Isle of Man

Business Environment

As a UK crown dependency the Isle of Man’s relationship with the EU is defined by a protocol attached to the UK’s membership. The Isle of Man is not a member state of the European Union, nor is it an associate member. Under protocol 3 to the EU Act of Accession, the Isle of Man is part of the customs territory of the Union for the purpose of trade in industrial and agricultural products. For the purpose of trade in financial services and products the Isle of Man is outside the EU and directives in this area are not applicable.

The Financial Supervision Commission licenses and supervises all banks, investment businesses, collective investment schemes and building societies. The FSC is also responsible for the companies registry and has introduced a regulatory regime for corporate services providers. The Insurance and Pensions Authority (IPA) is responsible for the licensing and supervision of insurance companies and insurance intermediaries.

Companies are deemed resident if central management and control is exercised on the island. Offshore companies may set up as exempt companies or international companies or partnerships if the beneficial interest belongs to non-residents, and do not carry on business or have a source of income in the Isle of Man other than with other international companies and international limited partnerships. An exempt company must have a resident director and secretary and is able to undertake any trade or business, at or from, any premises in the Isle of Man but cannot be engaged in prescribed activities, which include manufacturing, retail, wholesale, distribution or transport, construction, land development, fishing, mining, or agriculture. An exempt company may not be a public company (other than an exempt scheme), a bank or an insurance company.

International business companies and limited partnerships are formed under the International Business Act 1994 (as amended). They have the same features as an exempt company. However, an international company can be a public company. An international limited partnership is made up of a general partner and one or more limited partners. The partnership must be registered under the Partnership Act 1909 .The general partner must be a company other than one prescribed, which is resident, and has a place of business in the Isle of Man. At least one director and the secretary must also be resident in the Isle of Man. Limited partners, other than those which are international companies, must be resident outside the Isle of Man and not conduct any trade or business other than those prescribed.

In addition entities may be registered under the Limited Liability Companies Act 1996, which confers tax exemption on similar lines to the international limited partnership. Trusts fall under the Trustee Act 1961, the Variation of Trusts Act 1961 and the Perpetuities and Accumulations Act 1968. Banks are subject to licensing and supervision under the Banking Act 1998, as amended. Insurance business is controlled by the Insurance Act 1986 and regulations.

Individuals carrying on investment business either in the Isle of Man or through a Manx incorporated company are required to hold a licence under the Investment Business Acts 1991 to 1993. Collective investment schemes fall under the Financial Supervision Act 1988, which provides for the regulation of three main classes: (1) Authorised collective investment schemes can be sold to residents, the UK, Guernsey, Jersey, Ireland and Japan and benefit from the fast track approval procedures in Hong Kong; (2) Professional investor fund; (3’) Experienced investor fund.

The G-7’s Financial Stability Forum rated the Isle of Man a ‘group one’ offshore financial centre deemed to be under ‘good quality’ supervision. However, the OECD listed the island as among 35 jurisdictions that could face punitive measures over ‘harmful tax competition’. In response the Isle of Man signed a letter of commitment in December 2002 with the Organisation for Economic Co-operation and Development agreeing to exchange information with overseas authorities in criminal tax matters by 31 December 2003 and in civil tax matters by 31 December 2005. The Isle of Man was not blacklisted in the Financial Action Task Force report on jurisdiction's deemed to be 'uncooperative' in fighting money laundering. The Isle of Man currently is deciding on how to respond to a proposed EU taxation of savings directive. The directive would require the UK's dependent territories either to impose a 35% withholding tax on savings held by EU residents or to automatically exchange client information on interest paid to EU residents. Link: International Services Division.

Taxes

The Isle of Man does not have any capital gains tax, wealth tax or inheritance tax. The jurisdiction levies income tax, a national insurance tax, a form of property tax and value-added tax (VAT). The Income Tax Acts 1970 to 2000 supported by orders and regulations deal with the income tax liability of resident and non-resident persons. The definition of 'person' includes any association of persons, corporate or unincorporated. The Income Tax (Exempt Companies) Act 1984 grants exemption from income tax for a year of assessment to companies owned by non-residents carrying on approved activities. The International Business Act 1994 allows a Manx resident company to apply to be assessed to Manx income tax as an 'international company' on the whole or part of its income for a year of assessment and to elect for a rate of tax to apply up to maximum of 35%. The act also provides for 'international limited partnership' status, which allows non-resident limited partners exemption from income tax for a year of assessment for income received from the partnership. The Limited Liability Companies Act 1996 allows the creation of 'international limited liability companies' and 'other limited liability companies'. Limited liability companies are treated as partnerships for income tax purposes and members as partners. An international limited liability company is exempt from Manx income tax. Partners in other limited liability companies are assessed income tax on their share of the profits. Links: A guide to the provisions of the Income Tax (Exempt Companies) Act 1984 with downloadable application form.; A guide to the provisions of the International Business Act 1994 with downloadable application form..

Insurance and shipping companies benefit from a 0% rate of taxation. Resident trading companies pay 10% on the first £100 million of profit and 18% on higher levels. The income tax rate on a company’s non-trading income is 18%. The Isle of Man is the only offshore centre in the EU's value added tax regime. Most companies with a turnover of £55,000 or more are required to register for VAT, charged at 17.5% on most sales. The main employment tax is national insurance and is levied at a rate of 11.8% on earnings above £89 per week. The income tax standard rate for individuals is 10%, with a maximum rate of 18%. Link: Isle of Man Guide.

Contacts
Financial Supervision Commission
PO Box 58
Finch Hill House
Douglas, Isle of Man
IM99 1DT
Tel: supervision division 44 (0)1624 689317; enforcement division 44 (0)1624 689314; companies division 44 (0)1624 689336; companies registry 44 (0)1624 689300; policy division 44 (0)1624 689336; operations division 44 (0)1624 689300. Fax: 44 (0)1624 689399 for chief executive, operations and enforcement divisions; 44 (0)1624 689398 for supervision, companies and policy divisions; 44 (0)1624-689397 for companies registry.
Internet: www.fsc.gov.im

Department of Trade and Industry
Illiam Dhone House
2 Circular Road
Douglas, Isle of Man
IM1 1PQ, British Isles
Tel: +44 (0)1624 685675
Fax: +44 (0)1624 685683
E-mail: dti@gov.im
Internet: www.gov.im/dti

Film Commission
E-mail: filmcomm@dti.gov.im

Latest available figures

Country Description
Isle of Man (Manx). The Isle of Man is a UK crown colony or dependency. Population: 76,315 (2001); capital: Douglas. The United Kingdom government in Westminster may legislate, with consultation, on behalf of the Isle of Man on matters relating to defence, foreign policy and broadcasting. Isle of Man residents are British citizens.

Currency
The Isle of Man pound is at par with the British pound. British pounds are freely accepted. US$1 = £0.63 (February 2003)

Legal System
Based on British law and local statute, with significant differences in legislation relating to direct taxation, company law and financial supervision. The Isle of Man has a High Court (composed of the Chancery Division, the Common Law Division, and the Family Division), the Court of General Gaol Delivery (deals with criminal proceedings), and the summary courts (includes the High Bailiffs Court, Deputy High Bailiffs Court and the Magistrates Court). Final appeal is to the London Privy Council. High Court justices are appointed by the Lord Chancellor of England on the nomination of the lieutenant governor. Lawyers in the Isle of Man are known as advocates and combine the roles of solicitors and barristers in England.

Government
The head of state is the British monarch (Queen Elizabeth II) who is represented by a lieutenant-governor. The political head of government is the chief minister, who appoints a cabinet called the Council of Ministers. The island’s bi-cameral parliament is called the Tynwald and is made up of the 24-member House of Keys, directly elected for five years, and the 11-member Legislative Council. Elections are by the relative majority or 'first past the post' system. There are 15 constituencies. Two constituencies are each represented by three members. Two constituencies have two members each. The chief minister is chosen by the House of Keys from among its members. The Legislative Council is made up of three ex officio members and eight elected members from the House of Keys. The president of the Tynwald is elected by the members of Tynwald from amongst their number and he sits ex officio as the president of the Legislative Council. As the presiding officer the president has a casting vote in cases of a tied vote. The other two ex officio members of the Legislative Council are the Lord Bishop of Sodor and Man, who has a vote, and the attorney general, who does not. The remaining eight members of the Legislative Council are elected by the House of Keys from among their members. By convention bills are considered first in the House of Keys and then in the Legislative Council. Legislation, once passed by the Tynwald, is sent to the Privy Council for royal assent, or, now more commonly, by the lieutenant governor. UK acts of parliament only apply to the island if the Tynwald expressly agrees that they should do so. Link: Members of the Tynwald.

Executive
Lieutenant Governor Sir Timothy Daunt
Chief minister Richard Corkill

Council of Ministers
Agriculture, fisheries and forestry: John Rimington
Education: Stephen Rodan
Health and social security: Clare Christian
Home affairs: Phil Braidwood
Local government and the environment: Pam Crowe
Tourism and leisure: David Cretney
Trade and industry: Alex Downie
Transport: John Shimmin
Treasury: Allan Bell

Other
President of Tynwald: Noel Quayle Cringle
Attorney general: William John Howarth Corlett

Politics
The last elections were held on 22 November 2001 and had a 57.6 % turnout. The next are scheduled for November 2006. The Manx Labour Party won two seats. The Alliance for Progressive Government won three seats. Non-partisans won the remaining 19 seats

Economy
GDP by sector: Finance 41%, professional and scientific services 15%, construction 7%, tourist industry 6%, manufacturing 6%, public administration 4%, agriculture and fisheries 1%, other services 18%. Total deposit base (end-2002): £27.8 billion.

Gross Domestic Product (2002)
5.3% real GDP growth, £972.73 million at current market prices. Gross national product: £1.03 billion at current market prices.

Inflation Rate (2003)
3.2% annual

Labour Force (October 2003)
Economically active: 39,700 of which 23% work in insurance, banking and finance and business services. Unemployment: 0.8% (329 persons).

Government Accounts (2002-2003)
Revenues £405 million. Expenditure £581.7 million, including capital spending of £148 million. Government financial year: April–March.

Public Holidays (2004)
1 January (New Year); 9 April (Good Friday); 12 April (Easter Monday); 3 May (Early May bank holiday); 31 May (Late May bank holiday); 11 June (T.T. bank holiday); 5 July (Tynwald Day); 30 August (last Monday in August summer bank holiday); 27 December (Christmas observed); 28 December (Boxing Day observed).

Time Zone
GMT. The clock goes forward 1 hour at 1 am on the last Sunday in March and back to normal time at 1 am on the last Sunday in October.

Sources
Isle of Man Government