisers and private clients to guide them through the options for their pension in a divorce. These can include UK Self Invested Personal Pensions (SIPPs), Qualifying Recognised Overseas Pension Schemes (QROPS) and Qualifying Non UK Pension Schemes (QNUPS). Our UK qualified team of experienced international advisers can work with you and your client to find the best solution.

residence

Gibraltar High Net Worth Individuals Residency Changes…

1024 644 PWC

malta

Only two things in life are certain, death and taxes…How often have we heard this saying before? Well in Gibraltar since 1992 the High Net Worth (“Category 2”) Individual has not had to worry about taxes. For over 20 years individuals have been relocating to Gibraltar to enjoy the Mediterranean climate, cuisine and way of life.

The Category 2 rules allow individuals who meet certain criteria (including the purchase or rental of a suitable property and a minimum net worth of £2 million) to cap the tax on their worldwide income at an amount of less than £30,000 per annum.

One of the common and more restrictive features of the Rules to date has been that Gibraltar employment and trade has been specifically discouraged. Whilst the Finance Centre Director is able to waive this restriction where he feels that doing so would be of benefit to the economic development of Gibraltar, this has been, and remains, very much the exception.

Over the years, much like Gibraltar itself, the profile of the Category 2 individual has changed. When it was first introduced the typical Category 2 individual was a wealthy individual who had chosen to relocate to Gibraltar to enjoy the Mediterranean lifestyle as well as the tax free returns from their pension or investment portfolio. When in 2005 taxation on investment income was abolished for all Gibraltar residents followed shortly after by the exemption from taxation of pension income, the Category 2 status was no longer necessary for many of these individuals.

However, Gibraltar continued to attract a younger Category 2 individual, one who was not relocating to Gibraltar to retire here but was alternatively a much more entrepreneurial individual with active business interests. The Gibraltar Government recognising this trend issued guidance to the industry clarifying what activities Category 2 individuals could in principle carry out locally. The guidance was welcomed by the industry as it provided a number of clear examples of what a category 2 individual could do. Unfortunately though there were still restrictions with what could be done physically from Gibraltar.

In the autumn of last year the Gibraltar Government created a working group of industry professionals to review the Category 2 status and advise on how this product could be expanded and improved. The group is engaging with professionals experienced internationally in this area (including current Category 2 individuals) and is considering all aspects of the status from its process and application through to its functionality and practical application.
The recommendations, some of which have already been published in the Income Tax Amendment Bill 2015, will allow Category 2 individuals who have the necessary approval from the Finance Centre Director, to carry out or exercise any trade, business, profession or employment in Gibraltar. The intention is that the jurisdiction will benefit from the additional inward investment and from having these entrepreneurs using their business skills and expertise locally. The income from such activities will be taxed locally to the extent that the income is accrued and derived in Gibraltar. The challenge for the working group continues to be achieving the right balance in terms of the effective tax rate that these individuals should be subject to, in order for Gibraltar to retain its attractiveness as a low taxed jurisdiction.

An additional benefit of this new “opening of the doors” approach is the additional substance that it provides to the individual’s residency position. Substance is high on the global tax agenda and the weight that having an individual’s economic interests physically located in the jurisdiction gives to their residency position should not be underestimated. Many high net worth individuals, travel and have business interests in other jurisdictions therefore potentially there is a risk that another country may claim that the Category 2 individual is resident in their country. The more established the individual is in Gibraltar the better their defence against a claim for residency from another country will be.

Individuals affected by the change may be able to structure or plan their affairs to minimise the tax impact from the change. With its low corporate tax rate of 10% and its system of no taxation on capital gains, no wealth tax and no inheritance tax Gibraltar really is starting to feel like paradise in the sun.

So, only one thing in life is certain…….

MaltaMap

Malta: What Are The International Tax Planning Opportunities? Part 1

400 300 Ciantar Associates

expense report

In the first of a 3-part introduction to Malta’s tax system, we look briefly at its main advantages and benefits and show you why Malta is fast becoming a significantly important financial centre within the European Union.

A long history of fiscal and investment incentives for foreigners wishing to set up shop in Malta have led to a very attractive package for both investors as well as for non-residents wishing to use Malta in their international tax planning structures.
The Main Advantages of Malta’s Tax System
  • Net tax payable of 5% on company profits
  • Nil tax payable on incoming dividends from subsidiaries situated outside Malta (subject to certain conditions)
  • Possibility to opt to be taxed at 35% on incoming dividends and subsequently apply for a full refund or 6/7 refund on the Malta tax paid (i.e. 5% net tax). This might be beneficial in cases where the foreign shareholders would need to show that income has suffered tax
  • Net tax payable of 10% on passive income received from outside Malta (such as interest and royalties)
  • A Maltese Company can act as both a holding company and a trading company with no negative tax consequences, thus eliminating the need to open separate companies
  • A branch of a non-resident company carrying out activities in Malta will be treated in the same way as a resident company with resultant tax planning opportunities, and benefitting from the same net tax rate of 5% as companies
  • No Withholding taxes on outbound dividends, interest or royalties
  • Three or more tier Malta companies are possible
  • Relief on tax suffered abroad on incoming dividends possible up to full amount of Malta tax payable (35%) (if such dividend does not satisfy the conditions for exemption mentioned above)
  • Possibility to claim relief on Malta tax payable on income received from outside Malta, even if such income has not been subject to tax abroad or if such income has suffered tax at a lower rate
  • Full exemption on stamp duty and capital gains upon the transfer of shares between non-residents (subject to certain conditions)
  • Possibility of reorganisation relief, wherein a company can be amalgamated, split, or merged without losing any accumulated tax losses (in fact, tax losses can be surrendered or claimed within a group and set off against any other type of income and such claimed losses can be carried forward indefinitely)
  • All costs incurred in the production of the income is allowed as a tax deductible expense, there are no disallowed expenses (except for formation expenses)
  • Ability to hold shares under fiduciary (nominee). In order to hold shares under fiduciary a fiduciary agent must be a specially licensed company. Such company is bound by law NOT to reveal the identity of the ultimate beneficiary owners of a company to ANY party including the financial regulatory body (Malta Financial Service Authority) Indeed the only authority who has the right to ask for this information are the Courts of Malta and then only in cases of serious suspicion of fraud or money laundering
  • Malta currently has over 50 double taxation agreements in place including with all EU countries and with the US. Moreover the number is increasing yearly.
Other Benefits:
  • Member of the EU
  • Member of the Euro Zone
  • A sound banking system with representatives of some major banks like HSBC and Lombard Plc. The banking sector in Malta was almost completely unaffected by the world economic crisis due mainly to their low exposure to international finance
  • Maltese legislation conforms fully to EU law, EU code of conduct of business and abides to the Organization for Economic Co-operation and Development (OECD) standards
  • Possibility of redomiciliation of companies from anywhere in the world as long as such redomiciliation is allowed in the jurisdiction of the country of incorporation of the company and the country is not a black-listed country
  • English being one of the two official languages
  • A democratic and stable government
  • A well-established legal system based on UK law
  • A professional English speaking work force with a European mentality
  • A relatively low cost base
  • One of the best IT infrastructures in the EU
  • Good flight connections to all major EU cities.
Parts 2 and 3 of this series will delve deeper in to the features and benefits of Malta’s tax system, but for now, if you would like any more information on why Malta could be the jurisdiction of choice for your clients’ tax planning opportunities, please do not hesitate to get in touch.
leadership

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

1024 768 Abacus

jigsaw

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!

Finance

Malta Launches a New Investment Fund Structure – the Notified AIF

1024 683 Amicorp Fund Services

valletta

The Malta Financial Services Authority (MFSA) has recently announced the launch of a new framework applicable for notification of Alternative Investment Funds, the Notified AIFs, which will be promoted to qualifying or professional investors.

The AIFs falling within the scope of the notification process shall be managed by a full-scope AIFM. The Notified AIF is not authorised or in any way approved by the MFSA. In addition, Notified AIFs will not be subject to ongoing supervision. The MFSA shall make available and maintain updated on its website a List of Notified AIFs in good standing. The MFSA is separately assessing the licensing process for funds, particularly the Professional Investor Funds, currently licensed under Maltese law.

The Notified AIF can be established as any structure allowed under Maltese law and the AIFM will assume full responsibility for the Notified AIF and for the fulfilment of the obligations of the Notified AIF. EU/EEA AIFMs may submit a notification to the MFSA for an AIF to be included on the List of Notified AIFs. Third country AIFMs will be able to submit a request for notification of an AIF once the country where these have been established has been granted passporting rights pursuant to the AIFMD.

The process of notification of AIFs will be available to Collective Investment Schemes which are not already in possession of a licence issued by the MFSA in terms of the Investment Services Act. The MFSA will be publishing a list of documents required, together with a proforma prospectus template, to be submitted as part of the notification process of the AIF. Within 10 business days from the date of filing of a complete notification pack, the MFSA will proceed to include the AIF in the List of Notified AIFs.

The MFSA expects to start receiving requests for inclusion in the List of Notified AIFs from around the middle of the second quarter of 2016.