Posts Tagged :

information

2020

2020: “Changing, It Rests” (Heraclitus)

1024 646 Marta Bellamoli, Marketing Co-ordinator

changing

 

In sociology, but also in navigation, to understand where we come from and where we go, we need to know where we are.

Stephen Chbosky, American novelist, screenwriter and film director, quotes: ” We can’t choose where we come from, but we can choose where we go from there.”

Fiduciary services provider, Abacus, is based in Douglas, Isle of Man. Irrespective of their background, many people may not know where this jurisdiction is located.

In June 2016, the Island held an event called ISLEXPO. It celebrated the enterprising spirit captured by the Isle of Man’s mantra of ‘Where You Can’ and demonstrated opportunities for starting, growing or relocating a business on the Island. Above all, the Expo’s aim was to integrate the Island into a broader project, a vision that will culminate in the year 2020. A project that does not want to express the final place as to where we are going, but it just wants to outline a nearer and more immediate one.

 

In the past, sociologists, historians and economists enjoyed imaginary scenarios and proposing futuristic visions, along with overviews based on technical studies and data. It is therefore easy to find interesting studies on longevity, medical progress,birth rates, population studies together with scientific and technical reports in respect of IT or the biomedical sector. Rich-data papers on economics, development, GDP, energy production proceed with dissertations on the omnipresence and malleability that the future era could donate to humans. New concepts such as ‘teletravel’, ‘telentertainment’, ‘telerelationship’, are commonly used as they try to describe new stages of the processes expected in due course. These prove that everything could be possible by now.

Even though the above words can trigger a fervid imagination, equally it is fascinating to imagine where this Island, its businesses, our Company and we will be in the future.

We are continuing to produce and consume agricultural goods and producing and consuming industrial goods: our present society is actually characterised by the fact that the centre of the productive and social system is no longer the production of material goods, but new intangible assets: information, services, symbols, values and aesthetics.

The Isle of Man, and Abacus certainly, have always aimed to develop the production of ideas and services. To generate ideas we need “factories to produce the ideas”: laboratories and universities, for example.

Changes and adjustments are to be considered as an integral part of corporate essence, we should not be afraid in relation to what the future may reserve because “Changing, it rests”, said Heraclitus. The Greek philosopher claims rests by changing. A fire is constantly changing as the flame blazes up and up and never at any moment does it seem constant even if we call it the same fire. In fact, if the fire stopped changing in this way, it would die down and stop existing all together. As well as fire, so everything is dependent on its change for its existence.

Based on our mental make-up, we are designed for change, not to stand still. We are animals in a permanent mind-body movement. Our body never stops, not even at night, as our brain never stops because at night it is dreaming. That means we will be able to live our future with success because we would accept any change with great flexibility.

In the mid-twentieth century, there was a differing of views between two great architects: the well-known Le Corbusier, and Oscar Niemeyer, famous Brazilian designer.

Le Corbusier said: “Architecture is the masterly, correct and magnificent play of masses brought together in light. […] Light and shade reveal these forms; cubes, cones, spheres, cylinders or pyramids are the great primary forms which light reveals to advantage. The image of these is distinct and tangible within us without ambiguity. It is for this reason that these are beautiful forms, the most beautiful forms.” He put space first and absolute linear order.

Oscar Niemeyer replied: “Right angles don’t attract me. Nor straight, hard and inflexible lines created by man. What attracts me is the free and sensual curve — the curve that I find in the mountains of my country, in the sinuous course of its rivers, in the body of the beloved woman. When you have a large space to conquer, the curve is the natural solution.”

I strongly believe that Abacus, made of ideas and services, and Isle of Man, made of mountains and sea, would be able to live through the changes by this “free, sensual and curved” keystone.

These are the elements that I hope are leading us to 2020. This is the wish.

Checklist.

Gibraltar: The Alternative Funds Jurisdiction

1024 711 Fiduciary Management

investment

The significant global expansion in the Funds Sector has exerted considerable pressure on established Fund centres. Gibraltar has been proactive in attracting Fund business by enacting specific legislation for the setting up of Funds quickly whilst maintaining high professional and regulatory standards.

Gibraltar has a high quality infrastructure in that it has major international banks, accountancy firms and skilled financial services professionals and lawyers who are able to service the Funds industry. Gibraltar offers very high standards and, being a small jurisdiction, it is able to provide such services at competitive rates. All of the above makes Gibraltar an increasingly attractive Funds location. Whilst Gibraltar can offer numerous types of Funds to suit your needs, the main focus of this paper is to provide information on the establishment of a Private Scheme and an Experienced Investor Fund in Gibraltar.

Private Funds

Private Funds have proved to be very popular in Gibraltar. These are permitted under section 6(3)(c) of the CIS Act, provided that the scheme is promoted in accordance with, and is permitted by, the CIS Regulations. The CIS Act refers to Private Funds as “Private Schemes” and, in essence, these are collective investment schemes that are not listed on a stock exchange and are limited to no more than 50 participants.

Private Funds are unregulated and are not required to register with the Gibraltar Financial Services Commission (“FSC”). This allows private schemes to be established cost-effectively and quickly. There are no statutory investment restrictions but Directors must follow the investment objectives of the Fund as set out in the Fund’s offering documentation.

It is common practice in Gibraltar to establish a Private Fund as a Gibraltar limited company with two share classes: ordinary shares (the “Ordinary Shares”) which have voting rights but negligible economic rights with regards the investments made by the Fund, and preference shares (“Preference Shares” or “Participation Shares”) which are valued in accordance with the investments made by the Fund but have limited voting rights.

A Private Fund can be structured as an open-ended or closed-end Fund, although in the case of property closed-end is recommended. The Directors are obliged to make certain disclosures to investors regarding the operations of the Fund and this is best done through a professionally drafted offering document. An offering document will set out how the Fund will operate, the various parties involved, the investments the Fund intends to make and the risks involved in investing in the Fund. This will allow potential investors to make an informed decision when considering investing into the Fund.

A Private Fund does not require an audit, Custodian, FSC license or FSC-licensed Directors. Therefore it is substantially cheaper to create and operate compared to an Experienced Investor Fund (EIF).

Experienced Investor Funds (EIFs)

The Gibraltar Experienced Investor Funds regime was launched on 5 August 2005 with the publication of the Financial Services (Experienced Investor Funds) Regulations 2005.

The EIF offers many benefits in terms of ease and speed of set-up as well as a great degree of flexibility for investors. Both Promoters and Administrators can use Gibraltar’s investor friendly EIF legislation to set up Hedge Funds or Funds that can use hedge strategies in an easier and cost effective way for private clients and for external asset managers. To license a new Experienced Investor Fund, the Fund’s administrator must notify Gibraltar’s FSC within 14 days of its launch and supply the Fund’s offering documents and an opinion from counsel stating that the Fund complies with local EIF Regulations. The effect of this is that an EIF can be set up in a matter of days. An EIF must have two Gibraltar-resident directors who have been pre-approved by the FSC and a Gibraltar-based administrator and auditor, as well as a custodian or prime broker who does not have to be based in Gibraltar.

An Experienced Investor under the Experienced Investor legislation is a person or body who, at the time of the investment, falls into one of the following categories:

A. A person or partnership whose ordinary business or professional activity includes, or it is reasonable to expect that it includes, acquiring, underwriting, managing, holding or disposing of investments, whether as principal or agent, or the giving of advice concerning investments;

B. A body corporate which has net assets in excess of Euro 1,000,000 or which is part of a group which has net assets in excess of Euro 1,000,000;

C. An unincorporated association which has net assets in excess of Euro 1,000,000;

D. The trustee of a trust where the aggregate value of the cash and investments which form part of the trust’s assets is in excess of Euro 1,000,000;

E. An individual whose net worth, or joint net worth with that person’s spouse, is greater than Euro 1,000,000, excluding that person’s principal place of residence; or

F. A participant who invests a minimum of Euro 100,000 in the Fund.

Article

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.
sum of its parts

Malta: Fund Distribution Is The Sum Of Its Parts

1024 573 Ken Carmody, Finscoms

sum

Fund distribution plays an enormous role in the success of an investment fund. But what often overlooked elements play an enormous role in successful fund distribution? The answer is fund marketing and fund communications.

Strong marketing and communications strategies create strong distribution. Cut distribution open and it bleeds marketing and communications. Most asset managers refer to fund distribution as fund marketing but it’s vital to differentiate and understand each component.

Fund Marketing
Traditionally, fund prospectuses are seen as the main way to reach the investor by fund managers. And often oblige by sending out large, bland, monotonous and indigestible documents. On average, institutional investors receive 45 prospectuses a quarter and 10% receiving more than 100. Only 15% of these get passed the initial filtering stage. Less than 0.2% are actually successful in attaining investment. Pdf’s are being ripped from emails by many company firewalls and the hassle for the investor to have the pdf released becomes another boundary to penetration. Is it any wonder we are starting to hear slogans such as ‘Death to Pdf 2016!’ and ‘We are pdf deaf!’. In this post AIFMD world using ‘push’ marketing across global markets is an expensive way to attain very low penetration.

To overcome you must adapt. A dynamic fund marketing strategy will steer the fund toward reverse solicitation, inbound rather than push marketing. Spray and pray marketing is not effective. Those achieving the highest rates of penetration now rely on a strong brand and make the most of their marketing assets such as their website and reach prospects through video, webinars and social media. Many funds build a website on the premise that ‘my competitors have one so I got one’. The function of the website must be addressed. It can be a revenue generator, a communications tool, a value add to clients/investors. Asset managers are adopting social media as regulatory groups recognise it as suitable means to communicate. Social media can help create communities, promote without bombarding, become a thought leader or a subject authority.

Fund Communications
A fund is required to put out communications to stakeholders to satisfy fiduciary, regulatory and legal obligations. You don’t have to see this as an administrative drudge; a fund can use these obligations to strengthen your relationship with the investor and other parties. Change communications strategy regarding compliance to an open, transparent and well designed communication to investors. For example, with 54% of investors unhappy with the level of provided transparency compared to 78% of fund managers who believe they provide enough, create competitive advantage by addressing this clear disconnect. Speak the investors’ language, let them see how well the fund is being managed and see the relationship solidify. There is plenty of scope for this:

  • NAV publication
  • Meeting requirements in relation to Key Investor Information Documents (KIIDS) being provided to investors before they invest in a UCITS
  • Publication of semi-annual and annual financial statements
  • Shareholder notifications
  • Notices for Shareholder General Meetings
  • Key performance indicators such as investment performance versus benchmark

The fund’s message must be consistent across all mediums to avoid confusion and keep focus on the core message. The smart fund manager will deliver messages about updates and services through social media, the website, intranets, extranets. It is advisable to communicate regularly and stay in line with the investment philosophy and the strategy of the firm, this helps provide a ‘true to label’ comfort level for the client/investor. At all times funds must ensure that their communications are fully compliant.

Fund Distribution
The asset manager’s distribution strategy should include fund marketing, fund communication, knowledge of distribution channels and regulation.

Knowledge of the distribution channels per targeted jurisdiction is of course vital for building an effective distribution strategy. Each market differs from the next in terms of public offering listing, regulated public distribution, private placement, local distribution networks, regulatory requirements and more. The distribution network is still viewed as complex and somewhat opaque. A fund should make sure to complete full due diligence on the distribution network and on would be distribution partners. It is essential that the transfer agent and distributor used have solid know-your-customer and anti-money laundering procedures. From there the fund needs to grow a strong relationship with the local distributors and agents on a business and operations level.

Complying with local regulatory requirements is an area that needs constant supervision as regulations are constantly changing. Asset managers working with fund lawyers will need to get to grips with regulatory requirements on local agents, eligibility, investor disclosure, registration and continued registration, and marketing.

An adept asset manager will be looking at what the future holds for the industry and will have the fund prepared. For the near future in the asset management sector we can see the following:

  • An almost complete move from the traditional style of marketing to digital marketing. And the ‘Death of PDF’ in 2016.
  • An even greater evolution of fund products to match investor demand
  • The emergence of new distribution channels
  • The wide use of video to engage prospects taking into account the IT savvy nature of the ‘next generation of investors’

In Summary
Fund distribution is not complete without fund marketing and fund communication. These two components are often neglected and can result in the fund making a negative impression unbeknownst to the fund manager. In a congested sector, of over 25,000+ funds, investing in marketing and communication post AIFMD is critical. It is no coincidence that the most successful funds have strong brands and use communication strategy as a competitive advantage. Having a strong brand and identity helps strengthen the trust between investor and the fund. Strong communication strategy strengthens the relationship between the investor and the fund. Thus building a solid platform to increase the reach of fund distribution.

tax planning

Malta: What Are The International Tax Planning Opportunities? Part 2

1024 737 Ciantar Associates

SOLUZIONI

In Part 1 of our overview of Malta’s tax system, we looked briefly at the main features Malta can offer when considering tax planning for your clients.

In this part, we will take you through some of those benefits in more detail.

From 1st January 2007 a new set of provisions to the Income Tax Act and the Income Tax Management Act came into force, further strengthening Malta’s bid to become an important financial centre within the EU by 2015, the date set by the Maltese Government.

Malta practices a full imputation system of taxation which is unique within the EU. The basic concept of this system is that income received net of tax is grossed up in the hands of the recipient and taxed once more at the applicable rates of tax of that individual or body corporate. The tax suffered on the income is than taken as a tax credit and a refund or a topping up of the tax will then take place according to which rate of tax is the higher. This system coupled with a classical system gives rise to plenty of tax planning opportunities, which is what is making Malta so popular with investors worldwide.

The headline corporate tax rate is of 35%. However, upon a distribution of a dividend, shareholders can claim a refund of up to 6/7 of the tax suffered on the dividend bringing the net effective tax down to 5%. This refund is paid within a maximum of 6 weeks from the payment of the company tax.

If a Maltese registered company owned in full or in part by non-resident shareholders received dividend income from a Participating Holding (PH) i.e. dividend income from outside Malta, a full refund may apply to the shareholders upon distribution of a dividend . In certain cases the company may benefit from what is known as a Participation Exemption (PE) whereby a company need not pay the tax on this income from the outset.

The definition for PH is as follows:

• When a company holds directly at least 10% of the equity shares of the company, or
• Has the option to acquire up to 10% of the share capital, or
• Is entitled to first refusal in the event of a proposed disposal off all equity shares, or
• Has the right to sit on the board of directors, or
• Holds an investment of at least €1.2 Million in a company not resident in Malta and which is held for an interrupted period of 183 days or,
• Where these shares are held for the furtherance of the business, such holding should not be held as trading stock for the purpose of a trade.

The definition has been extended to include certain partnerships, thus enhancing Malta’s competitiveness as a holding company jurisdiction.

In order for a company to qualify for a PE it is enough to satisfy these provisions. However, for new companies incorporated on or after 1st January 2007 and for existing companies after 31st December 2010, the following anti-abuse provisions apply:

1. The foreign entity in which the PH is held must be resident or incorporated in a country or territory which forms part of the EU; or
2. is subject to any foreign tax at a rate of at least 15%; or
3. less than 50% of its income must be derived from passive interest or royalties.

If ALL three conditions are NOT met then BOTH of the following conditions must be satisfied:

1. The PH must not constitute a portfolio investment; and
2. either the body of persons not resident in Malta; or
3. its (the body of persons) passive interest or royalties have been subject to foreign tax at a rate of not less than 15%.

If a company satisfies the conditions for a PH and the anti-abuse provisions, it can opt not to declare this income in its tax return outright and no tax will be due.

Alternatively, the company may opt to declare this income, which might be beneficial in cases where the foreign shareholders would need to show that income has suffered tax. In this case, the company will benefit from a full refund payable within a maximum of 6 weeks from payment of the tax.

If a company satisfies the definition of PH but not the anti-abuse provisions it will still benefit from the 6/7 refund, i.e. it will have to pay the corporate tax of 35% and upon a distribution of a dividend the shareholder will apply for the a refund of the tax paid, effectively bringing down the net tax charge to 5%.

economy

Passive Income
Companies receiving passive interest or royalties from abroad, a 5/7 refund will apply on tax suffered in Malta upon a distribution of a dividend.

Passive interest or royalty income is defined as income which is NOT derived directly or indirectly from a trade or business, where such interest or royalties have not suffered any foreign tax, directly, by way of withholding, or otherwise, at a rate of tax which is less than 5%.

Such income will be taxed normally in the hands of the Maltese company (i.e. 35%) but will only result in 5/7 refund when distributed (i.e. 10%).

It is possible to ask the Inland Revenue department for an advance revenue ruling on whether such income falls under these provisions or not.

 

In this article, we have described in more detail two areas in which Malta offers exciting tax planning opportunities – simple and advantageous to individuals and companies seeking to do business in a jurisdiction making itself impossible to ignore.

In our final part, we will take a look at two more areas where Malta can be advantageous for your clients. In the meantime, 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.