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:

Fuel taxes lowest in state: CM  The Shillong Times

Truly Bizarre Taxes: The Tax on Illegal Drugs

One can never underestimate the enthusiasm that politicians have for... Read More

History Of The Federal Income Tax

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

Car Donation: An Easy Way to Support Your Favorite Charity and Get a Tax Deduction

Most people look forward to getting their tax return, but... Read More

Electronic Commerce Taxation and Pakistan

Assume a buyer in Pakistan downloads software from the Internet... Read More

Euro Tax Haven Threat

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

State Tax Information

All states also have their own tax system. Typically there... Read More

Employment Taxes ? What Are They?

If you have employees, you are responsible for paying a... Read More

IRS Statute of Limitations: Do Taxes Ever Expire?

Many Americans believe that an IRS debt is a debt... Read More

Section 179 ? Tax Relief From Depreciation Rules

"Depreciation." For business owners, this word is the one most... Read More

How to Maximize Your Home Business Tax Deductions for 2005

Someone once said, 'the best way to calculate your taxes... Read More

Taxation of Forgiven Debt: The 1099C & You

Often people fall on hard times and stop paying on... Read More

How Likely Are You To Be Audited?

Statistics for IndividualsUnfortunately, the IRS increased its rate of auditing... Read More

Insider Guides to IRS Audits!

Ever wish that, as a business owner, you knew exactly... Read More

Requirements To Produce Tax Information (Whats Up With That?)

"What we've got here is a failure to communicate." ... Read More

Tax Jokes and Quotes

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

Tax Trap #4 -- The Quagmire of Depreciation

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

How to Reduce the Estate Tax Using the A-B Revocable Living Trust

In a past article I relayed the plight of the... Read More

Navigating The Internet Sales Tax Laws

QUESTION: I have been contacted by my local city... Read More

Are You Overpaying Taxes If You Use Tax Preparation Software?

For many business owners the answer to this quandary is... Read More

A Taxing Investment

April 15 - The most dreaded day of the year... Read More

Small Business Tax Deduction - Write-Off Bad Debts

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

Save Money on Taxes - Double Your Income Now With Tax Saving Tips on Deductions

Adding Your First Additional Stream of IncomeMost new wealth builders... Read More

Corporations Failing To Claim AMT Exemption Overpay Taxes By $11,000

Does your incorporated business pay alternative minimum tax ["AMT]? If... 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

Hurricane Katrina ? How To Use Your Business Loss To Get A Refund on 2004 Taxes

With the massive losses caused by Katrina, the economy of... Read More