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Isle of Man Focus

ExpatBriefing.com Editorial
11 December, 2014


As reported by sister publication Lowtax.net on December 4, 2014, international corporate services provider Dixcart has published an article highlighting the benefits of immigrating to the Isle of Man. This feature provides a brief overview of the island, its tax system and visa types.


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 kilometres 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 centre, 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 defence 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 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 centre, 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.


Tax Advantages

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% 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 6 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 2014/15, income tax is charged at 10 percent on the first GBP10,500 of income (after a personal allowance of GBP9,500 for single persons and GBP19,000 for jointly-assessed couples), rising to 20 percent on the remainder.

An individual's income tax liability is capped at GBP120,000 (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 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 licences 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 years 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 etc

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 licence from the Department of Economic Development.


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 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.


Further Reading

More detailed information about the Isle of Man's business sectors and tax laws can be found in the Isle of Man section of Lowtax.net.




 

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