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Overview
Located in the centre of the British Isles, in the Irish Sea, the
Isle of Man is an internally self-governing dependent territory of the
Crown that is not part of the United Kingdom. Tynwald, the island’s
1000 year old Parliament, makes its own laws and oversees all internal
administration, fiscal and social policies. Offshore banking,
manufacturing and tourism are key sectors of the island’s economy which
has undergone major changes to its structure over the last two decades.
The Manx Government's policy of offering incentives to high-technology
companies and financial institutions to locate on the island has paid
off leading to a well-balanced economy. Banking now contributes about
45% to the Manx gross national product.
The Isle of Man (IOM) has a large and sophisticated financial
centre with a reputation for regulatory regimes which meet all current
international standards, but which offer a flexible and
non-bureaucratic approach. Since 1999 consumer interest in the IOM has
been intensifying and as a result it is growing on average at a rate of
12% per annum. As of 30 September 2004, the IOM’s financial industry
consisted of approximately 19 life insurance companies, 25 insurance
managers, more than 177 captive insurance companies, more than £ 17.2
billion in life insurance funds and £ 5.6 billion in non-life insurance
funds under management, 53 licensed banks and two licensed building
societies, 82 investment business license holders, and 164 collective
investment schemes with £ 6.5 billion of funds under management. There
are also 171 licensed corporate service providers, with approximately
another seven seeking licenses.
The island's banking industry is dominated by subsidiaries or
branches of the main UK clearing banks and some foreign banks. The
majority of banks in the IOM are engaged in providing private banking
services to UK expatriates and to foreign nationals. The services
offered often extend beyond deposit taking to establishing and
administering trusts and managing the underlying companies and assets
held by those trusts, including investment management. The IOM
Financial Supervision Commission’s annual report for 2004-05 showed an
increase in bank deposits of 16.4% to £ 33.08 billion from £ 28.42
billion in the previous year. This figure includes a 19.3% increase in
sterling deposits and a 9.1% increase in non-sterling. During the same
period there was a 17% increase in funds managed or administered from
the island.
As a UK crown dependency the IOM’s relationship with the EU is
defined by a protocol attached to the UK’s membership. The IOM 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 IOM is part of the
customs territory of the Union for the purpose of trade in industrial
and agricultural products but is not subject to any directives or
regulations, including those dealing with harmonisation of taxation,
financial services, exchange of information or social policy.
The 2000 Financial Stability Forum's report on offshore financial
centres and their effect on global financial stability rated the IOM as
having good supervisory practices and levels of co-operation and placed
it in the first division of offshore centres, along with jurisdictions
such as Hong Kong and Singapore and ahead of jurisdictions such as
Jersey, Guernsey, Bermuda and the Cayman Islands.
The Island's positive image has been further reinforced by Moody's and Standard & Poor's "AAA" accreditation.
Online News Sources
Isle of Man Today: www.imonline.co.im
Business Environment
The Financial
Supervision Commission (FSC) is an independent statutory body which
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. In 2005, the FSC is expected to become
the regulatory body for trust service providers. The Insurance and
Pensions Authority (IPA) is responsible for the licensing and
supervision of insurance companies and insurance intermediaries
On 8th March 2005, the Fiduciary Services Bill 2004 was completed
by the IOM Government and is now awaiting Royal Assent after passing
through the House of Keys and Legislative Council. The Bill extends the
Corporate Service Providers Act 2000 to cover Trust Service Providers
so that anyone who provides trust services in the Isle of Man as a
business will be required to hold a licence. The new regime will affect
professional trustees and trust administrators but not those who act in
a private capacity.
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 IOM 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 IOM
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 .
The Companies, Etc. (Amendment) Act 2003 received Royal Assent on 9
December 2003. A provision that took effect in December 2003 calls for
additional supervision for all licensable businesses, e.g., banking,
investment, insurance and corporate service providers.
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 IOM. At least one director
and the secretary must also be resident in the IOM. Limited partners,
other than those which are international companies, must be resident
outside the IOM and not conduct any trade or business other than those
prescribed.
In August, IOM’ s Treasury issued a consultative document for a new
Manx corporate vehicle to make it more attractive for businesses to set
up in the island. It is hoped that this new vehicle can be introduced
as early as 2006. The document states: 'The steering group has had
discussions informally with, and input from, a variety of individuals
and organisations involved in the legal and corporate service sectors.
As a result of which, it has become apparent that the need to create a
modern Isle of Man corporate vehicle is now most urgent.'
It adds: 'Since a full scale review and amendment of the Companies Act
1931-2004 would be an extremely lengthy exercise, it was felt that the
most appropriate and immediate method to achieve the desired product
would be to introduce a separate, largely stand-alone, piece of
legislation allowing for a new type of Manx company, which would
co-exist with the present and future companies incorporated under the
CA 1931-2004.'
The new structure is aiming to remove the compulsory need to have
directors and company secretaries based in the Island, remove the need,
in some cases, for annual returns and remove the requirement for
overseas companies to register here if they are being administered by a
Corporate Service Provider (CSP).
The document states: 'The conclusions to date are that corporate
directors should be permitted within certain limitations, annual
returns should only be required for companies undertaking business
locally, and that the provision of corporate administration services to
an overseas company should not result in a place of business being
established in the Island.'
He added: 'The FSC feel there may be some issues about the fact that we
are moving down the value chain by not increasing the legislation
requirement and if anything we are going the other way. That, perhaps,
is contradictory to the way a lot of the regulatory environments are
going, but our argument is that we do have such a strong regulatory
regime, that we can have a more ordinary, accepted corporate
legislation.
'For some time the CSP industry had been concerned that the existing
product was not "ageing well" and that the Isle of Man might be losing
out to other more "business-friendly" jurisdictions, such as the
British Virgin Islands.
'Establishing a new corporate vehicle that is practical and easy to
administer will not only endorse the Island's status as a world class
offshore jurisdiction, but also provide a welcome boost to the local
CSP industry and serve as a catalyst to encourage growth in many other
areas of the Island's finance sector.'
There appears to be a wide measure of acceptance that a new corporate
vehicle (commonly described as an NMV) is required. However, others in
the finance sector fear that the new proposals may be implemented in
haste without proper consideration of the full consequences to the
Island's reputation.
The consultation period is set to finish at the end of September 2005.
In addition, under the present regime 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.
In November 2003, the Government of the IOM published the full
report made by the International Monetary Fund (IMF) following its
examination of the regulation and supervision of the IOM’s financial
sector. In this report the IMF commends the IOM for its robust
regulatory regime. The IMF found that "the financial regulatory and
supervisory system of the Isle of Man complies well with the assessed
international standards." The report concludes the Isle of Man fully
meets international standards in areas such as banking, insurance,
securities, anti-money laundering, and combating the financing of
terrorism.
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.
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%.
The Isle of Man only has one tax treaty, which was entered into
with the UK in 1955 and is very similar to the equivalent agreements
between the UK and Jersey and Guernsey. The agreement specifically
excludes dividends and debenture interest from its provisions. Exempt
companies, International Companies and International Limited
Partnerships are not entitled to the benefits of the treaty.
The IOM is in negotiations with 10 countries with a view to
concluding Tax Information Exchange Agreements with them. The
government has stated however that none will be finalised unless they
are able to negotiate mutual economic benefits for IOM.
Although the IOM is not part of the EU, it has voluntarily agreed
to apply a withholding tax instead of an automatic exchange of
information under the new EU Saving Tax Directive which came into force
on 1 July 2005. No information is exchanged where the withholding tax
is applied although customers will generally be given the option to
elect for exchange of information in order to receive their interest
payments gross. The rate of tax to be applied to the interest payment
will be 15%. After three years this will increase to 20% and finally
after a further three years it will increase to 35%.
In October 2002, Tynwald approved modifications to the Island’s
Taxation Strategy. This was in response to c riticism levied by the EU
(through the Primarolo Report) and the OECD (through the harmful tax
competition initiative) at the island's use of ring-fenced regimes. The
island's solution to this criticism was to commit to remove all
ring-fenced regimes and, in their place, introduce a zero-rate
corporate tax by 6 April 2006. The island is on course to achieve this
and the replacement regime has been accepted by the UK, EU and the OECD
as being neither harmful nor in breach of perceived norms of
international taxation.
The modifications were designed to achieve a uniform tax system for
the whole business sector. The zero tax will apply to all businesses,
whether local or international, regulated or unregulated, with one
important exception - banks. Banking business will be taxed at a 10 per
cent rate.
A move towards a zero rate began with its introduction for
shipping, insurance and fund management in 2003 and from 6 April 2005
the trading income of companies in the agriculture, fishing,
manufacturing, E-gaming, tourist accommodation and film and television
production sectors also became subject to a zero percent rate of tax.
Subject to economic conditions, the 2005 Budget announced that it
remains Treasury’s intention to introduce the zero rate for almost all
companies by 6 April 2006. It was further announced in the 2005 Budget
that IOM’s Taxation Strategy will be completed by the introduction of a
new corporate tax system which will simplify the tax treatment of
companies in line with the introduction of the current year basis of
assessment for the taxpayer by April 2007.
Key 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.
Email: info@fsc.gov.im
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
Email: dti@gov.im
Internet: www.gov.im/dti
Film Commission
Email: filmcomm@dti.gov.im
Key Stats
Country Description:
Isle of Man (Manx). The Isle of Man is a
UK crown colony or dependency. Population: 78,084 (March 2005);
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 = £0.56 (September 2005)
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 (Donald Gelling as
of December 2004), 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.
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: 5.9% in 2004 but down to 3.7% in June 2005
Labour Force ( February, 2005): Economically active: 39,700 of
which 23% work in insurance, banking and finance and business services.
Unemployment: 1.3%
Government Accounts: In the February 2005 Budget gross revenue
expenditure was estimated for 2005/6 to be £725 million an increase of
£43.5million on the figure for 2004/5. There was a budget surplus of
£9.1 million for 2004/5 and an estimated surplus of £11.7 million for
2005/6.
Financial year: April–March.
Public Holidays (2005)
3 January (New Year); 25 March (Good
Friday); 28 March (Easter Monday); 2 May (Early May bank holiday); 30
May (Late May bank holiday); 10 June (T.T. bank holiday); 5 July
(Tynwald Day); 29 August (last Monday in August summer bank holiday);
26 December (Boxing Day); 27 December (Christmas 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.
Restaurant Guide
We recommend:
The Gallery Restaurant
Sefton Hotel
Douglas
Tel: 01624 645 500
Internet: www.seftonhotel.co.im
Ciappelli’s
Noble’s Park
Douglas
Tel: 01624 677 442
Café Tanroagan
9 Ridgeway Street
Douglas
Tel: 01624 472 411
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