On 6 October 2011, Switzerland and the UK have signed a Tax
Agreement regarding the regularisation of existing untaxed assets
of UK taxpayers with UK principal address of Swiss accounts. UK
taxpayers have now the opportunity to regularise their untaxed
bankable assets in Switzerland by levying an anonymous one-off
payment for the past as well as a withholding tax regime for the
future. The Agreement is expected to enter into force on 1 January
2013, after both Parliaments will have completed the respective
In addition to the recently concluded Tax Agreement, UK
taxpayers have also the opportunity to regularise their historic UK
tax affairs on the basis of the "Liechtenstein Disclosure
Facility" (LDF). A comparison of the Tax Agreement and the LDF
show the following key issues:
Under the LDF, UK taxpayers will benefit from a worldwide tax
clearance and finality approach from a UK perspective whereas the
Swiss one-off levy for the past as well as the withholding tax
regime for the future will only grant tax clearance limited to the
bankable assets in Switzerland as per 31 December 2010 (no finality
and even clearance under the reservation that potentially removed
assets have been repatriated to Switzerland).
LDF procedure offers to the UK taxpayer extensive and
unrestricted immunity from prosecution and privacy whereas the Tax
Agreement does not provide immunity from pending (and internal)
criminal and civil investigations which could lead to an ordinary
20-years-back assessment taxation, to penalty taxes up to 200% and
potential publication of data ("name and shame") although
the one-off payment is limited to 2003 on first sight. The LDF on
the other hand is limited to include only the UK tax years
commencing on April 1999.
The LDF procedure allows an account holder to regularise his
tax affairs immediately, rather than waiting until 2013.
Although the disclosure process is not anonymous throughout the
LDF, the UK taxpayer will enjoy unrestricted privacy without any
exchange of information for assets located in Liechtenstein; the
Tax Information Exchange Agreement (TIEA) will basically enter into
force not until 31 March 2015.
Until 31 March 2015, the LDF is generally open for UK taxpayers
who have no prior connection to Liechtenstein whereas the Tax
Agreement is only an option for UK taxpayers who have a Swiss
account conditionally open on 31 December 2010.
The LDF will be likely the cheaper option, in particular for
moderate as well as for inherited assets by way of an agreed
composite rate tax (average overall tax rate approx. 18% compared
to approx. 25% under the Agreement).
Under the LDF, only interest/investment income and capital
gains are liable for taxes (and not the relevant assets and the
increase of assets itself).
Further, with the LDF option, all UK taxpayers may declare
their tax liabilities themselves without the need of a UK
professional involved independent from their UK tax status
(so-called "Self-Certification" declaration).
Under the Tax Agreement, Certification must be provided by a UK
professional even for UK residents who are not domiciled.
Last but not least – in time disclosure under the LDF
will pay off: exposure of additional tax liabilities and
investigations through HMRC may be minimized or even eliminated. Do
not forget that both options are simultaneously available to UK
taxpayers only having a Swiss account by establishing a
Liechtenstein connection now or in future. UK taxpayers can
therefore rely on their Swiss financial intermediary while keeping
this longstanding relationship. The involvement of the relevant
Liechtenstein financial intermediary guarantees an extensive, full
and sustainable solution in favour of and to the best benefit to
the UK taxpayer under the condition that the respective services
will be properly coordinated.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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A new legislation, according to which the Tax Department will have the authority to tap into bank accounts of taxpayers without a court order in order to obtain any unsettled taxes, is expected to be enacted soon.
Companies which are incorporated in Malta are deemed to be resident and domiciled in Malta and chargeable to tax on a world-wide basis, irrespective of where the income generating activitiy is carried out.
Third country nationals may take up residence in Malta in terms of the Global Residence Programme Rules (GRP) Rules.
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