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The Isle of Man Private Limited Company has become a popular corporate vehicle for carrying out international trade particularly with the European Union countries where all trades are subject to Value Added Tax (VAT) Accounting.
On 21st February 2006 the Hon. Allan Bell, Minister for the Treasury, announced that with effect from 6th April 2006 the rate of corporate income tax on trading and investment income will be 0% and that the rate of corporate income tax on banking business income and land & property income will be 10%. From the same date the rate of withholding tax on taxable distributions to non-residents will be the same as the rate of tax paid by the company. In addition corporate taxpayers, except those that currently pay a fee and those that may be exempted, will pay an annual corporate charge of £250 from the tax year commencing 6th April, 2006.
In the event that Manx companies are owned by Manx trusts, the residence of a trust for tax purposes (notwithstanding that it may have Isle of Man-based trustees) generally will be determined by the residence for tax purposes of the beneficiaries of the trust.
Existing exempt and non-resident companies and international LLCs will continue to pay exempt duty for the fiscal year commencing 6th April, 2006 but such duty will cease to be payable
by them for any subsequent year. Applications for exempt companies and international LLCs will cease to be accepted from 6th April, 2006.
The result of the foregoing is that clients who are not resident in the Isle of Man for tax purposes can utilise a tax-resident Isle of Man company for trading purposes (most effectively within Europe as an Isle of Man company can be registered for V.A.T.) with no Isle of Man tax on the profits thereof or on distributions therefrom.
The abolition of corporate tax also adds substantially to the attractions of asset-holding companies on the Island, which already benefit from the absence of capital gains tax, stamp duty or inheritance tax.
Additionally the Minister announced in his Budget Speech a capping of individual income tax liability at £100,000 p.a. on worldwide income with a view to encouraging entrepreneurs to relocate to the Isle of Man, thereby encouraging growth of the Manx economy. The combination of the reduction in corporate income tax as noted above to 0% (10% for land and property income) with the capping of personal income tax liability should make the Isle of Man a fiscally attractive location for high net worth individuals.
The OCRA Worldwide team based in Ramsey, in the North of the Island,
has particular expertise in the utilisation of Manx business
entities for international trade and investment and for real property and intellectual property holding.
For further information about “Setting up a Business in the Isle
of Man” please contact a director of our Isle
of Man office or fill in the Isle
of Man Business Services questionnaire and a director will
respond to your enquiry immediately.
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