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Taxation in Montecara is administered by the Secretariat of Finance.

Montecara is known as a tax haven and offshore financial hub thanks to its lack of income, capital gains, and estate taxes.

Residency is established for tax purposes by being physically present or employed in Montecara for 183 days in a calendar year.

Direct taxes

Montecara does not assess a personal income tax or a capital gains tax.

Corporate income tax

Corporate income tax is assessed on the net profits of corporations, cooperatives, and other business ventures. Resident companies are taxed on their worldwide income, except for profits derived from foreign branches and foreign immovable property, which are exempt.

Corporate income is taxed at two rates: a "trading rate" of 13.5% applies to regular income earned from business activities, and a higher "passive rate" of 22% applies to earnings made on non-business activities such as rents, investments, and interest.

Dividend tax

Foreign worker tax

Foreign worker tax is charged to employers for each foreign employee hired. The rate depends on the employer’s industry and the ratio of foreigners to Montecarans employed in the company.

Transfer tax

Transfer tax is charged to the buyer or recipient when certain types of property are sold, traded, or given away. Montecara charges a transfer tax on three categories of property: real property, meaning land and buildings; securities, which are mostly stocks and bonds; and cryptocurrency.

Montecara does not assess estate tax or gift tax.

Transfer tax rates
Category Rate
Cryptocurrency 0.50%
Real property 1.125%
Securities 0.015%

Surtaxes apply to certain transfers of real property determined by the residency status of the buyer, the use of the property (residential, commercial, or industrial), the holding period of the property, and the number of properties owned. These surtaxes can increase the overall transfer tax rate up to 15%.

Land value tax

Land value tax is assessed on the unimproved value of land. It currently stands at 2.75% with limited exemptions (e.g. diplomatic and consular missions and international organizations).

Withholding tax

Withholding tax is assessed on certain payments to non-residents. For instance, a withholding tax on income is levied on income earned in Montecara by a worker domiciled abroad, and a technical service fee withholding tax is levied on technical and professional service fees paid to non-residents.

Withholding tax rates
Category Rate
Dividends 17%
Income 22%
Interest 17%
Remittances 17%
Royalties 10%
Technical service fees 17%

Indirect taxes

Excises

Tax stamp for cigarettes sold in Montecara

Excises are per unit taxes paid on specific items when they are created or imported.

Alcohol taxes
Category Rate
Beer or cider ≤8% abv Ł225/hl
Beer or cider >8% abv Ł375/hl
Spirits Ł160/l of pure ethanol
Wine ≤15% abv Ł365/hl
Wine >15% abv Ł725/hl
Cannabis and tobacco taxes
Category Rate
Cannabis (dried plant matter) Ł2,000/kg
Other cannabis products 35% of wholesale price
Cigarettes (pack of 20) Ł12
Cigar ≤ 10g Ł7
Cigar > 10g Ł9
Loose tobacco Ł700/kg
Other nicotine-containing products 50% of wholesale price
Documentary taxes
Category Rate
Insurance 4.75% of premium
Reinsurance 1.25% of premium
Mortgages 0.25% of payments against principal and interest
Environmental taxes
Category Rate
Fluorinated gases
Landfill waste Ł80/tonne
Ozone-depleting substances
Fuel and energy taxes
Category Rate
Diesel Ł6.35/l
Kerosene for use in aviation Ł2.15/l
Kerosene for other uses Ł3.00/l
Gasoline Ł5.75/l
Aviation gasoline
Liquefied petroleum gas (LPG) Ł1.90/l
Compressed natural gas (CNG)
Liquefied hydrogen
Liquid fuel derived from biomass
Liquefied natural gas (LNG)
Heavy fuel oil Ł2.85/l
Coal and coke Ł15.50/Gj
Utility taxes
Category Rate
Electricity Ł22/MW·h
Natural gas Ł2.55/m³
Water

Tariffs

Montecara is a free port and levies tariffs on only two line items: fresh fish at 3.5% and works of art at 6%. The overall weighted mean tariff rate is 0.0%. Receipts from tariffs totaled approximately Ł133 million (€26 million) in 2019.

Value-added tax

Value-added tax (VAT) is levied on the consumption of goods and services.

There are four rate categories for the purpose of assessing VAT: standard (20%), reduced (12%), zero (0%), and exempt. The reduced rate applies to food (non-prepared), animal feed and fertilizer, livestock and fishstock, seeds and living plants for cultivation, grain, medication, and utilities. The zero rate applies to direct deliveries of goods abroad, cross-border transport services, and services for customers abroad. Rent and the sale of real estate, banking and insurance services, postal services, medical and dental services, welfare and social services, and education are exempt.

An environmental surtax of 4% is added to the applicable rate for airline and cruise tickets, fishing equipment, fossil fuels, single-use plastics, motor vehicles, electronic goods, tires, and household appliances.

Discontinued

Straits tolls

Thanks to its strategic location in the Aurean Straits, Montecara was for centuries able to tax the ships and goods that traversed its littoral. Vessels refusing to stop and be taxed were summarily bombarded by the extensive network of coastal artillery. This was the major source of funding between the fourteenth and nineteenth centuries. Straits tolls ended with the Gaullican annexation and were not reinstated when Montecara regained independence.

Salt tax

Salt tax (Montecaran: gabèla) was first imposed in the fifth century CE and was levied in some form up to the late nineteenth century. It was for many centuries the single largest source of revenue for the Montecaran state, though it was often bitterly resented by common people. At times it required the purchase of a fixed quantity of salt monthly by every man, woman, and child in Montecara.