Isle of Man - the High-tech, Low-tax Isle that Welcomes Skilled Expats

ExpatBriefing.com Editorial, 20 July, 2018

If you are a highly qualified and experienced IT professional, doubtless your talents are in high demand in many parts of the world. But where to go? You could do worse than consider the Isle of Man, the high-tech, low-tax island which has recently made entry into the information technology easier.

IT Professionals: The Isle of Man Wants You!

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.

As from 1 March 2016, certain ICT and e-business sector workers are exempt from the Isle of Man's work permit requirements, 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 GB£25,000 (US$32,350) per year.

For ICT roles, the exemption is only available to those who 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 competence 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 work permit exemption for skilled workers in the ICT and e-business sectors has been in high demand since itwas introduced two years ago, according to the Government.

Introduction To The Isle Of Man

Situated in the Irish Sea, the Isle of Man is an English-speaking dependency of the British Crown but not part of the United Kingdom. The island spans 52 km from north to south and 22 km from east to west at the widest point, and its population was estimated at approximately 85,000 in 2016. Douglas is the island's administrative and commercial centre and largest town with a population of around 28,000.

The island is politically stable and enjoys parliamentary government without party politics. Its 1,000-year-old parliament, known as Tynwald, presides over the island's domestic affairs, specifically including 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. Brexit has of course subjected the Isle of Man's future relationship to the EU to much uncertainty.

Tynwald has encouraged economic growth by creating a beneficial tax regime and by offering financial incentives to manufacturing and tourism. The Isle of Man is probably best known as an "offshore" financial centre: 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, Tynwald 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, accounting for about 10% of the island's GDP, which was valued at USD6.3bn at purchasing power parity in 2012-13.

The island's currency is the pound sterling and there are no exchange controls. There are frequent flights to a number of UK airports.

Life on 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 (40.8 F) 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 Isle of Man 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 to the UK (especially urban areas), crime is low in the Isle of Man; 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.

Tax Advantages

There are no general capital gains tax, turnover tax, capital transfer tax or stamp duties payable on the Isle of Man. Apart from VAT, the only significant tax is income tax, which has a maximum rate of 20% 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 (6th April to 5th April). 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 2018-19, there is a personal allowance of £13,250 for single persons and £26,500 for jointly-assessed couples. Income tax is then charged at 10% on the next £6,500 (£13,000 for couples) of income, rising to 20% on the remainder. An individual's income tax liability is capped at £150,000 (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 is subject to foreign taxation and proof of the tax paid 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%. Companies holding banking licences and those receiving income from land and property on the Isle of Man (which includes rental income, extraction of minerals and property development) are taxed at 10%.

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.

Other Work Permits And Visa Schemes

The Isle of Man's work permit system is operated and enforced by the Department of Economic Development under the Control of Employment Act 2014. The Manx government is particularly keen to attract highly-skilled and wealthy immigrants, especially if they intend to make an investment in the island.

The EEA states are the 28 member states of the European Union, plus 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. Employers may employ non-Manx individuals from within the European Economic Area (EEA), provided there are no suitable Manx workers available to fill those specific roles.

In June 2010, the Manx 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 2015 Changes – Streamlining the Work Permit System

Changes to the Manx work permit system came into effect on 1 October 2015; they were 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.

Employee Relocation Initiative

In 2018, the Isle of Man's Department for Enterprise introduced the Employee Relocation Initiative. To be eligible, companies must be permanently established on the island, must be expanding its workforce locally and must fulfil the other criteria in the Enterprise Act 2008 (Eligible Business) Regulations 2014. They must also be in eligible sectors: these include financial services, e-commerce and manufacturing.

Eligible businesses will be granted financial aid when recruiting people from outside the island. The maximum amount of aid available is £10,000 per employee. The Department for Enterprise has allocated a total of £2 million to the initiative.

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