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The Isle of Man has adopted an attractive tax regime for both corporations and individuals.
This article explains in detail the procedures and obligations for new Isle of Man companies.
Isle of Man Tax Position 2006/2007
From 6 April 2006 the standard rate of income tax for resident companies is 0%. Exceptions are income from land and property in the Isle of Man and banking profits, which will be taxed at 10%.
Resident companies with non-resident members will not have to account for a distributable profits charge. This charge is being imposed, in specific circumstances, on resident companies with resident members. This is, to some extent, to mitigate the loss of revenue to the Isle of Man Government following the reduction in the standard rate of income tax to 0%.
Resident companies will pay an annual corporate tax charge of £250 for the year ended 5 April 2007. This charge will be payable in January 2007.
A company will become resident with effect from the date of rescission of its non-resident declaration. Companies need to submit form NR2 with a payment of £5 to the Isle of Man Registry to rescind their non-resident declaration. Form NR2, and the payment, need to be submitted before, or with, the Annual Return. In these circumstances the non-resident duty fee of £1,000 will be waived by the Isle of Man Government.
Companies can maintain their exempt or non-resident company status until 6 April 2007. When companies become resident an Isle of Man resident tax return will need to be filed and financial statements submitted with the tax return.
Tax legislation relating to exempt and non-resident duty companies is to be repealed with effect from 6 April 2007. All companies in this category will automatically become resident in the Isle of Man for tax purposes.
Companies are audit exempt if they satisfy two of the following three criteria:
- Turnover less than £5.6m.
- Balance sheet total less than £2.8m.
- No more than 50 employees Resident companies are required to submit a tax return from 6 April 2007.
Tax computations and accounts will also need to be submitted to the Assessor of Income Tax in the Isle of Man. Income will only be assessable from the date of residency. This will apply to all companies as of 6 April 2007, as all companies will be resident.
The year ending 5 April 2007 is a transitional year for tax purposes. All resident companies, whatever their previous tax status, are to be treated in the same manner. In terms of information to be submitted to the Assessor of Income Tax, it has not yet been definitively agreed by the Isle of Man Government what data will be required from 6 April 2007.
Summary
The Isle of Man Government has introduced a number of tax changes which increase the attractiveness of this jurisdiction for corporations. Companies need to be resident Isle of Man companies to enjoy these benefits. The procedures for, and the obligations of, resident companies in the Isle of Man are relatively simple and are neither excessively time consuming or costly.
For more information
Please contact Dixcart Trust Corporation Limited, St Peter Port, Guernsey.
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