The Isle of Man is a jurisdiction located geographically in the British Isles but with a separate government and identity. The island has a customs agreement with the UK which facilitates trade but it is legally separate from the UK and from the European Union. This gives some definite advantages to a company formed in the Isle of Man when it comes to trading in other jurisdictions or holding investments.
The Isle of Man is a low tax jurisdiction that has a zero corporation tax rate except for banks which pay tax at 10% on their profits. There is no withholding tax on dividends paid to shareholders resident outside the island and no withholding tax is imposed on any other payment to people overseas. There is also no capital gains tax, stamp duty or inheritance tax. An offshore company tax return must be filed with the Treasury in the island.
Do you want to read more about Isle of Man taxation system? Read our article here.
Non-tax advantages of the Isle of Man include the well established legal system, a sophisticated banking system, political stability and an absence of any exchange controls or similar limitations on financial transactions.
The Isle of Man has a customs and excise agreement with the UK under which the two territories are effectively treated as one territory for customs duties, most excise duties and value added tax. If a company incorporated in the Isle of Man is to trade with the UK or countries of the European Union it will therefore need to be registered for VAT, subject to reaching the registration threshold.
A company can be incorporated in the Isle of Man with a single shareholder and can have just one share with no minimum value. A company only requires one director and this director does not need to be resident in the Isle of Man. An offshore company incorporated in the Isle of Man needs to file an annual return to the Companies Registry in the island and this must be prepared by the director or directors and submitted by an agent in the island.
Audited accounts are necessary for companies of a certain size but most start-ups will be below the threshold for audit. The threshold is a turnover of GBP 5.6 million or less; a balance sheet total of GBP 2.8 or less; and an average number of employees of 50 or fewer.
The Isle of Man companies legislation permits the incorporation of companies limited by shares or by guarantee; a company limited by guarantee with a share capital; or an unlimited company. Companies may be public or private. Private companies may not make their shares available to the general public; but they do not need to file audited accounts with the Companies Registry in the island. Companies pay a small annual corporate charge, effectively an administration fee, to the island.
A company incorporated in the Isle of Man can be advantageous for holding investment portfolios including commercial property. The Island has signed the Paris Convention on Patents and Trademarks and an Isle of Man company is therefore also suitable for holding intellectual property. Appropriate advice should be sought from an agent before incorporating an Isle of Man company.