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Company and Jurisdictions

Isle of man

Exempt Company

Legislation: Standard capital:
The Companies Acts, 1931 to 1993; International Business Act 1994; Limited Liability Companies Act 19961999; Insurance Act 1986 and the Companies (Transfer of Domicile) Act 1998; Companies, etc (Amendment) Act 2003. GBP 2,000 is the maximum capital for which minimum registration fees apply.
Annual government fees: Corporate Taxation:
GBP 60 filing fee. Corporate tax rates vary from 10-18% but most companies apply for exempt status, paying a flat rate GBP 450 tax per year.
Time to incorporate: Ready-made companies:
48 hours Yes.
Minimum members: Registered office required:
One, individual or corporate. Yes, must be maintained in the Isle of Man at the address of a licensed management company or law firm.
Local registered agent: Minimum number directors:
Yes. Two, individuals only. A register of directors must be filed with the Registrar but is open to public inspection.
Officer to be locally resident: AGM required:
A professionally qualified local secretary and a local director are necessary for exempt companies. Yes.
Annual return required: Financial statements to be prepared and/or audited:
Must be submitted annually on anniversary of incorporation. Company is required to keep financial records reflecting financial position of the company.
Balance sheets to be filed: Share register required:
No. Yes, at registered office
To be filed with Registrar: Open to public inspection:
Yes. Yes.
Exchange controls: Redomiciliation permitted:
No. Yes, in and out.
Language of incorporation: Confidentiality:
English. No specific statutory provisions governing confidentiality in relation to companies, but English law, which applies within the jurisdiction imposes a common law duty on professionals to keep the affairs of their clients confidential.
Bearer shares permitted:  
No

Advantages

Disadvantages


  • Blue chip jurisdiction.
  • Quick and efficient.
  • Relatively inexpensive compared with other EU jurisdictions.
  • Well-regulated and respected, one of the few offshore areas where a VAT number can be obtained for EU trading.
  • The need for local directors for exempt status means only suitable where a company can be managed fully offshore.

International Agreements

OECD Harmful Tax Practices

The Isle of Man was among 35 jurisdictions identified by the OECD in June 2000 as meeting the technical criteria for being a tax haven. On 13 December 2000, the Isle of Man government signed a commitment to improve the transparency of its tax and regulatory systems and establish effective exchange of information for tax matters with OECD countries by 31 December 2005.

Tax Information Exchange Agreement (TIEA)

On 4 October 2002, the US and Isle of Man signed a Tax Information Exchange Agreement. The agreement provides for the exchange of information on a variety of tax investigations, paving the way for audits that could uncover tax evasion or money laundering activities. It was to have effect from 1 January 2004 or sooner with respect to criminal tax matters and from 1 January 2006 with respect to all other tax matters. Currently, similar agreements are being negotiated with other countries, among them members of the European Union.

EU Savings Tax Directive

The EU Savings Tax Directive is to be applied to all Member States, as well as their associated and dependent territories. The Isle of Man elected to apply the withholding (retention) tax option rather than the automatic exchange of information. The retention tax will only be introduced at the same time as EU member states and the named third countries, including Switzerland, which means 1 July 2005 at the earliest. The retention tax regime does not rule out an option for customers to choose exchange of information instead, it just gives them that choice if they wish.

Financial Action Task Force (FATF)

The Isle of Man regulatory regime was reviewed by the FATF in 2000. It was found to have a “comprehensive” anti-money-laundering system and was not therefore identified by the FATF in June 2000 as a non-cooperative country or territory (NCCT) in the fight against money laundering.

Mutual Legal Assistance Treaties (MLATs)

The Isle of Man is able to assist overseas authorities through participation in Mutual Legal Assistance Treaties (MLATs) between the UK and other countries. In other cases, it is willing to give the same assistance as would be provided under an MLAT. Through the UK, the Isle of Man is party to the 1990 Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds of Crime. The Isle of Man is party to the 1988 Vienna Convention against Illicit Trafficking in Narcotics and the 1988 US-UK Agreement Concerning the Investigation of Drug Trafficking Offences and the Seizure and Forfeiture of Proceeds and Instrumentalities of Drug Trafficking,

Tax Treaties

The Isle of Man only has one tax treaty, which was entered into with the UK in 1955 and is very similar to the equivalent agreements between the UK and Jersey and Guernsey. The agreement specifically excludes dividends and debenture interest from its provisions. Exempt companies, International Companies and International Limited Partnerships are not entitled to the benefits of the treaty.


General Info

Full Country Name: Isle of Man
Status: British crown dependency
Area: 572 sq km
Population: 75,049 (July 2005 est.)
Capital City: Douglas
Nationality: Manxman/Manxwoman; adjective, Manx.
People: Manx (Norse-Celtic descent), Briton
Languages: English, Manx Gaelic.
Currency: British pound (GBP); note - there is also a Manx pound
Government: Parliamentary democracy
Legal system: English common law and Manx statute
Head of State: Lord of Mann, HM Queen Elizabeth II

Geography

The Isle of Man is situated in the Irish Sea, equidistant from Scotland, Ireland, and England.


History

Among its earliest inhabitants were Celts, and their language, Manx, which is closely related to Irish and Scottish Gaelic, remained the everyday speech of the people until the first half of the 19th century. Manx now has no native speakers. Norse (Viking) invasions began about 800, and the island was a dependency of Norway until 1266. During this period the Isle of Man came under a Scandinavian system of government that has remained practically unchanged ever since. The island came under the control of England in 1341. After allowing a succession of feudal lords to rule the island, the British Parliament purchased sovereignty over the island in 1765. The Isle of Man continues to be administered according to its own laws by a government composed of the lieutenant governor, a legislative council, and a House of Keys, one of the most ancient legislative assemblies in the world.


Government and Politics

Executive branch
Head of State: Lord of Mann, HM Queen Elizabeth II (since 6 February 1952), represented by Lieutenant Governor Ian Macfadyen (since 26 October 2002)
Head of Government: Chief Minister Donald Gelling MLC (since 14 December 2004)
Cabinet: Council of Ministers
Elections: The monarch is hereditary; lieutenant governor appointed by the monarch for a five-year term; the Chief Minister is elected by the Tynwald; election last held 6 December 2001 (next to be held December 2006)
Election results: Richard Corkill MHK elected chief minister by the Tynwald (resigned 2 December 2004); Donald Gelling MLC elected Chief Minister in Tynwald (14 December 2004) with 31 votes in favour and two against.
Legislative branch

Bicameral Tynwald consists of the Legislative Council (an 11-member body (MLCs) composed of the President of Tynwald, the Lord Bishop of Sodor and Man, a non-voting attorney general, and 8 others named by the House of Keys) and the House of Keys (24 seats; members (MHKs) are elected by popular vote to serve five-year terms)

Elections: House of Keys - last held 22 November 2001 (next to be held November 2006)

Election results: House of Keys - seats by party - Manx Labour Party 2, Alliance for Progressive Government 3, independents 19

Judicial branch

High Court of Justice (justices are appointed by the Lord Chancellor of England on the nomination of the lieutenant governor)

Political parties and leaders

Manx Labour Party; Alliance for Progressive Government; Manx Nationalist Party

Note: most members sit as independents

The UK Home Secretary has a duty to oversee legislative developments in the Island before they receive Royal Assent. The Island is not represented in the UK parliament, and UK laws do not automatically apply on the Island. Tynwald legislates for internal affairs, including taxation.

Economy

Basic economic facts

GDP (2001 est.): USD 1.6 billion

Growth rate:13.5%

Per capita GDP (2001 est.): USD 21,000

Main industries: Financial services, manufacturing, film and tourism

The Isle of Man economy has undergone major changes to its structure over the last two decades. Whereas there has been a decline in traditional industries such as agriculture, fishing and tourism, there has been substantial growth in sectors such as financial services and manufacturing leading to a well-balanced economy. The Isle of Man enjoys free access to EU markets.

The Isle of Man (IOM) is a large and sophisticated financial centre. As of 30 September 2004, the IOM’s financial industry consists of approximately 19 life insurance companies, 25 insurance managers, more than 177 captive insurance companies, more than GBP 17.2 billion pounds in life insurance funds and GBP 5.6 billion pounds in non-life insurance funds under management, 53 licensed banks and two licensed building societies, 82 investment business license holders, GBP 30.1 billion in bank deposits, and 164 collective investment schemes with GBP 6.5 billion of funds under management. There are also 171 licensed corporate service providers, with approximately another seven seeking licenses.

The Financial Supervision Commission (FSC) and the Insurance and Pension Authority (IPA) regulate the IOM financial sector. The FSC is responsible for the licensing, authorisation, and supervision of banks, building societies, investment businesses, collective investment schemes, corporate service providers, and companies. In 2005, the FSC is expected to become the regulatory body for trust service providers. The IPA regulates insurance companies, insurance management companies, general insurance intermediaries, and retirement benefit schemes and their administrators. In addition, the FSC also maintains the Company Registry Database for the IOM, which contains company records dating back to the first company incorporated in 1865. Statutory documents filed by IOM companies can now be searched and purchased online through the FSC’s website.

The IOM introduced the Online Gambling Regulation Act 2001 and an accompanying AML (Online Gambling) Code 2002. The Act, Regulations, and dedicated AML Code are supplemented by AML guidance notes issued by the Gambling Control Commission, a regulatory body that provides more detailed guidance on the prevention of money laundering through the use of online gambling. The Online Gambling legislation brought regulation to what was technically an unregulated gaming environment.

The Companies, Etc. (Amendment) Act 2003 received Royal Assent on 9 December 2003. A provision that took effect in December 2003 calls for additional supervision for all licensable businesses, e.g., banking, investment, insurance and corporate service providers. The act further provides that no future bearer shares will be issued after 1 April 2004, and all existing bearer shares must be registered before any rights relating to such shares can be exercised.

The Financial Crimes Unit (FCU), formed on 1 April 2000, evolved from the police Fraud Squad and now includes both police and customs staff. It is the central point for the collection, analysis, investigation, and dissemination of suspicious transaction reports (STRs) from obligated entities. The entities required to report suspicious transactions include banks/financial institutions; bureaux de change; casinos; post offices; lawyers, accountants, advocates, and businesses involved with investments; insurance; real estate; gaming/lotteries; and money changers.

The IOM has developed a legal and constitutional framework for combating money laundering and the financing of terrorism. There appears to be a high level of awareness of anti-money laundering and counterterrorist financing issues within the financial sector, and considerable effort has been made to put appropriate practices into place. In November 2003, the Government of the IOM published the full report made by the International Monetary Fund (IMF) following its examination of the regulation and supervision of the IOM’s financial sector. In this report the IMF commends the IOM for its robust regulatory regime. The IMF found that "the financial regulatory and supervisory system of the Isle of Man complies well with the assessed international standards." The report concludes the Isle of Man fully meets international standards in areas such as banking, insurance, securities, anti-money laundering, and combating the financing of terrorism.

In October 2002, Tynwald approved modifications to the Island’s Taxation Strategy. The modifications were designed to achieve a uniform tax system for the whole business sector. The strategy currently provides for a new standard zero rate of corporate tax combined with a higher rate of 10% levied on defined regulated businesses, principally banks.

The 10% rate was achieved for tax resident trading companies from the start of the 2003 income tax year. A move towards a zero rate has already begun with its introduction for shipping, insurance and fund management. Subject to economic conditions, it remains the Treasury’s intention to introduce the zero rate generally by 2006.

Following its introduction the exempt and international tax regimes perceived by the EU Code of Conduct Group (Business Taxation) to be “harmful” will be abolished. This will provide a seamless transition into a uniform system of business taxation. Confirmation has been received that the taxation strategy not only meets the earlier standard set down by the OECD but also the more stringent conditions set down by the EU Code.

The Income Tax (Amendment) Bill 2004 is one of a series of Bills designed to deliver the tax strategy agreed by Tynwald. The Bill’s measures, subject to approval by the House of Keys and Legislative Council, include:

  • extending the current year basis of assessment to all income received by individuals and other non-corporate taxpayers, including income from investments, self-employment and other sources. (Income from employment is already on a current year basis).
  • two months longer – five months instead of three months – to make a tax return. But overdue returns will be subject to a new £50 penalty after September 2005 and the Bill also updates offences in relation to returns more than two years overdue.
  • new defined powers for the Assessor of Income Tax to obtain documents including material relevant to the international exchange of tax information on request, in line with the Island’s commitment to the OECD.
  • provision to prevent the avoidance of Manx tax by company directors, for example, using company loans to exploit the differential between corporate and personal income tax rates.

The Bill also extends personal allowances to non-residents.


The UK Government is responsible for external affairs and defence, although it is accepted practice that the Island is notified and consulted before any international agreement which would apply to it is agreed by the UK. The Island is not a member of the EU but it has a special relationship with the EU under protocol 3 of the Act of Accession of the UK and its Customs & Excise Agreement with the UK. The treaty was applied to the Island for very limited purposes – free trade and certain customs matters. As a result Manx goods can trade freely within the EU through the single market procedures. Companies with a turnover greater than £54,000 per annum must apply to be registered for VAT.

The IOM is a member of the Offshore Group of Banking Supervisors. The IOM is also a member of the International Association of Insurance Supervisors and the Offshore Group of Insurance Supervisors. The FCU belongs to the Egmont Group. The IOM cooperates with international anti-money laundering authorities on regulatory and criminal matters. Application of the 1988 UN Drug Convention was extended to the IOM in 1993.




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