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Information about Non-Commonwealth European Nations - Andorra, Austria, Campione D'Italia, Canary Islands, Cyprus, Ireland, Madeira, Monaco, Spain & Yugoslavia - with Various Features that can be Useful for Tax Reduction, Asset Protection, Investments, Banking and a Wide Range of Other International Personal and Business Tactics & Strategies.
This 700 year old miniature state in the Pyrenees is located between France and Spain. In theory, it is ruled jointly by an archbishop and a monarch from Paris and Madrid. In fact, it is independent. It is the choice of those who enjoy a mild alpine climate, winter sports, and political and economic stability.
It has a high standard of living and immigration permits are very difficult, but not impossible, to obtain. Andorra has zero tax liability and maintains absolute discretion with foreign tax authorities.
Like the Island of Sark, it does not have a Registrar Of Companies and so has not become an offshore zone for company formation. It is nevertheless possible to do business from Andorra and formal residency has significant advantages for some persons.
It is highly recommended for persons looking for a place to buy a second home in the mountains. The skiing is great and it is much more relaxed than Switzerland. The miniature state has miniature regulation and virtually no government.
Few people know that this small country in the Alps - one of the most politically and economically stable in the world - offers foreign retirees near-zero tax status. This makes it one of the world's most desirable retirement havens for the upscale retirees. Residence permits are easy to obtain.
The banking system is confidential. It is possible to have a banking account in bearer form - the ownership of the account can be transferred by the physical delivery of a passbook. Unemployment and crime rates are low.
If you are thinking of retiring in Switzerland, think again. You'll be better off in Campione, the Italian enclave where there is an international community of retired persons who enjoy near-zero tax status. It is also an ideal businesses location for the well off and discrete.
Campione is one of the world's most unique - and least-known - tax havens and an attractive base for companies looking for a regional headquarters in Europe. Located on Lake Lugano, in the Swiss Canton Ticino - about 10 driving minutes from Lugano and 45 highway minutes from Milan - Campione is an Italian enclave in Swiss national and economical territory entirely surrounded by Switzerland. There are no border controls, so there is complete freedom to pass in and out of Campione. In terms of banks, currency, duty, traffic, post, telephone and telegraph Campione belongs economically to Switzerland concerning:.
In contrast with the Swiss national territory, it's not difficult for foreigners to obtain the right of residence - if you can prove you have property such as a flat, house, etc. It would even be sufficient to prove having rented a flat or a house, but there's virtually no property available for rent because there is so little of it. The local authorities attach great importance to the fact that registered residents live at least sometime in Campione and they control whether or not flats or houses are provided.
From Campione you can establish a clear and unrestrained operational base in all Switzerland and Liechtenstein.
Campione's interest as a tax haven arises from the fact that, although its tax law is made within the framework of Italian tax law, there are special regulations for Campione. There are no personal income tax and no municipal taxes at all in Campione as all Campione's income are derived from the Casino. Since banks cannot be established in Campione (according to a Swiss/Italian treaty) it is necessary to use Swiss banks, preferably in Lugano. Thus Campione is a part of the Swiss currency area like Liechtenstein, and all payments and investments are made in Swiss Francs.
Campione residents - in contrast with foreigners in Switzerland - are not subject to Switzerland's double taxation agreements with the USA, Canada and most of Western Europe. Profits from bank deposits, shares, bonds, real estate and other transactions from a Swiss or international source are not registered for tax purposes for Campione residents as long as they pass through Swiss banks.
These islands off the NW coast of Africa are part of Spain but enjoy special status in the same way as Madeira does with Portugal. They have very well developed tourist facilities.
After a long gestation period, caused through both EU and Central Government intervention in Madrid, it appears that the Canary Island Economic Zone (ZEC) will soon become a reality. If the regulations are passed as expected both "holding" and trading companies will be available.
Most importantly, such companies are likely to be able to use Spain's double taxation treaty network -- yet pay only 1% tax for "holding" companies, or even no tax for "Free Trade Zone" undertakings. When introduced, ZEC companies are expected to provide stiff competition to existing Maderian SPGS Holding companies. However, the Portuguese tax treaty network is far less comprehensive than that of Spain and, because there is no tax levy, more susceptible to third party anti-avoidance provisions.
Cyprus has a sophisticated network of double taxation treaties available for use by non-resident companies and a very professional infrastructure. Documentation presented to the companies registry must be in Greek and bank referenced and copies of passports must be forwarded to the central Bank of Cyprus before Offshore status is granted to a company.
Cyprus is one of the most favored jurisdictions for those seeking a residency permit at competitive rates. In effect, Cypriot legislation allows an investor establishing either a genuine offshore branch or an indigenous Cypriot company the ability to be granted an authentic Cypriot residency permit.
To qualify, it is necessary to prove management and control will physically take place in Cyprus. Once office facilities have been set-up it is then possible to arrange residency permits for the beneficial owner and his family/dependents within a short time span. The company itself will be subject to a 4.25% tax rate on its world-wide profits which will be assessed at the end of the financial year based upon submitted audited accounts.
It is essential to remember that a Cypriot non-resident company must only conduct trade outside of Cyprus and that whilst the company itself is only subject to a 4.25% tax rate any money withdrawn for the use of the beneficial owner will be subject to 50% of the normal individual tax rate (assuming that the beneficial owner plays an active role in company affairs). In effect, this equates to a maximum tax rate of 20% but normally considerably lower.
Cyprus is a popular tax haven for public and trading companies which can find significant advantages in the double taxation treaties network available to offshore companies. It is otherwise expensive and subject to significant disclosure requirements.
The mild south is especially attractive as a retirement haven and, for a select group like writers and painters, it is a zero tax haven, though if you lack artistic talent there are other ways to qualify and receive your income, profits, pension or social security check at a zero tax rate.
An Irish company which is beneficially owned by non residents of Ireland, does not do business in Ireland and which is managed and controlled from outside Ireland (i.e. has non resident directors), will not be taxable in Ireland. As Ireland is not an obvious tax haven, an Irish non resident company provides an excellent low profile tax avoidance vehicle. For a time during the early 1980 this was also possible in the UK. The EU objected to a developed country permitting such tax avoidance and so the legislation was changed. In time, the situation will also change for Ireland as it is now approaching the EU economic norm in many areas. Currently, Irish non resident companies enjoy huge popularity.
Legislation introduce in l995 now requires the disclosure to the tax authorities of: The address of the company's principal place of business which by definition must be outside Ireland, and; The name and address of any individuals who have "control" of the company. These requirements have tax implications for both the beneficial owners of the company and the company.
Ireland has an extensive network of tax treaties and many of these provide for the exchange of information. Details of the directors and of the registered shareholders already appeared at the Companies Registry and now are also registered with the Tax Department -- increasing the likelihood of those details being passed to your home tax authorities. Even if no tax treaty is in place the Irish authorities tend to be compliant in meeting requests for information from overseas tax authorities.
Most onshore countries have provisions within their tax legislation whereby any company, no matter where it is incorporated, which is managed or controlled from within their jurisdiction can be considered tax resident and taxable on worldwide income at local rates. Thus, for example, any offshore company which had UK based directors would be deemed by the UK Inland Revenue as being tax resident in the UK and subject to UK tax on its worldwide income. Most other onshore countries have similar provisions within their tax legislation. Therefore, to guarantee that confidentiality can be retained and in order to help rebut any suggestion that the company may be tax resident in the home country of the promoters or any other onshore jurisdiction, the management of an Irish company should be based somewhere fiscally neutral. This will normally necessitate employing the services of professional third party directors.
Most countries have Controlled Foreign Corporation legislation and other anti-avoidance provisions which may allow them to tax the profits of the company as though those profits had been distributed to the shareholders whether they had been so distributed or not. For example, if it is revealed that the Irish company has UK resident shareholders then the UK Revenue may seek to tax the shareholders as though they had actually received the profits of the company even if this was not the case.
The use of nominee shareholders would not remove the obligation to reveal the beneficial ownership as the nominee agreements make it clear that the real control of the shares rests with the beneficial owner and not with the registered nominee shareholder. The shares may, however be held by a discretionary trust so that the only detail required to be revealed to the Irish Revenue authorities is the name and address of the trustee rather than the client's own details. Many clients are not prepared to use a discretionary trust for security and cost reasons and so Ireland has become less popular with those seeking a low cost and private company registration solution.
For individuals, the principal advantage of the Irish Republic is that there's a clear distinction between a person's domicile and physical residency for tax purposes. In effect, a "foreign" person resident in Ireland need only be taxed on remitted income back to Ireland. If a suitable distinction is made between capital and subsequent income from capital (i.e. interest) before taking up permanent residence it may even be possible to live in Ireland almost completely tax free.
Another benefit of Ireland over most other potential tax havens is that all permanent residents will be able to benefit from Ireland's sophisticated and extensive double taxation treaty network. Third party investigating tax authorities will be bound by the terms and conditions of the applicable tax treaty and clients will be protected against the almost ubiquitous reverse burden of proof employed by other developed nations. These basic advantages combined with other domestic tax breaks have resulted in Ireland having a significant and wealthy expatriate community.
Entry clearance criteria are very similar to those of the United Kingdom with the possibility of Irish passports for those willing to invest IRL 1,000,000.00.
While the distinctions drawn between domicile and residence in Ireland for tax purposes are well know (i.e. that non-Irish nationals resident in the Republic are only taxed on external passive income when directly remitted to the country), what is not as well known is the fact that it is also an ideal base for working "international" consultants. Under the 1994 Finance Act, inducements were introduced not to tax Irish based (i.e. resident) executives working on behalf of their employer outside of the Republic on such foreign generated income even if remitted. The rule are complex, but very real advantages are available.
Incorporation of Portuguese companies is the preserve of the legal profession and is an extremely lengthy and bureaucratic process. First, name approval has to be obtained from a Central Registry not known for flexibility nor speed of processing applications. Once this has been obtained, the proposed share capital of the company (minimum Esc 400,000.00) must be deposited with a bank in an account opened in the name of the proposed company. The Articles of Association of the company must be drafted and signed by the shareholder(s) by way of a deed before a public notary following which registration with the local Finance (tax) Department and Social Security office must be made. Within 90 days of the date of the deed of incorporation the company must be registered at the local Commercial Registry Office followed by publication of the articles of association in the Government Gazette and a local newspaper. The official books of the company must also be registered with the local tax department and the Commercial Registry.
Obviously this is a lengthy and tortuous process which can delay the start of business activity by several weeks or longer.
Madeira Offshore Zone
The beautiful island of Madeira is situated about 700 kms west of the coast of north west Africa on the same latitude as Casablanca, Morocco. It was discovered by Portuguese seafarers in the 15th century and has remained Portuguese territory ever since. Due to the political changes in Portugal in the mid 70's Madeira has become an autonomous region with its own Parliament and locally elected Government however it remains legally and politically part of Portugal and is thus a full member of the European Union.
Legislation implemented by the Portuguese government with the aim of "kick starting" the islands economy makes it one of the most effective tax free corporate vehicles in the world today. Recognized by most EU countries as being a development area and not purely a tax haven and with the advantage of full access to the Portuguese tax treaty network, Madeira registered companies are often the perfect vehicle for investment by non-EU individuals into Europe, particularly for trading within the European Union where a Value Added Tax (VAT) registration number is required.
Portugal currently has tax treaty agreements with Austria, Belgium, Brazil, Denmark, Finland, France, Germany, Italy, Japan, Mozambique, Norway, Spain, Switzerland and the UK. The terms of these treaties provide, amongst other things, that payments of dividends and royalties from these countries can be made with a much lower rate of tax being withheld at its source. For example, royalties being paid by a UK company to a non-resident corporation or individual would normally be subject to a withholding tax of 25%. However, if those same royalties are paid to a Madeira company the rate of withholding tax may be reduced to 10% by virtue of the provisions of the UK/Portugal tax treaty -- despite the fact that those same royalties would not be subject to tax on arrival within the accounts of the Madeira company and would also avoid any withholding tax when remitted from the Madeira company to the eventual beneficiary.
In addition to the normal offshore company, Madeira also allows incorporation of the SGPS (Sociedades Gestoras de Participatoes Sociais). The SGPS has been specifically designed to take advantage of European Union Directive 90/435 that requires that dividends paid by a subsidiary located in one EU state to a parent located in another EU state must not be subject to any form of withholding tax as long as certain conditions are met -- the most important of which is that the parent company cannot be exempt from taxation in its country of incorporation. The SGPS is therefore subject to a rate of tax of 36% on dividends received from subsidiaries situated in other EU states but 95% of the dividend income is exempt from taxation. Thus, the effective rate of taxation on dividends is only 1.8%.
The SGPS must not undertake activities other than holding shares in other companies and so of considerable use to any company located outside the EU wishing to invest within the EU. Therefore this Madeira corporate entity deserves special attention either as a holding company or for trading by a non EU entity with, or within, the Union.
With the offshore world booming, many countries such as Malta and The Canaries have jumped on the bandwagon to attract new and lucrative business. However, for some time Madeira has been the leader of the Southern European pack. Being an integral part of Portugal Madeira benefits from Portugal's double tax treaties and EU directives, such as 90/435, which makes it an ideal conduit for European investment. Because few treaty partners make a distinction between mainland Portugal and Madeira it is under certain treaties for "tax credits" will be available since the Maderian company will be deemed to be liable to full Portuguese tax.
The SGPS benefits from Portugal's tax treaties and EU directives and, unlike other Maderian undertakings, it does not have to be licensed or located in the International Business Centre. Whilst the activities of the SGPS are limited to investments the advantages are significant: Dividend income arising to the SGPS from EU investments is taxed at 1.8%; No Portuguese withholding taxes (normally 25%) on dividend distributions; Where dividends are received from investments made in companies incorporated outside of the EU, no taxes, including the 1.8%, will be payable, and; All other income, provided it is within the proscribed parameters, will be taxed on the same basis as all other Portuguese at a 1.8% rate.
The Principality of Monaco is one of the most favored residency locations for the wealthy -- primarily because of the lack of income taxes, ideal geographic position and absolute safety. Apart from the ability to pay local rents, which are proportionally higher than those in London, there are no artificial constraints placed upon non-Monegasque nationals.
To become an official resident it is necessary to obtain a carte de sejour (residency permit) which can normally be obtained within 3 months of the original application date. Documents required include:
* A "Police Certificate" from the appropriate country confirming that the applicant(s) have no known criminal record(s).
* A valid French Visa issued by the French Embassy in the jurisdiction of current residence.
* A "Medical Certificate" provided by an approved physician again in the jurissdiction of current residence
* Proof of property acquisition or rental providing either the requisite property deeds or lease (bail a loyer). In addition, if applicable, the type of property must correspond to the size of the applying family unit.
* The completion of multiple application forms outlining the full personal details and circumstances of all applicants.
* An "Attestation" from a Monegasque bank that at least FRF 2,000,000 or its equivalent have been lodged. This attestation must be given on each subsequent renewal date for the residency permit.
* A "Referee" in Monaco -- normally the local Monegasque advocat or immigration consultant.
Additional factors that should be borne in mind before relocating to Monaco are that:
(i) It is expensive and time consuming to establish a local company. When more than 25% of a businesses revenue derives from external trade a 33.3% tax will be levied on all profits.
(ii) There may be constraints on what activities an applicant can conduct from the Principality.
(iii) The 1963 Tax Treaty between Monaco and France prevents French nationals from enjoying any of the indigenous fiscal benefits.
Nevertheless, Monaco is often an ideal personal location especially if employed in conjunction with an external tax planning structure.
While Spain is in the process of establishing its own offshore "haven" in the Canary Islands it has long taken a dim view of structures which could circumvent Spanish property acquisition and capital gains taxes. Certainly, as a result of Laws 31/1990 and 18/1991 it is no longer possible to use "stigmatized" jurisdictions such as Gibraltar or even Irish / Delaware non-resident structures.
However, Spanish anti-avoidance provisions are not as sophisticated as their French counterparts. The two most common solutions are either to use a resident British or Irish company (owned by a tax exempt offshore company) or a domestic Spanish company (normally a SRL) owned in turn by a "respectable" non-resident Irish/Delaware undertaking.
The first solutions works because the domestic legislation of Britain and Ireland does not impose capital taxes on gains realized by the sale of shares in a domestic entity by non-domiciled/resident individuals/undertakings. The owner of the resident British/Irish company, being a "foreign" Isle of Man or Bahamian company, is hence able to benefit from this "loop-hole" (Note: a British domiciled person may not be able to use this structure). The second solution, favored by Spanish lawyers, simply relies on the fact that Laws 31/1990 and 18/1991 do not apply to domestic companies.
Montenegro is a member of the war-torn Federal Republic of Yugoslavia and lies to the south west of the Balkan Peninsula, along the Adriatic Sea, covering an area of 13,812 square Km. Despite years of blood-shed, in an attempt to attract development to the area, Montenegro has recently introduced new legislation to promote the area as a prospective manufacturing centre and to allow the incorporation of companies which are subject to a tax on profits of just 2.5%. In addition, Yugoslavia has a wide variety of tax treaties including ones with France, Belgium, The Netherlands, the UK and Russia.
The procedure for forming a company - which can be a Limited or Joint Stock Company - is relatively straightforward. Name approval is virtually guaranteed, though names which include words such as "Insurance", "re-insurance" and "bank", will require a license. Once a name has been selected, an application is filed with the Ministry of Finance. The Ministry is required to register the company within 10 days. Bearer shares are permitted and a Ltd company must have a minimum and paid up share capital of US$1000.
The costs for establishing a company are likely to be on a par with a standard Caribbean IBC incorporation, so those interested will have another option to consider. Sources say that Montenegro offers splendid skiing in winter and admirable beaches in the summer!
This document was excerpted, modified & otherwise prepared by the 'Lectric Law Library ('LLL) from materials supplied by Baltic Banking Group - www.BalticBankingGroup.com Copyright 1998 - 2002 'LLL & BBG, all rights reserved.