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,
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.
Buying property in Portugal
Portugal has long been a popular choice for people, particularly from the colder climates of Northern Europe, looking to purchase a holiday home or a retirement home. Traditionally they have done so using offshore companies, mainly to avoid estate taxes. Unfortunately Portugal, along with some other countries, has made this route considerably less attractive by the imposition of swingeing tax penalties on offshore companies. The magnitude of these penalties can be seen from the examples below,
Yacht and Ship Registration in the Isle of Man
The maritime history of the Isle of Man dates from the eighteenth century and the Island is recognised internationally as an efficient and well- run centre for both registration and management. It was ranked third in the world by Port State Authority in September 2004.
Buy to Let Property Investment
In recent years buy to let has been a popular way of investing in residential property. Stock markets are out of favour with many investors who have seen the values of their portfolios, endowment policies and pension funds shrink, whereas property has generally continued to rise in value. Interest rates are at historically low levels and mortgage finance is readily available on competitive terms from major banks and building societies. This brings property investment within the means of more investors than ever before. In these notes we will take the example of a foreign domiciled person, a non-resident of the United Kingdom, buying a property in London with the benefit of loan finance, but the general principles can apply to many other markets.
