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ExpatBriefing.com Editorial, 12 April, 2016
Ever responsive to the demands of international business, the Isle of Man Government has recently made a number of important changes to its visa and work permit system to make it easier for skilled workers, particularly in the vital area of information technology, to bring their talents to the island. This feature provides an overview of the Isle of Man, and its tax and work permit rules.
Introduction To The Isle Of Man
Located in the Irish Sea, the Isle of Man is an English speaking dependency of the British crown but has never formed part of the United Kingdom. The Island spans 52 kilometers from north to south and 22 km from east to west at the widest point, and its population was estimated at approximately 89,000 in 2014. Douglas is the island's administrative and commercial center, and largest town with a population around 28,000.
The Isle is politically stable and enjoys parliamentary government without party politics. Its 1,000-year-old parliament, Tynwald presides over the Island's domestic affairs including, specifically, taxation. Britain is responsible for the Island's defense and foreign affairs. The island forms part of the EU single market and VAT area but is otherwise not part of the EU fiscal area.
The Isle of Man has an English common law type legal system and tends to follow English legislation. There is an infrastructure of sophisticated legal and other professional services. The Isle has a Financial Services Authority (Until November 2015, the Financial Supervision Commission) with a great deal of experience in overseeing and regulating sensitive financial areas.
The Island's government has encouraged economic growth by creating a beneficial tax regime and by offering financial incentives to manufacturing and tourism. Obviously the Isle of Man is probably best known as an "offshore" financial center, and banking, wealth management, investment funds and insurance are all mainstays of the finance industry, while the shipping registry is now one of the largest in the world. However, the Government has invested heavily in telecommunications infrastructure, and the island has a growing reputation as an IT hub. The e-gaming sector is now one the most important pillars of the Manx economy.
The island's currency is the pound and there are no exchange controls. There are frequent flights to a number of UK airports.
Life In The Isle Of Man
The Island has a temperate climate due to the influence of the surrounding Irish Sea. Snowfall and frost are rare in winter. February is normally the coldest month, with an average daily temperature of 4.9 C and is often fairly dry but rather windy. April, May and June are the driest months whilst May, June and July are the sunniest. The average daily maximum temperature in the summer months is around 17.6 C.
The Island has excellent health care, high educational standards, efficient transport and communication systems, and offers the sorts of leisure opportunities expected of an advanced European country.
Compared with the metropolitan areas of the UK, crime is low in the Isle of Man, and away from the main towns residents can enjoy a largely peaceful existence. Unlike Britain's other Crown Dependencies (Guernsey and Jersey), the local housing market isn't controlled, and there are properties available to suit most tastes and pockets.
In the Isle of Man there is no general capital gains tax, turnover tax or capital transfer tax, and there are no stamp duties. Apart from VAT, the only significant tax is income tax which is levied at a maximum rate of 20 percent on individuals. Social security contributions are also payable.
There is no general definition of "residence" or "ordinary residence" in Manx tax law. A person will qualify as a resident if they spend a total of six months on the island in any income tax year (April 6th to April 5th). An individual who visits for more than an average of three months each year for four or more consecutive years will also be deemed resident. However, there is an important short-term residence concession which allows a person who owns a property on the Island to spend not more than four months in any two consecutive years in the Island and not be liable to Manx income tax.
Resident individuals are liable to tax on their worldwide income; non-residents only on income arising in the island.
In 2016, income tax is charged at 10 percent on the first GBP8,500 of income (after a personal allowance of GBP10,500 for single persons and GBP21,000 for jointly-assessed couples), rising to 20 percent on the remainder.
An individual's income tax liability is capped at GBP125,000 (which is doubled in the case of a jointly assessed married couple) in relation to all income types.
The Isle of Man has a number of taxation agreements with various countries in place. Where a double taxation agreement does not exist with a country, relief may still be given for any income which suffers foreign taxation and proof of the tax suffered is submitted. The relief is based on the lower of the overseas rate of tax or the Isle of Man marginal rate of tax.
One of the most attractive features of the Isle of Man's tax regime is its "zero-ten" corporate tax system, under which income from most types of business is taxed at 0 percent. Companies holding banking licenses and those receiving income from land and property in the Isle of Man (which includes rental income, extraction of minerals and property development) are taxed at 10 percent.
As in most major offshore jurisdictions, incorporating a company in the Isle of Man is now, thanks to online systems, a relatively straightforward and quick process.
Work Permits And Visas
The Isle of Man's work permit system is operated and enforced by the Department of Economic Development under the Control of Employment Act 1975. The Isle of Man Government is particularly keen to attract highly-skilled and wealthy immigrants, especially if they intend to make an investment in the island.
Employers may employ individuals from within the European Economic Area (EEA) who are not Isle of Man workers, provided that there are no suitable Isle of Man workers available to fill those specific roles.
The EEA states are the 28 member states of the European Union and Norway, Liechtenstein and Iceland. Although Switzerland is not an EEA state, its nationals have the same rights to live and work in the Isle of Man as EEA nationals.
In June 2010, the Isle of Man government announced major changes to rules surrounding work permits for nationals from outside the EEA or from Switzerland, which ushered in a points-based system (PBS) in line with legislation in place in the UK.
The PBS does not apply to applications for work permits for people from within the EEA or Switzerland and these continue to be dealt with under the Control of Employment Act.
Points are awarded for evidence of a lack of suitable local skilled workers, qualifications and the prospective earnings of the worker. In addition, migrants must also meet points-based criteria for having sufficient funds available to them and a proficiency in English language.
There are four tiers under the PBS systems, the first two of which are of interest to high-net-worth individuals intending to settle and/or invest in the Island Man, and highly-skilled individuals. They are as follows:
Tier 1: Highly skilled workers, businesspersons and investors
The Tier 1 (Entrepreneur) category is for those investing in the Isle of Man by setting up or taking over, and being actively involved in the running of one or more businesses in the Isle of Man.
To obtain a Tier 1 Entrepreneur visa, applicants are required to invest at least GBP200,000 in a new or existing business which is registered in and pays tax in the Isle of Man. The individual must not be absent from the Isle of Man for more than 180 days in a 12-month period. The visa (known as Leave to Remain) permits an individual to enter and reside in the Isle of Man for up to 3 years and 4 months.
The individual can apply for an extension of the Leave to Remain in the Isle of Man for a further two years as long as the individual remains engaged in the specific business activity covered by the visa and the business has created at least two full time jobs in the Isle of Man for more than 12 months. After five years the individual can apply for Indefinite Leave to Remain (ILR) in the Isle of Man.
Individuals can enjoy an accelerated ILR in the Isle of Man after 3 years if the business has created at least 10 full time jobs or has generated an income (or incremental income) of at least GBP5m.
The Tier 1 Investor visa is for individuals seeking to remain in the Isle of Man through making a qualifying investment in the island.
In order to obtain the Investor visa, applicants must invest at least GBP2m into a "permissible investment" in the Isle of Man.
For the Investor visa to remain valid, the holder must not be absent from the Isle of Man for more than 180 days in a 12-month period. After the initial three-year period the individual will be granted a further two-year visa and following this can then apply for ILR in the Isle of Man. The rules allow for accelerated ILR after three years if an individual has invested GBP5m and after two years if GBP10m has been invested.
In both cases, an application must be made for any dependents intending to follow the main applicant at the same time as the Tier 1 application is made. Adult children are not considered dependents and must apply for Tier 1 visas in their own right.
Tier 2: Skilled workers with a job offer
Tier 2 is intended to allow skilled workers with job offers to work in the Isle of Man. This tier also covers ministers of religion, elite sportspersons and intra company transfers.
Isle of Man employers who wish to employ foreign nationals will need to apply to become Licensed Sponsors under PBS.
Tier 4 Students with unconditional offer of places on relevant courses
Tier 4 applicants must be sponsored by a licensed education provider in the Isle of Man.
A student may work while on the Isle of Man provided he or she has a work permit under the Overseas Students Scheme 2006.
Tier 5 Temporary workers
Tier 5 is intended to allow temporary workers with job offers to work in the Isle of Man. The prospective employer requires a sponsor's license from the Department of Economic Development.
October 1, 2015 Changes - Streamlining The Work Permit System
Changes to the Isle of Man's work permits system came into effect on October 1, 2015 intended to reduce bureaucracy and introduce more flexibility into the work permit rules.
According to the Government, the most important changes are that:
As a result of the changes, the Department is also empowered to exempt a person whose employment would be in the national interest. Furthermore, the DED is upgrading its computer systems so that in future, it can support more online work permit applications.
Exemption For ICT And E-Business Workers
As from March 1, 2016, certain ICT and e-business sector workers are exempt from the Isle of Man's work permit requirements from March 1, to support the island's e-business sector. The exemption applies to those taking up employment lasting at least 12 months with a salary of at least GBP25,000 per year.
For ICT roles, the exemption is only available to those that satisfy one of the following: they have a minimum of 3 years' experience in an ICT role; they have a computer science degree; they have certain technical or vocational qualifications; or they can demonstrate competency at a specified level of the Skills Framework for the Information Age.
For e-business roles, the exemption is available to people with a minimum of 2 years' experience in an e-business position, or those with advanced mathematical, statistical, or data analysis skills, or those with extensive knowledge of e-business systems or processes.
The British-Irish Visa Scheme
In February 2016, the British-Irish Visa Scheme was extended to the Isle of Man, in a move intended to drive further business to the island. As a result of the measure, Chinese and Indian nationals can now travel freely around the United Kingdom, Republic of Ireland, and the Isle of Man using a single visit visa. Previously a Chinese or Indian visitor planning to travel first to Ireland and then on to the UK had to apply in advance for two visas, which required two separate application processes and fees.
Commenting on the move, Annie Taylor, the Isle of Man's Senior Passports, Immigration, and Nationality Officer, said: "The Isle of Man has a close working relationship with the UK on immigration matters and this move makes it easier for Chinese and Indian tourists and short-stay business visitors to include the Isle of Man in their travel itinerary. For example, a Chinese or Indian national visiting Dublin will now be able to travel onward to the Isle of Man without the need for a separate visa. It's hoped this will provide a welcome boost to business and tourism in the island."
However, the British-Irish Visa Scheme applies only to Chinese and Indian nationals traveling on certain short-stay and visitor visas. It does not permit them to work.