Isle of Man

Executive Summary
Isle of Man is a Crown Dependency with a high level of autonomy, it has never been a part of the UK, the UK Queen being also called the Lord of Mann is the head of the island. UK is responsible for only the island’s foreign relations, defense and good-governance. Population is around 80,000 people with a relatively low density. Douglas is the Capital of the Isle of Man.

Isle of Man is not a member of the EU, but has a special status in terms of free movement of the goods and services. Historically, Island was a Celtic Community, and Tynwald – the local one thousand year old parliament active also today is one of the names brought in by the culture.

It is politically and economically stable and tends to apply the English legislation, following the common law traditions. The Pound (£) is its currency and Isle of Man does not have any exchange controls.

It represents a favorable tax environment and its economy is based on highly developed financial industry services, especially banking, insurance, trusts and investment fund management. The Island is widely known for the Tourist Trophy (TT) motorbike competition which every year runs there for already more than 100 years.

Isle of Man is situated in the waters of the Irish Sea, it covers the surface of 572 sq km, extending 24 km from West to East and 51 km from North to South. Well defined valleys vary with the mountainous ground making a relatively small territory of the island rich of natural diversity. Sandy beaches are varied with rocky ones. 2/3 of the whole territory is occupied by the cultivated land.

There is a temperate climate on the Isle of Man, where snow is almost never encountered in winter. The average summer temperature is around + 17 C, and the difference between seasons is minimal. Apart from the main island, Isle of Man includes also a partially inhabited small island – Calf of Man and uninhabited St. Patrick’s Isle and Chicken Rock.

Map, Flag and Coat of Arm

Types of Company

Private Company Limited by Shares

Private Company Limited by Shares This company needs to have at least one member, either a private or a corporate entity, and the details on shareholders are available in public files. It is possible to use nominee shareholders for the purposes of incorporation of this company. At least two directors is an obligatory requirement and directors should be private persons.

Company Limited by Guarantee
These companies are used for charity and non-profit business organization, as well as for private family foundations and offer an advantage over trust for certain purposes. They are also used for international leisure and clubs activities and offer a good opportunity of high flexibility in terms of ownership and capital. Isle of Man is a leading jurisdiction for conducting a business with the help of this structure, as exactly this jurisdiction has applied a lot of efforts in the last thirty years for this company type development.

Public Company Limited by Shares
This company should have at least two members, it shares are available to the public, and its name must contain “Public Limited Company” or its abbreviation “PLC”

Limited Liability Company
This type of organization has been introduced in 1996, it should have at least two members whose liability is limited to the invested capital. This structure does not have a director or a secretary, but it must have a local agent. The existence period of a Limited Liability Company is up to 30 years

Branch of Overseas Company
A foreign company can register its branch on the Isle of Man by submitting all the necessary documentation to the Financial Authority. From the moment of the completion of formal procedures, such a company is treated as a local company.

General Partnership
It is based on the Partnership Act of 1909 which in its turn applies the rules of UK Partnership Act of 1890. Partners can be either individuals or companies with unlimited liability. Names of Partnerships should be registered with a regulatory authority in case it differs from the surnames of the partners. It is not an obligatory requirement to submit a partnership agreement and financial accounts.

Limited Partnership
This Partnership is regulated by the Partnership Act of 1909 as well and must be registered as a Limited Partnership, as if not, it will be considered as a General Partnership. There should be at least one general partner with unlimited responsibility and at least one limited partner with the limited liability that corresponds to the contributed capital. A limited partnership must not have more than 20 partners and a limited partner must not take active part in the partnership management.

International Limited Partnership
It is a similar structure to a Limited Partnership that was introduced in 1994. An Isle of Man resident company should be a general partner, structured according to the standards of an International Company. Limited partners must be non-residents or International Companies. There is no limit for the number of partners and this structure is appropriate to use as an investment vehicle.

Sole Proprietorship
This is a name of one trader who has unlimited liability and responsibility for the company performance. In case the name is different from the sole trader, it should be registered with General Registry.

The Trust Law of the Isle of Man is based on the English Trust Law. Isle of Man has adopted the Hague Convention in the Recognition of Trust Act of 1988, however, applying some regulations changes. There is no stamp duty and the documents are constituted in the English language. There are no particular registration requirements, the perpetuity period is of 80 years, and there are no restrictions on the income accumulation.

Exempt Private Company
Income tax was not applicable to a private company owned by non-residents, but this structure has been abolished in 2006.

International Company
This company should not have conducted any activities on the Isle of Man, but it was an exempt company. Income should have been received from other countries or other International Companies. However, a director and a secretary should have been local residents. This structure has been abolished in 2006.

Non-Resident Company
A company registered on the Isle of Man could have applied to receive a Non-Resident Status if its management was conducted from outside the island. This type of company was abolished in 2006.

A tax year on the Isle of Man is the same as in UK, starting on 6th April and ending on 5th April of the following year. There are no capital gain taxes, neither capital transfer taxes nor stamp duties, as well as no wealth or inheritance taxes. However, the island makes a part of the EU VAT area, and the VAT rate is the same as in UK (17,5%).

Residents, people who spend more than 6 months a year on the Isle of Man territory are liable to income tax at a maximum rate of 18%, as well as they are liable to pay social security contributions. The concept of a ”domiciled” person is not widely applied, but many residency related issues are the same as in the UK. A new Isle of Man resident starts paying taxes from the date he/she has arrived on the Island. An online software for individual tax purposes has been launched in the year 2005 that significantly facilitates submitting, managing and paying due taxes.

Residents are liable to tax on the worldwide income, while non-residents must pay taxes only on income generated within the Island.

Starting from April 2006 most trading companies are not liable to the income tax, while non-trading companies should pay tax of 18% on profits. Companies the turnover of which is equal or exceeds £ 55,000 must be registered as VAT payers. It is the only offshore jurisdiction where the European VAT system is applied.

Whether a settler, beneficiaries and tenants of a trust are non residents and no business activities are conducted on the Isle of Man, such a trust is exempt from the taxes. However, an Isle of Man resident, receiving an income from a trust, will be liable to pay taxes on it.

For the new tax year, which starts on April 6th, 2010, the Isle of Man government has implemented several changes in the personal taxation system. The main changes include:
-    Standard tax rate stays at 10%, but the higher rate increased from 18% to 20%;
-     Tax cap increased from £100,000 to £115,000.

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