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A Top Asset Protection Jurisdiction in the EU: Madeira Trusts
Madeira is an
otherworldly island in the Northwestern coast of Africa, about 400 miles west
of Morocco. For years, it has been a top Atlantic cruise destination because of
its breathtaking sights.
The home of
Cristiano Ronaldo is widely known for its natural beauties, such as Pico Ruivo
and Cape Girão.
However, we are
here to talk to you about a different kind of Madeiran beauty: Trusts in
Madeira.
Madeira is an
autonomous region of Portugal. Its distance from mainland Portugal has always
granted the island with relative independence and cultural autonomy from the
rest of Portugal.
When Portugal
entered the C.E.E. (today E.U.), and to introduce economic diversification to
the Island, it was agreed that Madeira could offer, duly authorized by the European
Commissioner for Competition, some tax benefits to companies in order to
attract international investment. This was the birth of the International
Business Centre of Madeira (IBCM).
The incentives
mainly target corporate tax to attract investment into the area. That has been
a way many small island economies have found to develop into reliable financial
and investment jurisdiction.
The IBCM is made of
three main areas: The Industrial FTZ, the International Shipping Register, and
the International Services.
This means Madeira
has become a hub for varied economic activities such as trading, marketing,
consulting, telecommunications, holding of shares and intellectual property,
manufacturing, yacht registration, and much more.
Even better: the
FTZ comes with full EU compliance and support, which gives it a robust legal
framework.
Nevertheless, we're not here to talk to you of the IBCM per se but of a particular feature that you may not know of and which is one of the most underrated benefits of the IBCM.
The establishment
of a Madeira trust.
If you know at
least a bit about trusts, you may think: well, if Portugal isn't a common law
jurisdiction, such as the UK, most Caribbean islands, and Hong Kong, how in the
world can I establish a trust?
That's a fair
question.
As Portugal is not
a common law jurisdiction, its internal legislation doesn't regulate trusts.
That means the government had to come up with a Decree-Law to authorize such
asset protection vehicles.
However, the
government also established a creative solution to regulate trusts. When
creating the trust, the settlor must designate the law that will regulate it
and even change it at any time during the trust's existence.
Moreover, to
transfer a trust to Madeira, you don’t need prior authorization. You’d only
need to exchange the law to the law of the foreign
jurisdiction from which the trust will migrate. The settlor has to designate the law that
will regulate the trust when he incorporates it and the trust deed can reserve
the right to change the law that will regulate the validity, interpretation,
and administration of the trust.
This means, for example, you can protect your trusts
by using Nevis’ trusts law but setting it in Madeira, which gives you the
perfect balance between the strength of Nevis’ trusts law and the access to
Portugal’s network of double tax treaties and the EU jurisdiction.
If there’s no income deriving from tax havens and its
main purposes are succession and protection of assets, then Nevis law can be a
top choice.
If you wish to follow a more conservative
strategy, our experts also recommend the UK or Swiss law as the base of your
trust for asset protection purposes.
This is a
magnificent benefit for those interested in protecting their assets as it makes
Madeiran trusts robust yet flexible at the same time.
As in the top trust
jurisdictions, Madeiran trusts are wholly exempt from taxation on dividends
they receive from shares, royalties, or any interest earned from deposits – if
received and/or transferred from/to white list countries.
However, they are
not allowed to execute any financial activities. Still, all non-financial
income the trustee distributes to the trust's beneficiaries is fully tax-free
if these beneficiaries are 1) corporate entities that have a license operate
within the IBCM or 2) non-resident corporate bodies or individuals - if tax
residents in white list countries.
That means
Portuguese residents cannot make use of the Madeiran offshore trusts.
Furthermore, the law forbids a trust to own immovable property in Portugal or
have settlor or beneficiaries that are Portuguese residents.
Thus, all
properties of a trust have to be based outside Portugal, and its income must
derive from foreign sources if it wants to receive the tax benefits of the IBCM
– except if received and/or transferred from/to blacklisted countries.
Where you receive
trust income in Portugal, it is taxable over the trustees as if the trustees
were fully entitled to the income. The reasoning is simple: the Portuguese law
does not recognize the concept of a trust andnit does not recognize the
distinction between legal and beneficial ownership regarding taxation.
Remember: the
establishment of trusts is an exception of the law created especially for
Madeira, that's why it's best to avoid income arising from Portugal.
But we've mentioned
that a trust can be established by a company operating in the IBCM. Does that mean
its income is taxable? No. As an exception, income arising from investments
made through companies licensed to operate under the IBCM isn't considered to
have arisen within Portugal for tax purposes, if your investment hasn’t been
actually made in Portugal.
So, you have a top
trust jurisdiction that actually allows you to obtain income from the IBCM. And
there's more! The fact that you can establish your law based on a foreign law
adds an extra layer of protection for you.
Eight
Benefits of a Madeira Trust
Specially designed for foreigners
Trusts don't exist
within the Portuguese legal frame. They were specially created and designed for
the IBCM and for foreigners to help them protect their assets and manage their
wealth.
Lowest taxation in Europe
Yes, the whole
purpose of establishing a trust is asset protection and tax optimization, so
it's evident that a Madeiran trust must offer that. All (non-financial) income
distributed from the trustee to the trust’s beneficiaries is fully exempt of
taxation if these beneficiaries are corporate entities licensed to operate
within the IBCM or non-Portuguese resident entities/individuals. Thus, you can
safeguard your non-financial income of your IBCM company in a Madeiran trust.
Moreover, whereas
other trust jurisdictions offer significant benefits for the beneficiaries of
the trust, they put a significant financial burden on the side of the trustee,
that’s not the case in Madeira, as the trustee must only pay a 5 % corporate
tax rate.
Fully integrated
with the EU financial system
Far away from the
blacklists
Most top trusts
jurisdictions have been put into blacklists to prevent investors and high net
worth individuals from using them as an asset protection strategy. That’s
unfair, but it doesn’t change reality.
Privacy and confidentiality
Settlor and beneficiary names are not included in public records (under the above-mentioned limitations) and trustees must keep private all information regarding a trust. In fact, the trust deeds don't have to be filed, and a trust must only be registered if they exist for more than a year.
Ideal price-value relationship
Sound banking
system
Get advantage of the IBCM
The
features of a Madeiran trust
Now that we've
given you a general introduction for Madeiran trusts, what else do you need to
know?
Name |
A trust cannot
have a name alike or similar to another legal entity in Portugal and the word
trust must be present at the end of its name |
Qualifications |
To be valid it
must be intended as a trust, its assets must be located outside of Portugal,
and the beneficiaries cannot be Portugal residents |
Deed |
The deed
establishes the purpose of a trust and the rules regarding its management and
administration, and info such as:
|
Registration |
Trusts must
register in the FTZ registry. However, the names of the settlor and
beneficiaries won't be included in public documents |
Settlor |
Only foreign,
non-resident natural or legal persons can create trusts. All properties and
assets of the trust must be located abroad |
Trustee |
It needs to be a Madeira company duly licensed under the IBCM |
Beneficiaries |
To obtain tax
benefits all beneficiaries must be non-residents of Portugal, whether they
are natural or legal persons, or corporate entities licensed to operate
within the IBCM. |
Confidentiality |
The trust deed
and the names of the settlor and beneficiaries don't have to be filed.
Trustees opening bank account representing a trust must disclose the
beneficiaries' identities. That means only
the identity of the beneficial owner is provided, not his or her financial
information. |
Taxes |
The trust itself
is fully tax-free on dividends received from shares, royalties or interest
received on the deposits. The trustee is
taxed at a 5 % corporate tax rate. If the income is generated domestically,
it will be 21 % |
Audits |
Trust companies
must be audited each year and appoint an auditor on their board. They must
keep books and accounting records on every trust in their power |
Who are
we, and what can we do for you?
In Mundo,
along with NTL Trust, we have 25 years helping investors and high net worth
individuals around the world do business freely and protect their assets.
NTL Trust is the
oldest trust providing company in Nevis and, since then, we haven't stopped
offering expanded services for our clients across the world to help them live
freely. That's our core value: freedom. What we want the most is to see you
live, work, invest, and protect your assets, your legacy, and your family.
NTL has its own
head office in Panama and specializes in trust and other asset protection
vehicles for family offices, high net worth individuals, and lawyers and
intermediaries that whish to offer these services for their clients.
In Portugal, NTL
has a top expert team for all main corporate and financial services within the IBCM
to help you set up and manage your trust and have top asset protection.
We have a fantastic
team of experts and lawyers in Madeira ready to give advice in all aspects of
trust law and finding a tailor-made solution for you.
The fact that
Madeiran trusts are governed by the foreign law of your choosing means you can
pick St. Kitts & Nevis trust laws. We are the most
experienced trust providers in Nevis, meaning you will have the best team to
advise you. We love Nevis as a trust jurisdiction because it will protect your
trust against claims, creditors, spouses, and business partners thanks to its
robust legal framework.
If you wish to
follow a more conservative strategy with rock-solid international reputation,
our experts are also acquainted with using the Swiss and British trust law as
the base for your Madeira trust.
The legal services we provide to our clients are generally divided into two separate areas:
- Assistance with the setting up of a Madeira trust, duly licensed and established under the Madeira International Business Centre in Portugal.
- Acting as a trustee, for which they are duly licensed to operate within the Madeira International Business Centre in Portugal, in accordance with what is established in the trust deed.
That means they handle all the main operations of the fund and the steps you need to take to establish it. They usually only need the following standard KYC documentation to help you set up your trust:
- Clear certified copy of the main page of passport;
- Proof of residence – certified copy of utility bill, e.g., gas, electricity, water, fixed phone line, not older than three months after issued;
- Proof of occupation/profession - Statement from current employer issued on the relevant company letterhead, stating title or position within the company, period of employment, etc.;
- Curriculum Vitae;
- Bank Reference Letter;
- Proof of source of funds/bank statements/ last Annual Tax Return, etc.
And that's it!
The perfect structure
Making your Madeira trust subject to Nevis Law gives you the benefit of the best legal international asset protection regime (St. Kitts and Nevis) combined with the reputation of Europe and access to Portugal’s broad network of double taxation treaties.
Only a structure like this can help you avoid all
claims by creditors, wives, and business partners while giving you unyielding
asset protection. Why? Because the claim will have to be made to a Nevis court,
which is incredibly tough because Nevis laws don’t recognize any claim against
a trust if the claim was made two years after the trust creation.
In Mundo,
we can help you protect your legacy and optimize your taxes. You may be one
email away from protecting your assets and your loved ones. You just have to contact us.
Want to know the
details of our Madeira trust services? Enquire now!
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