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Isle of Man considers tax cap on business profits

The Isle of Man Treasury is consulting the finance industry on the introduction of a proposed new tax cap on profits from annual income in the future.

Many businesses are already subject to standard zero rates of corporate tax, while financial services and property companies are currently subject to an income tax rate of 10% on normal trading profit. All other income, including liability on reserves, is now zero-rated.

The proposed tax cap on corporate profits would restrict the maximum liability to a fixed annual amount -– £6 million is the suggested level, which is just above the highest tax currently being paid by any company operating in the Isle of Man.

The tax cap would provide an additional incentive for financial groups to consider the jurisdiction as a headquarters where they could generate added profits by capping their entire group corporate tax liability.

The Treasury described the potential cap as a further demonstration of “the Isle of Man’s stated intention to move to an overall zero rate of corporate tax when future revenues permit”.

A tax cap of £100,000 on personal income was introduced in the 2006 Budget in a bid to encourage entrepreneurs to relocate to the Island and bring their businesses along with them.

The new proposal is part of the Island’s planning strategy for the next five years. Treasury Minister Allan Bell is seeking to formulate a future plan to build on the success of the zero tax strategy and maintain the current momentum of economic growth.

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