For businesses that are relocating to the Isle of Man, there are many things to consider when it comes to tax status.
The Isle of Man is an independent jurisdiction with its own legislation and a favourable tax regime, which is completely separate to its UK counterpart. This makes the Island a competitive offshore jurisdiction for many looking to do businesses as it affords both corporates and individuals the benefits of independence when it comes to direct taxation matters and getting the most out of your business.
When is a company considered to be tax resident?
A company is considered tax resident in the Isle of Man through a combination of factors including its place of incorporation and its central place of management and control, as set out in Section 2N of the Income Tax Act 1970.
Where a company is incorporated outside of the Isle of Man, it will still be considered tax resident if it is centrally managed and controlled on the Island, and its day-to-day operation and administration takes place in the Isle of Man.
Transfer of domicile
If a company is incorporated outside of the Isle of Man but is to redomicile to the Isle of Man, the company will be deemed tax resident by reason of incorporation (the date of transfer of domicile) and added to the Isle of Man register of companies.
Similarly, where a company is considering transferring its domicile to another jurisdiction, it will cease to be tax resident on the date that the redomiciliation takes place.
How does a company register as a tax resident?
Companies considered tax resident in the Isle of Man are required to register with the Assessor. In doing so, the company will have to provide sufficient evidence to the Assessor, that the day-to-day operations of the company is managed and controlled in the Isle of Man.
Following an application for tax residency, the Assessor may issue a Certificate of Tax Residence (provided in paper format) which effectively states that the company is tax resident in the Isle of Man and therefore has the applicable responsibilities and liabilities to fulfil thereafter.
Preparing an Isle of Man Income Tax Return
All companies in the Isle of Man are required to complete and submit an income tax return whether they are liable for tax rates of 0%, 10% or 20%.
A company’s taxable period will be based on its accounting period, which for tax filing purposes is every 12 months.
An Income Tax Return will be issued to each Isle of Man tax resident company at the end of the its accounting period. The Company must then complete said income tax return and file it online with the Isle of Man Income Tax Division prior to the due date. Fixed rate penalties of £250 and or default assessments will be issued should any company fail to comply and/or fail to submit their return by the due date, with a second penalty chargeable should the return still be outstanding after a six-month period from the due date.
In addition, an Economic Substance section has to be completed by companies resident in the Isle of Man.
Corporate Tax Rates
0% – Standard rate for all resident and non-resident companies
10% – Banking Business Income
20% – Land and property income from Isle of Man sources
10% – Retail Businesses (with profits exceeding £500,000 per annum)
What are the Economic Substance requirements in the Isle of Man?
Economic Substance regulations are applicable to the Isle of Man and a number of other offshore jurisdictions who have committed to incorporating the respective economic substance requirements to entities that do business in their jurisdiction.
The substance legislation is applicable to Isle of Man entities that derive their income from the following relevant sectors/activities:
– Operation of a Holding Company
– Financing and Leasing
– Shipping
– Insurance
– Banking
– IP Company (Intellectual Property)
– High Risk IP Company
– Fund Management
– Headquartering
– Distributions and Service Centres
For more information on Economic Substance, check out our article ‘The Elephant in the Room – Economic Substance’
The Benefits of Being a Tax Resident Business in the Isle of Man
– 0% Corporate Tax
– No Inheritance Tax
– No Capital Gains Tax
– A simple taxation regime
– No insurance premium tax
– A stable legal and political environment
– A European time zone
– A robust regulatory system
– A high quality international reputation
Additionally, the Isle of Man is also on the OECD ‘white list’ of jurisdictions and in the top tier of countries that comply with the global standard for tax cooperation, transparency and exchange of information.
For more information on how to set up a company in the Isle of Man or if you would like to know more about becoming a tax resident or your Isle of Man tax obligations, please contact iom@sentientinternational.com or call +44 1624 616544.
