Category: Tax

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EU Anti-Tax Avoidance Directive implemented in Malta

Categories Tax, Malta, E&S Group

EU Anti-Tax Avoidance Directive implemented in Malta

On the 11th December 2018, Legal Notice 411 entitled ‘European Union Anti-Tax Avoidance Directives Implementation Regulations’ was published in the Malta Government Gazette.

These Regulations, which shall come into force on 1st January 2019, implement the provisions of Directive (EU) 2016/1164 of 12 July 2016 adopted by the Council of the European Union laying down rules against tax avoidance practices that directly affect the functioning of the internal market. They apply to all companies as well as other entities, trusts and similar arrangements that are subject to tax in Malta in the same manner as companies, including entities that are not resident in Malta but that have a permanent establishment in Malta provided that they are subject to tax in Malta as companies.

The Directive presents key tax policy changes to Maltese law which include an interest limitation rule where exceeding borrowing costs shall be deductible in the tax period in which they are incurred only up to 30% of the taxpayer’s earnings before interest, tax, depreciation and amortisation (EBITDA). This rule is meant to deter artificial debt arrangements intended to minimise tax.

Also introduced is an exit tax on capital gains at an amount equal to the market value of the transferred assets, at the time of exit of the asset. This tax, as an exception to the other regulations, shall come into force on 1st January 2020, and is directed at preventing companies from avoiding tax when relocating assets.

The Directive also includes a general anti-abuse rule (GAAR rule) as a response to aggressive tax planning, and also a controlled foreign company rule (CFC rule) addressed at deterring profit shifting to a low or zero tax country, which requires that an entity, or a permanent establishment of which the profits are not subject to tax or are exempt from tax, shall be treated as a CFC when certain conditions are met.

Contact us on +356 20103020 or by mail at [email protected]. E&S can help you in ‘making things happen’.

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VAT Grouping

Categories Business, Tax, Regulatory, VAT

VAT Grouping

Pursuant to the 2018 Government Budget Speech and the introduction of Subsidiary Legislation 406.21 Value Added Tax (Registration as a Single Taxable Person) Regulations, eligible entities are now able to register for VAT Grouping in Malta through the online application form issued by the Office of the Commissioner on 30th November 2018.

Any two or more legal persons established in Malta may apply to be registered as a single taxable person if the following conditions are satisfied:

  1. At least one group member is licensed under any of the Acts identified by the Regulations;
  2. Each of the applicants is bound to one another by financial, organisational and economic links; and
  3. All group members are fully compliant with their Income Tax and VAT obligations at the time of the application.

VAT Grouping generates several benefits for businesses, including a simplification of the administrative and compliance burdens, VAT cash flow advantages and potential VAT savings. Contact us for further information to know how your company can benefit from VAT Grouping!

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Why is Malta a jurisdiction of choice for aircraft registration?

Categories Tax, Aviation, Malta, E&S Group, Jurisdiction, Aircraft Registration

Why is Malta a jurisdiction of choice for aircraft registration?

Amongst all of the blockchain/iGaming and FinTech hype that is prevalent in Malta, people sometimes forget that the country is also a prime jurisdiction for various other types of business. Malta is well known for its long history with the maritime sector, but have you also known that it offers great incentives for those individuals or businesses that are looking to register an aircraft?

In 2010, The Aircraft Registration Malta Act came into force with the aim of regulating the aviation industry in Malta. The Act focused on the registration and enforcement of aircraft mortgages, the interface of aircraft protocol with Maltese law, as well as the implementation of the Cape Town Convention.

So what are the main advantages of registering an aircraft in Malta?

Fiscal

  • Malta offers an attractive corporate taxation regime including a full imputation system on the distribution of dividends meaning the rate of tax paid can be as low as 0% in certain circumstances.
  • Malta is part of an extensive network of double taxation treaties.
  • Malta encourages the development of both finance and operating aircraft leases as well as clarity on the tax treatment of final charges, tax deductions and capital allowances.
  • Malta does not charge withholding tax on lease payments as long as the lessor is not a Malta tax resident.
  • Malta does not consider that the use of aircraft by a person who is not resident in Malta and is not an employee of, or involved with a company which owns, leases, or operates aircraft, is a taxable fringe benefit.

Registration

  • Malta offers a broad range of registration possibilities for aircraft that are registered privately and not for commercial use.
  • Malta offers owners to register an aircraft whilst it is still under construction.

Ownership

  • Malta recognizes fractional ownership of aircraft so the title can be effectively divided between numerous co-owners into fractions or percentages which can each be financed by different creditors.
  • Malta offers a wide range of top-quality airline services such as maintenance, repair, overhaul, management, training and other ancillary services, all within the country.
  • In Malta, an owner operating an aircraft, an owner of an aircraft under construction, the owner of an aircraft currently not being operated, the owner of an aircraft under a temporary title, or a trustee is able to register an aircraft in Malta.

If you are interested in registering a commercial or private aircraft in Malta, contact us today by sending us an email on [email protected]

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E&S Group Announces Participation in KSU Fresher’s Week 2018

Categories Tax, iGaming, Blockchain, Cryptocurrency, Malta, ICO Legal Service, Law, E&S Group, University, Technology, Tokenomics, DLT, KSU, Corporate Services

E&S Group Announces Participation in KSU Fresher’s Week 2018

As Malta continues to stride towards solidifying its reputation as the ‘Blockchain Island’, E&S Group is proud to announce its participation in the KSU Fresher’s Week 2018 at the University of Malta.

Held in between the 1st-5th of October 2018, the KSU Fresher’s Week gives new students the opportunity to meet not only each other but also businesses involved in the sectors they may one day wish to work in. E&S Group will have a stand at the event where students are invited to come and meet the team, network, make contacts for future internship opportunities, and learn about the range of services the company provides. Students will also be able to get their hands on merchandise and enjoy a range of games and competitions throughout the week.

E&S Group is a boutique law firm, located in the heart of St Julian’s. Whilst based in Malta, their client portfolio has a global reach across multiple sectors and disciplines. As Malta’s cryptocurrency and blockchain sector continue to increase, so does the demand for special legal professionals with an interest in these emerging industries.

Lawyers and accountants with experience and knowledge in ICOs, cryptocurrency, and blockchain technology are in demand, and as the sector is still in its infancy, this demand is set to grow exponentially. E&S Group is looking to inspire, educate, and develop the talents of potential digital market participants, as well as to attract the island’s brightest professionals to a sector that is set to revolutionise the local, and international economy.

E&S Group provides a range of services including ICO Legal Services, Corporate Services, iGaming, International Tax Planning, Financial Planning, Tokenomics, and more. If you are a student willing to work in one of these fields in the future, be sure to stop by the E&S Group stand to say hello!

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Israel considering launching the virtual currency Shekel

Categories Tax, Blockchain, Cryptocurrency, Technology, Tokens

Israel considering launching the virtual currency Shekel

As cryptocurrency continues to grow in popularity in Israel, whispers of a possible state-backed virtual currency are circulating.

The Bank of Israel as well as the states Finance Ministry has been considering such a move since the price of Bitcoin peaked at the end of 2017. Since then, officials have been discussing the possibility of a state-sponsored cryptocurrency that could be rolled out to lower the number of cash transactions. It is also hoped that such a move could help to decrease issues such as tax evasion and money laundering.

Financial crime is a big issue in Israel with black market activity accounting for a whopping 22% of the GDP.

At the start of 2018, a draft legal framework was put forward for a state-sponsored cryptocurrency and over the last few weeks, additional information about a possible “crypto-Shekel” has come to light.

Whilst a centralised cryptocurrency is sort of something of a contradiction, the introduction of such a concept could see confidence levels in other cryptocurrencies boosted globally.

Crypto is already all the rage in Israel thanks to a large number of patents filed in the country, as well as a large Israel-based technology industry. It was even ranked as one of the 10 most innovative nations in the world, during 2018.

As well as a state-sponsored cryptocurrency, Israeli institutions such as the Bank of Hapoalim have teamed up with companies like Microsoft to offer Azure for blockchain-based asset digitisation.

If Israel was to launch a crypto-Shekel, it would be following in the footsteps of Venezuela and Russia who have already either launched or announced their intention to launch a digital currency backed by their respective governments.

E&S Group is a leading corporate & law firm offering various services with regards to ICOs. Feel free to contact us directly on +356 20103020 or by email at [email protected] to find out how E&S can help you in ‘making things happen’.

For more information click the link.

 

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Corporate tax regimes in DLT-friendly jurisdictions

Categories Tax, Blockchain, Cryptocurrency, Malta, The Blockchain Island, DLT Regulation, Technology, DLT

Corporate tax regimes in DLT-friendly jurisdictions

Over the last few months, Malta has worked hard to cement its position as the global hub for DLT, cryptocurrency and related industries. After recently bringing in three new Acts that will provide much needed regulatory certainty within the industry, Malta is currently the most crypto-friendly EU jurisdiction. But when it comes to setting up a cryptocurrency or blockchain business, tax considerations are often at the forefront of entrepreneurs minds. So how do various EU jurisdictions stack up against each other?

Malta

Malta’s tax regime has been approved by both the European Commission and the OECD and any company that is incorporated in the country is subject to a flat tax rate of 35%. There are however a number of exemptions and refunds available that can effectively reduce the amount of tax paid to as little as 0%. When a company pays the 35% rate, the shareholders are entitled to a refund of part or all of the tax they pay on the dividends that they receive.

Switzerland

Whilst not technically EU, Switzerland is still in the EAA and has long been a reputable jurisdiction when it comes to business. When it comes to corporate taxation, Swiss companies are liable to pay income tax on any profits generated within the country; at the federal level this is 8.5% but this can be reduced to 7.83% as it is deductible for tax purposes. Tax is also payable at a local level, meaning that a business incorporated in Switzerland can pay between 11.5% and 24.2% tax.

Gibraltar

A British Overseas Territory, Gibraltar has a flat rate of taxation of just 10% on any income that is derived in or from the jurisdiction. The problem with setting up a business in Gibraltar at the moment is that no one is sure what will happen when the UK leave the European Union. This hangs a cloud of uncertainty over business that jurisdictions operating there, particularly if they have business interests in the European Union.

Lithuania

Corporate entities that are incorporated in Lithuania are subject to an income tax rate of just 15%.  Some businesses are able to apply for a reduced rate depending on the size of their business, for example, if they have less than 10 employees or a turnover of less than EUR 300,000.

 

The above is not to be construed as legal advice. If you need any advice you should contact your advisers accordingly.

If you are looking to set up a business, E&S Group is able to assist you with every step of the way. To find out more, send us an email on [email protected] or phone us on +356 2010 3020

 

 

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Investors guide to Cryptocurrency Taxes.

Categories Tax, Blockchain, Cryptocurrency

Investors guide to Cryptocurrency Taxes.

Over the last 12 months, cryptocurrencies have overtaken pretty much every single other traditional asset. Since the beginning of 2018 alone, the value of crypto coins has increased at a rate surpassing 900%. Given this huge increase in value, the likelihood is that investors are going to have to hand over a significant chunk of taxes to the IRS.

Cryptocurrency as property

To be able to understand the tax implications of cryptocurrency trading, it is important to first dispel the myth that the Internal Revenue Service (IRS) treats crypto coins as currencies. According to the IRS, cryptocurrencies are considered as a property when it comes to tax purposes. This means that it is similar to the way that gold or raw materials such as oil is treated. Therefore, the principles and rules that apply to these type of property transactions, also apply to cryptocurrency transactions.

Calculating the cost basis of virtual currencies

The first step in calculating your personal taxes is to find the cost basis of your holdings. This is defined as the purchase price, plus other costs that are associated with purchasing the crypto coin. These could include things like account fees, transaction fees, and commissions payable to brokers. The more cost that you can include in your basis, the less you will be liable to pay in taxes and once you determine the basis, you can calculate your gain or loss at the time of sale.

Determining the fair market value

One of the most important bits of information for cryptocurrency transactions is the fair-market value. This is calculated by using an exchange and referencing the price history in USD at the time of the transaction. You are allowed to use the open, close, or average price for each date as long as you apply this same rule to all of your transactions across the board.

Taxing purchases made with cryptocurrency

They say that only two things in life are certain- death and taxes. The same can be said about cryptocurrency because whilst taxing them may be a grey area, you cannot escape tax even if you use them to buy goods and services. Regardless of whether you sell your coins for USD, the IRS interprets it that you sold the coins.

This approach is not unique to cryptocurrency as companies that trade something for company stick will also incur a similar sort of tax. It is, however, a hassle, if you are making a large number of trades using crypto coins then you must report every exchange and then calculate the gain or loss for each transaction.

Incurring taxes whilst trading

As with stocks, each time you trade cryptocurrency you are incurring capital gains or losses. This comes from the way that the IRS treats commodities in general and the same treatment applies if you traded company stock for tangible property.

One interesting side effect of the way that the IRS treat cryptocurrencies, is that you are still liable for taxes, even if you do not have the cash. For example, if you purchase a Bitcoin for $5000 and then the price goes up to $5100 and you trade it in for $5100 of Ethereum, you have triggered a taxable event and are liable to pay taxes on the $100 of taxable income.

Due to these taxable events, it is very important that you keep an accurate record of these transactions as the IRS places the onus on you and if you cannot provide records then they have grounds to charge you at the highest rate.

Interested in Learning More about ICOs Legislation in Malta? Contact us directly on +356 20103020 or by mail at [email protected] to find out more.

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Good news for the Maltese tonnage tax system.

Categories Tax, European Commission, Malta tonnage tax, Income tax

Good news for the Maltese tonnage tax system.

The European Commission has concluded their decision with regards to Maltese tonnage law. This inspection has been ongoing since October 2011 and was finalised on the 7th of February 2018. In fact, during the assessment the Commission found that Malta’s tonnage tax system is in line with the Maritime guidelines that were issued back in 2004.

With Malta having by far the largest ship registry in Europe, its general cargo, car carriers, bulk carriers, containers and passenger vessels will remain exempt from Malta’s income tax.

Such exemptions include; relevant fees paid to Transport Malta and maintenance of separate accounts which are used as ring-fencing activities. This said, the Commission has reviewed all fees paid to Transport Malta and will accept the Commission’s final decision, thus providing legal certainty to Maltese tonnage tax.

Maltese registered vessels are required to be in full compliance with the below-mentioned rules. The European Commission will send vessel information gathered from shipping companies to Maltese authorities. This information should include: type of vessel, the activities performed with the vessel, the net tonnage, days in use, flag state and types of operation. Moreover, directors of these shipping companies need to stay updated if further changes may occur. Below is a list of Malta’s exemption of income tax approved by the European Commission:

  • Ship owners leasing a bareboat to group companies will generate some income.
  • When leasing a boat, it does not have to exceed 50% of the total fleet, (this is calculated on a group basis);
  • Income gathered from cruises and ancillary services to cruises, (ancillary services are spa, hairdressing services etc…) the total revenue for each ship cannot exceed 50% of the total revenue;
  • Income generated from gambling/betting and other luxury goods should be less than 25% of the ships total revenue;
  • Commercial yachts need to be registered with Transport Malta;
  • Tugboats and dredgers representing maritime transport need to provide more than 50% of operational;
  • Self-propelled barges that are designed and normally used for navigation in open seas;
  • Time/voyage chartering in of vessels is also possible provided that the flag link requirements are met;
  • Dividend distributions from shipping companies;
  • Capital gains on the sale of tonnage tax ships which are engaged in genuine shipping activities; and
  • Interest derived from working capital of shipping companies.

In contrast, the below do not fall within the Maltese tonnage tax system.

  • Fishing and fish factory ships;
  • Private yachts and ships used primarily for sport or recreation;
  • Fixed offshore installations and floating storage units;
  • Non-ocean going tugboats and dredgers;
  • Ships whose main purpose is to provide goods or services normally provided on land;
  • Stationary ships employed for hotel and or catering operations (floating hotels restaurants); and
  • Ships employed mainly for gambling/as casinos (floating or cruising casinos).

The European Commission drafted tonnage laws solely for Malta which has put Malta in a competitive advantage from other EU states. By this ruling, the island will see an increase in shipping registry.

If you want to know more about the Yachting industry in Malta, contact us by email on [email protected] or visit this link to know more.

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The European Commission conditionally approves Maltese tonnage scheme

Categories Business, Tax, Regulatory, Malta, Shipping

The European Commission has conditionally approved under European Union State aid rules the Maltese tonnage tax scheme for a period of 10 years.

In order to comply with EU state aid rules, Malta agreed to make changes to the scheme to meet the commission’s objections to it. In particular, Malta agreed to restrict the scope of the scheme to maritime transport and to remove those tax exemptions for shareholders which constitute state aid.

Under the tonnage tax scheme the shipping company is taxed on the basis of ship net tonnage (i.e. based on its volume) rather than the actual profits of the company. In particular, tonnage taxation is applied to a shipping company’s:

  • core revenues from shipping activities, such as cargo and passenger transport;
  • certain ancillary revenues that are closely connected to shipping activities (which are, however, capped at a maximum of 50% of a ship’s operating revenues); and
  • revenues from towage and dredging subject to certain conditions.

If a shipping company wants to benefit from the scheme, a significant part of its fleet must fly the flag of an European Economic Area (EEA) Member State. In addition, any new entrant to the scheme must have at least 25% of its fleet subject to tonnage tax with an EEA flag.

Contact us for more information regarding shipping companies in Malta at [email protected]

www.ellulschranz.com

 

 

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Indirect Tax – European Commission proposes reform of the EU VAT System

Categories Business, Tax, Economy, Regulatory, VATTags , ,

Background

The European Commission (EC) estimates a loss in VAT revenue of €50 billion every year as a result of cross-border VAT fraud. In an effort to combat this issue and introduce a ‘more modern, robust and simpler’ system, the EC published a series of fundamental principles and key reforms which, if embraced, will have a significant impact on current VAT practices and the relevant stakeholders.

The EC envisions the implementation of the long-term plan with effect from 1 January 2022, which includes the introduction of a new definitive single European VAT Area. Meanwhile, in preparation for such major overhaul, ‘cornerstones’, ’quick fixes’ and the concept of ‘certified taxable persons’ have been proposed and are foreseen to come into force on 1 January 2019 subject to consultation at European Parliament and unanimous agreement by the European Council.

Cornerstones

The following fundamental principles, or ‘cornerstones’, being proposed by the EC will change drastically the transitional VAT rules currently in place for cross-border supplies of goods.

  1. The principle of taxation at the Member State of arrival for intra-European Union (EU) cross-border supplies of goods.
    Under this principle, the VAT rate of the Member State of destination is charged and the current VAT exemption on intra-community supplies of goods at the Member State of departure is abolished.

 

  1. The confirmation that, as a general rule, the responsibility of charging and collecting VAT in cross-border supplies of goods is vested upon the supplier.
    The proposed rules allow an exception to the general rule where the buyer is a reliable taxpayer and meets the criteria of a ‘Certified Taxable Person’ (CTP), in which case the liability for payment of VAT in the Member State of destination is shifted upon the customer.

 

  1. Extension of the One Stop Shop, through which businesses will be able to submit declarations, pay VAT which is due in the Member State of destination as well as claim deductions via a single digital portal in their home Member State, as currently in place for electronically supplied services.
    National tax administrations would transfer any VAT due to each other directly. This measure, in combination with a simplification of the VAT invoicing rules, whereby vendors would still be allowed to issue invoices in accordance with their local rules, shall facilitate VAT compliance and reduce red tape.

Quick Fixes

The EC presented the following four short-term quick fixes to improve the current VAT system:

  1. Simplifications of rules for ‘call-off stock arrangements’
    Where goods are moved from one Member State to the other for storage purposes before being supplied to the customer, who would be known in advance of the transfer, the transaction is considered as a single supply rather than two distinct supplies. Such measure removes the need for a separate VAT registration in the Member State where the stock is located. The simplification is limited only to CTPs.
  1. Chain transactions simplifications
    Applicable where supplies in a chain do not lead to the actual transfer of the goods. The simplification is limited only to CTPs.
  1. Simplification of the proof of transport required for the exemption of Intra-Community supplies
    The simplification is limited only to CTPs.

4. Confirmation that, in addition to the proof of transport, the verification of the VAT number of the parties involved as per the EU VAT-number verification system (VIES) is an essential requisite in order for the cross-border VAT exemption to be applied under the current rules.

Certified Taxable Person

A business established in the EU can apply for the status of CTP from its national tax authority, which would allow the trusted VAT taxpayer to benefit from the simplified and time-saving measures. The pre-defined criteria to obtain such attestation are:

  1. Regular payment of taxes and absence of serious criminal offences or infringements;
  2. Reliable internal controls; and
  3. Proof of solvency

Such status is comparable to the Authorized Economic Operator status for customs purposes and is recognized across all Member states.

Concluding Remarks

These proposals represent a positive step forward towards the notion of a Single EU VAT area. Having said this, in order for the new rules to come into force, Member States must reach unanimous agreement at the European Council level, which itself is no mean feat. The tangible impact of the proposed changes can be determined upon the issuance of the detailed provisions, which are expected in Spring 2018.

For further information, please refer to the official EC website.

Or contact our team on [email protected] or +35620103020

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