Setting up your business in Isle of Man

Advantages

IOM Tax Advantages

These changes have been aimed at competing with jurisdictions that offer international companies that are easy to manage and with advantageous tax systems such as the British Virgin Islands, Cayman Islands or Bermuda. With the addition that Manx companies are not restricted from carrying out onshore transactions or own assets located on the island.

Companies incorporated in the Isle of Man are subject to corporate income tax at a 0% rate. A 10% tax rate for companies engaged in the financial services business and Isle of Man’s property transactions.

Dividend distributions, royalties, and interests paid to non-Manx residents are subject to withholding tax at the rate of 0%.

In addition, the Isle of Man is part of the customs territory of the EU under Protocol 3. Therefore, Manx incorporated entities benefit from free trade with the EU and EU VAT registration.

However, the recent BREXIT has created uncertainties on the Isle of Man’s future relationship with the EU and companies holding EU assets and trading with the EU.

VAT in the Isle of Man

One major difference between the Isle of Man and other low tax jurisdictions is that we are part of the UK for VAT purposes.

This can give rise to a number of advantages. At a basic level there is the opportunity for UK inward investors to arrange for VAT registration, without the risk of a taxable presence in the UK.

The Isle of Man is also an ideal location for what are known as VAT triangulation arrangements under which goods invoiced by one EU country to another, but physically delivered direct from a third, need only pay VAT once.

In addition there are customs planning opportunities using the Isle of Man. Goods bought by an Isle of Man company and sold to the UK need only pay input duty on the price paid by the Isle of Man company and not the price paid by the UK importer. The advantage of doing this through the Isle of Man is that the profits can be tax free.

IOM Cryptocurrency

Isle of Man Holding Companies

Intellectual Property

The Isle of Man is a signatory to the Paris Convention on Patents and Trademarks, making the Isle of Man limited company an interesting vehicle to hold intellectual property.

With respect to IP holding companies – companies that are exploiting IP rights and:

• have not created such IP.
• have acquired the IP from a company of the same group structure or from a third-party that has conducted research and development out of Isle of Man and licenses the IP to a company(s) of the same group or does not carry out research and development, branding or distribution as part of its Isle of Man core income generating activities – are considered high-risk intellectual property businesses and may be subject to an enhanced substance requirements test.

All in all, an Isle of Man company is an excellent vehicle for movable and immovable assets holding, investments companies and SPVs, e-gaming and wealth management.

Economic Substance Requirements

Companies conducting relevant activities such as fund management, banking, insurance, finance and leasing, distribution and service center business, headquarters business, intellectual property business, shipping, and holding company business – are required to meet economic substance requirements:

• conduct its core income-generating activities in Isle of Man (which are defined in the law).
• be directed and managed from within the Isle of Man.
• have an adequate amount of operating expenditures incurred in or from within the Isle of Man.
• have an adequate physical presence (including maintaining a place of business or plant, property, and equipment) in the Islands.
• have an adequate number of full-time employees or other personnel with appropriate qualifications in the Islands.