Private company limited by shares
The Isle of Man is a high-reputable international finance and international business center due to its political stability, business-friendly policies and an attractive fiscal and regulatory environment.
In 2006, it came into force the Companies Act 2006, which currently co-exist with present and future companies incorporated under the previous Isle of Man Companies Act 1931.
The newest Companies Act presents several advantages over the previous one:
- Under the Companies Act 2006, the ultra vires doctrine does not apply. This means that a company has unlimited capacity to carry out any business or transaction if it is in the best interests of the company to do so, notwithstanding any provision to the contrary in a company’s memorandum and articles of association.
- Companies incorporated under the Companies Act 2006, may have a single director and may be corporate, instead of the two individual directors required by the Companies Act 1931.
- Share capital and class of shares issued provisions are more flexible.
- There is not a distinction between private and public companies and therefore shares may be offered to the public.
- Directors may authorize distributions by the company to its shareholders at such time and of such amount they deem appropriate if the company if the financial viability of the company is not compromised immediately and the company passes the solvency test.
- Accounting requirements are noticeably lower. Companies subject to the Companies Act 2006, are only required to keep accounting records and those may be kept anywhere. Financial statements preparation is not mandatory and private companies are exempt from audit. In the Companies Act 1931 Act, companies are required to file financial statements and audit their accounts if their turnover, balance sheet and the number of employees exceeds a certain threshold.
- 2006 Act Companies are not required to file with the Registrar details of any change in its directors as they occur, share capital variation or alteration, any allotment of shares or any shareholders’ resolution.
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.
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.
The Isle of Man has also enacted legislation for businesses dealing with cryptocurrencies. The Designated Business (Registration and Oversight) Act 2015 regulates cryptocurrency businesses, such as exchanges, and requires them to register with the Isle of Man Financial Supervision Commission and comply with Anti-Money Laundering and Countering Terrorist Financing legislation and the Proceeds of Crime Act 2008.
The country has also a strong E-Gaming industry, due to its gaming license simple application process, low betting duties, its extensive cluster of services providers/advisors with experience in the industry and its supportive legislation.
The Isle of Man has started to undertake the first OECD automatic exchange of information (AEoI) through Common Reporting Standard (CRS) in 2017 and has signed over 50 tax information exchange treaties (TIEa) and 11 double taxation agreements (DTA).
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.
Holding companies which only hold equity participations in other entities and only earn dividends and capital gains will be subject to a reduced economic substance test – it must have complied with all applicable filing requirements and must have adequate human resources and adequate premises in the Islands for holding and managing equity participations.
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.
Legal
Country code – IM
Legal Basis – Common law
Legal framework – Companies Act 2006
Company form – Private company limited by shares (LTD)
Liability - The liability of the shareholders for the company is limited to the amount of their respective shareholdings.
Economic Substance – Companies conducting relevant activities are required to meet economic substance requirements.
'Relevant activities' include:
- banking i.e. banking business
- insurance i.e. insurer
- finance and leasing i.e. business of providing financing or leasing of assets
- fund management i.e. management of collective investment schemes
- distribution and service center business i.e. reselling goods to affiliated companies or providing services to affiliated companies. Affiliated company is defined as a company which is part of the same group (e.g. parent-subsidiary, sister entity with common parent company, etc).
- headquartering i.e. providing management services to affiliated companies
- intellectual-property business i.e. holding and exploiting IP assets, generating identifiable revenue from such assets. Please note that the provision of services for developing IP assets or holding or using IP assets for ordinary commercial or service business is not considered an intellectual property business. IP businesses are those that generate separate and identifiable revenue from IP assets (e.g. patent licensing)
- shipping i.e. transportation by sea of persons, animals, goods or mail, the renting or chartering of ships for such transportation, management of ship crew, sale of travel tickets, the use, maintenance or rental of containers, including trailers and other vehicles or equipment for the transport of containers, used for the transport of anything by sea
- pure equity holding companies.
Economic substance requirements for companies conducting relevant activities are as follows:
- 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.
Holding companies which only hold equity participations in other entities and only earn dividends and capital gains are subject to a reduced economic substance test – it must have complied with all applicable filing requirements and must have adequate human resources and adequate premises in the Isle of Man for holding and managing equity participations.
Share capital – There is no minimum issued share capital other than issuing at least 1 share at the time of incorporation. There is no requirement to establish an authorized share capital. The share capital may be in any currency and shares may be with or without par value. Shares may be of different classes, and may be issued as ordinary, redeemable, convertible, with different preference rights, different voting rights, and different rights to dividends and surplus assets upon liquidation. Bearer shares are not permitted.
Shareholders – Companies in the Isle of Man may be formed by one or more shareholders, who can be either natural or legal persons, residents or non-residents, without limitations. Details of shareholders may not be available to the public. Nominee shareholders are permitted.
Directors – At least one director, who may be natural persons or corporations. If a director is a corporation, it must bear the appropriate fiduciary's license granted by the Financial Services Committee. Directors’ details are available in the public registry.
Secretary – There is no statutory requirement to have a company secretary, and it may be an individual or a corporation, resident or non-resident.
Registered Address – Corporations must have a registered physical office address located in Isle of Man and must have a registered agent, who holds the appropriate fiduciary's license granted by the Financial Services Committee.
General Meeting – Annual general meetings are not mandatory. However, if meetings are held, they can be anywhere in the world and it may be by proxy.
Electronic Signature – Permitted.
Re-domiciliation – Inward and outward re-domiciliation is allowed.
Compliance – Limited companies formed under the Companies Act 2006 are required to maintain accounting records and prepare financial statements for at least 6 years, which can be held anywhere in the world and in any currency.
Limited companies should file annually a tax return and an annual return, and pay the annual return fee, but are not required to file their financial statements, nor required to audit the accounts. However, the tax return includes financial information of the company.
Shareholders have the right to require formal financial statements to be produced and also to require an audit report on such financial statements.
- Shareholders not disclosed
- Directors not disclosed
- Corporate shareholders permitted
- Corporate directors permitted
- Local director required
- Secretary required
- Local secretary required
- Annual general meetings required
- Redomiciliation permitted
- Electronic signature
- Annual return
- Audited accounts
- Audited accounts exemption
- Exchange controls
- Common law Legal basis
- 1 Minimum shareholders
- 1 Minimum directors
- - Minimum issued capital
- - Minimum paid up capital
- GBPAny Capital currency
- Anywhere Location of annual general meeting
- 2017 AEOI
Taxes
Tax residency – A company is tax resident in the Isle of Man if it is incorporated in the Isle of Man or its place of central management and control is in the Isle of Man. A company incorporated in Isle of Man, subject to certain conditions and requiring the approval of the Assessor of Income Tax, may be considered as non-resident if it is managed and controlled elsewhere.
Basis – Resident companies are taxed on a worldwide income basis, while non-resident entities are subject to tax on their income derived from the Isle of Man.
Tax rate – Corporate tax standard rate is 0%.
A 10% tax rate applies to companies conducting banking business in the Isle of Man and licensed by the Isle of Man Financial Supervision Commission, and companies conducting retail activities. Income from real property located in the Isle of Man is subject to 20% tax.
Capital gains - Capital Gains are exempt from taxation.
Dividends - Dividends received from resident or non-resident entities are generally subject to 0% tax.
Interests - Interest income is taxed at a standard rate of 0%.
Royalties – Royalty income is usually subject to taxation at a 0% rate.
Foreign-source income – Foreign-source income is usually taxable but at 0% rate.
Withholding taxes – Dividends, interests, and royalties paid to non-residents are usually subject to withholding tax at 0% tax rate. However, interest income and rental income derived from land and property may be subject to a 20% tax rate.
Losses – Losses arising from taxable income may be carried forward indefinitely. Carryback of losses to the preceding year is permitted.
Inventory – Inventories are usually valued at lower of cost or net realizable value valuation will be acceptable. First in first out method (FIFO) is permitted, but the Last in first out method (LIFO) is not allowed for taxation purposes.
Anti-avoidance rules – The Isle of Man has not enacted transfer pricing regulations. Thin capitalization and controlled foreign companies rules are also not applicable.
Labor taxes – Employers are required to make contributions to the National Insurance at 12.8% on resident employees’ income above IMP 118 per week, reduced rates may apply in certain circumstances.
For its part, resident employees pay 11% on its earnings above IMP 118 up to IMP 784 per week, above this amount a 1% contribution is payable.
Tax credits and incentives – Unilateral tax relief for foreign tax paid is available up to the tax payable in the Isle of Man.
Under the Land Development Tax Holiday, relevant profits of an Isle of Man company may be tax-exempt, if it provides productive employment in the islands. Profits included are those from new or improving commercial developments and rental income received on these commercial developments.
Personal income tax – An individual is tax resident in the Isle of Man if is physically present in the island for at least 183 days or more in a tax year, or an average of 91 days or more over 4 consecutive years.
Residents are taxed on worldwide income, while non-residents pay tax on their income derived from the Isle of Man. Income tax is levied at 10% on annual income up to GBP 8,500 and 20% on the excess. Capital gains are not subject to taxation. Investment income is taxed as ordinary income.
For non-residents, income sourced from the island is taxed at a flat 20% rate. Non-residents don’t pay tax on dividends, bank interest and building society interest are tax-exempt.
Other taxes – Companies incorporated under the Companies Act 2006 are not subject to capital duties on the creation of new share capital.
For V.A.T. and Customs duties purposes the Isle of Man and UK forms a single territory. V.A.T. standard rate is 20%. V.A.T. applies to the supply of goods and services to UK and Isle of Man residents.
There are no additional property taxes more than the 20% income tax payable from rental or development of land and property.
In Isle of Man there are no transfer, stamp, inheritance and wealth taxes.
- Offshore Income Tax Exemption
- Offshore capital gains tax exemption
- Offshore dividends tax exemption
- CFC Rules
- Thin Capitalisation Rules
- Patent Box
- Tax Incentives & Credits
- Property Tax
- Wealth tax
- Estate inheritance tax
- Transfer tax
- Capital duties
- 0% Offshore Income Tax Rate
- 0% Corporate Tax Rate
- 0% Capital Gains Tax Rate
- 0% Dividends Received
- 0% Dividends Withholding Tax Rate
- 0% Interests Withholding Tax Rate
- 0% Royalties Withholding Tax Rate
- 1 Losses carryback (years)
- Indefinitely Losses carryforward (years)
- 20% Personal Income Tax Rate
- 0 Tax Treaties
Country details
The Isle of Man is a British Crown Dependency formed by the main island and some islets located in the sea of Ireland, between Ireland and Great Britain. The sovereign is the British monarch, as lord of Man, who is represented by the governor-general. Its international representation and defense are the responsibility of the Government of the United Kingdom.
Like all other dependencies, it is not part of the United Kingdom, neither the European Union nor the European Economic Area. Although it does belong to the customs union of the European Union, thus benefiting from the free movement of industrial and agricultural goods.
As a member of the Common Travel Area, the free movement of citizens of the European Economic Area is also permitted.
The island is 572 sq. km. in extent and low elevation above sea level, with 621 meters of maximum altitude on Snaefell mountain. Around the main island, there are a few small islands such as Calf of Man, St Patrick, and St Michael.
The Isle of Man has about 80,000 inhabitants, of whom 26,000 reside in the island's capital, Douglas.
The English language is spoken by almost the entire population of the island and is also the official language. Manx Gaelic is the historical language and was traditionally spoken, but today there are few who speak fluently or on a daily basis.
The Isle of Man Pound is the official currency, which is not an independent monetary unit but is a special pound sterling (GBP) issued for the island.
The Isle of Man has a completely independent government, parliament elected by universal suffrage (Tynwald) and judicial system. The executive power of the island is in charge of the General Minister and his or her Council of Ministers. The General Minister is nominated by Tynwald after each general election.
Financial services are the main economic sector. Banking, insurance, financial and offshore business services alone constitute more than a third of the island's GDP. Recently, it has been opened an office of the International Stock Exchange to boost the financial industry of the island.
Manufacturing, tourism, and more recently gambling are other key sectors of its economy. Agriculture and fisheries, traditionally the major sectors, are currently relatively small in the Manx economy.