Taxation of Isle of Man Companies from April 2006

At the present time a company incorporated in the Isle of Man, owned by non-residents and which complies with the other statutory requirements, is not liable to Isle of Man taxation. Whilst locally trading companies pay tax at 18%, a qualifying offshore company pays a flat annual tax of £475 or £1,000.

The Isle of Man is however required to comply with the E.U. Code of Conduct on Business Taxation and other international initiatives designed to eliminate discrimination between taxpayers. This means, essentially, that the tax treatment of local and offshore companies should be the same. The Island decided some time ago that it would meet its obligations by introducing a zero rate of taxation for all companies except those engaged in certain finance sector activities and the Government has now issued a consultation paper outlining how it is proposed that the new system will operate.

From April 2006 the distinction between offshore and locally resident companies will disappear and companies will be classified as distributing or non-distributing. A distributing company will be one of the following,

? Where the whole of the distributable profit has been charged to tax at the rate of 10% or

? Where the company has distributed a specified minimum of its distributable profit, expected to be 60% for a trading company and 100% for an investment company or

? A company owned wholly by non- residents, regardless of what percentage of profit is actually distributed.

It is this third category of qualification, which is the most important, as it means that companies, incorporated on the Isle of Man but wholly owned by non-residents, will continue to enjoy tax- free status.

Companies will have to apply for distributing status but the exact means by which they will do so has not as yet been decided. The Government has however indicated that companies which have successfully claimed such status may not be required to submit accounts with every tax return providing sufficient information is provided on the return to support the claim.

There are further rules which apply to companies which are wholly or partly owned by Isle of Man residents and these companies will be obliged to calculate the tax payable on that part of the profits applicable to local shareholders and to pay it over to the Treasury.

The new system will accord with the international obligation for the Isle of Man not to discriminate between onshore and offshore companies and enable it to escape the sanctions, which may be invoked against some of the other offshore centres.

The Chesterfield Group provides a full range of trustee, and corporate advisory, formation and management services and invites enquiries. More particulars can be found on our web-site http://www.chesterfield-management.com REF=CH5EZ

In The News:


History Of The Federal Income Tax

The powers of Congress, and the limitations set upon those... Read More

Tax Trap #4 -- The Quagmire of Depreciation

If you are a Small Business Owner or Self-Employed Person,... Read More

Tax Trap #1 -- Waiting to Incorporate: What A Difference A Date Can Make

NOTE: This is the first in a series of 5... Read More

Euro Tax Haven Threat

Media reporting of a new EU savings tax directive has... Read More

Employment Taxes ? Depositing With The IRS

If your business has employees, you must pay employment taxes.... Read More

Small Businesses: Company Car Vs. Personal Mileage Reimbursement In Hurricane Katrinas Wake

With gas prices at an all time high before Hurricane... Read More

Marriage or Divorce ? Check Your Social Security Number

Newlyweds and the recently divorced should make sure that names... Read More

Anticipating Your IRS Refund Can Cost You Plenty

While accountants are reaching for aspirin, millions of Americans are... Read More

How to Donate Your Car to Charity and Get Tax Deduction

Donating your used car to charity is a win-win situation;... Read More

What the Tax Software Companies Dont Want You to Know

Haven't done your taxes yet? No problem. Now there is... Read More

Tax Audits: What Signs Make You More Likely to be Audited by the IRS?

It's a major fear for most Americans: A notice from... Read More

What is a Federal Tax Lien?

A Federal Tax Lien (FTL) is a legal instrument that... Read More

Failure To Pay Employment Taxes ? Penalties

As an employer, you must pay employment taxes if you... Read More

Business Tax Deductions

As we enter mid-March, taxpayers begin to become very interested... Read More

1031 Exchange Rules and Requirements

Following is a reproduction of the IRS's rules and requirements... Read More

Business Tax Loophole: Leasing Assets To Your Corporation

While there are many equally valid reasons to incorporate, saving... Read More

Small Business Tax Deduction - Write-Off Bad Debts

Practically every small business has receivables that it cannot obtain... Read More

Tax Jokes and Quotes

Do you realize that some tax forms ask you to... Read More

Need an Offshore Sales Office in a Tax Free Environment?

The 100 year old investment-banking firm of... Read More

Gambling Income and Expenses - Tax Requirements

Hit a big one? With more and more gambling establishments,... Read More

Keeping Your Own Money ? NOT Handing It Over To The Taxman

Most people trying to make a crust online (or offline... Read More

Some Folks Pay A Lot Less Tax Than Others On Very Same Income?Did You Pay Too Much Tax In 2004?

Someone once remarked, "Next to being shot at and missed,... Read More

How to Check the Status of Your Tax Refund Online

So, you were pleasantly surprised to learn that you are... Read More

The Tax Man Cometh... To Search

You're at your office, or home, and the doorbell rings... Read More

10 Tax Tips to Reduce Costs and Increase Income

No one likes paying tax. Everyone understands that tax is... Read More