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Isle Of Man

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    ISLE OF MAN CORPORATE TAX

    The Isle of Man is located in the heart of the British Isles. The Island is a British Crown-dependent territory with internal autonomy.

    Except for Value Added Tax, which is primarily the same and levied generally by the same law that applies in the UK, the Isle of Man corporation tax structure is wholly distinct from that of the UK.

    An Isle of Man corporation can benefit from low-income tax rates of 0% rate of tax for businesses on the majority of revenue thanks to its entirely distinct tax system.

    The following components make up the tax framework that applies to Isle of Man companies.

    • The majority of income is taxed at 0%
    • 10% income tax rate for banking businesses
    • Retail enterprises with annual taxable profits of £500,000 or more are subject to a 10% income tax rate.
    • Income from Isle of Man land and property is subject to a 20% income tax rate, such as on rents and profits from property development.
    • Withholding tax is not necessary to be withheld from the majority of dividend and interest payments.

    VAT (VALUE-ADDED TAX) IN THE ISLE OF MAN

    The standard rate of VAT, a transaction-based tax that is imposed on the majority of goods and services supplied domestically, is now 20%. There are also other rates, such as 0% on food, magazines, books, and public transportation and 5% on home repairs.

    VAT is not applied to financial services, insurance, education, or health care. In the UK, the Isle of Man is a member of a customs union. In other words, Isle of Man and UK business supply transactions are subject to VAT just like domestic supply transactions. There is a separate Customs & Excise Authority for the Isle of Man.

    CORPORATE TAXES FOR BUSINESSES IN THE ISLE OF MAN

    Companies with Isle of Man residency are subject to taxation on their globally taxable profits, which is calculated in accordance with local law. Every year, businesses must file an income tax return.

    Only the profit due to the Isle of Man establishment will be taxed in the case of a non-resident company that was formed outside the Isle of Man but has a permanent establishment or place of business there.

    The Corporate Income Tax has three rates.

    The 10% rate is applicable to income from:  

    An Isle of Man-based financial institution operating under a deposit-taking license from the Isle of Man Financial Services Authority; and

    Retail operations happening on the Isle of Man. It only applies, though, if the profit for the year reaches GBP 500,000.

    Income from the Isle of Man real estate is taxed at a rate of 20%.

    All other income is subject to the 0% rate.

    Residents and non-resident businesses pay the same tax rate. However, a tax credit is used to provide unilateral relief from double taxation about income from foreign sources. The Double Tax Agreement (‘DTA’) will be used to identify residency when a firm is a resident of a nation with whom the Isle of Man has a tax treaty.

    Other than this, there are no property-related taxes for businesses.

    20% income tax is levied on profits from the development or renting of land or other property located in the Isle of Man.


    ONLINE FILING FOR CORPORATE TAX PAYERS IN ISLE OF MAN

    Corporate taxpayers must submit income tax returns online.  

    Companies that are residents must pay taxes on all of their income, whereas non-residents are only required to pay taxes on their Manx-sourced income. The same rates of income tax apply to resident and non-resident businesses.

    To assure Treasury revenue cash flow and as an anti-avoidance tool, the Distributable Profits Charge was implemented at the same time as the corporate income tax rate’s reduction to 0%. Some businesses that don’t distribute their profits might have to cover the Distributable Profits Charge on behalf of their shareholders who live on the Isle of Man.

    Residents who own stock in a relevant firm will be taxed on their portion of the profits that are ascribed to that company. Individuals will be taxed directly as if they had earned the income attributable to their share of the annual earnings of a relevant company, thereby removing the corporate veil for income tax purposes. This is referred to as the attributed revenue.

    Reach out to us at Relin Consultants for Isle of Man Company Formation.

    FAQs

    Do non-resident companies need to pay corporation tax in the Isle of Man?

    Non-resident companies that have a permanent establishment in the Isle of Man need to pay corporation tax on their Isle of Man profits. The standard rate of corporation tax for non-resident companies is also 0%.

    Do resident companies in the Isle of Man pay tax on their foreign income?

    Residents companies that are resident in the Isle of Man are not subject to tax on their foreign income.

    Is there a separate capital gains tax in the Isle of Man?

    No, the Isle of Man does not have a separate capital gains tax. Capital gains are subject to income tax.

    Does the Isle of Man have company tax?

    The Isle of Man’s local government does not impose any profit-based taxes. However, commercial business rates are payable. A property is evaluated and granted a “rateable value,” which serves as the foundation for the annual rates levy.

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