Offshore Jurisdiction Review: Isle of Man

Tucked between the islands of Britain and Ireland in the middle of the Irish Sea, this little island has a lot to offer the international financial sector.

The Isle of Man today is one of three self-governing crown dependencies, the other two being the Bailiwicks of Guernsey and Jersey. It has a relatively diversified economy with international finance, tourism, and igaming (online gambling) being key.

Isle of Man Companies and Entities

Company formations are usually processed quickly, often within two or three days. Delays are limited to the service provider performing due diligence on the client (you) or—rarely—delays within the government.

Isle of Man imposes naming limitations not often seen elsewhere. The word “Group” may only appear in a company’s name if the company can be proven that it will own a group of related companies. The word “Holdings” is also limited and can only appear if the company owns at least 51% of another company. Names that include words and phrases that imply international or large-scale operations (such as “International,” “Global,” “Worldwide,” and “Multinational”) may also be scrutinized and require justification.

Excluding banking, insurance, and domestic realty, there is a 0% corporate tax rate. The value-added tax (VAT) stands at 20%, with a reduced rate of 5% applicable to hotels and property maintenance. The VAT threshold is £81,000.

Formation costs for Isle of Man companies are relatively high, often starting at around £3,000 for the first year and £1,500-£2,000 annually for upkeep.

An optional but common cost is to have local management of the company. The cost for this varies from a few to several thousand pounds per year.

Compared to many other jurisdictions, the Isle of Man is often used to form companies that qualify as resident so as to legally avoid tax liability elsewhere. This is a matter to be discussed with a tax advisor.

Isle of Man Foundations

As recently as 2012, the Isle of Man enacted legislation allowing for foundations to be formed. A foundation is, roughly speaking, a hybrid of a trust and a company. Foundations are often formed alongside trusts for charitable or asset-protection reasons.

Foundations are dictated and formed based upon its rules and its instrument. The “instrument” is comparable to a company’s memorandum in that it stipulates the foundation’s name, address, and the object of the foundation. Rules dictate how the foundation is to be run; the object specifies the goal or purpose for which the foundation was established.

Unlike trusts, foundations are in and of themselves not confidential. However, the rules of the foundation are not subject to public record. A foundation can be specifically formed so as to prevent information to be disclosed to the beneficiaries, in order to enable the foundation to be run without interference.

Isle of Man Banking

Practically all British banks are present on the Isle of Man, as well as a number of foreign banks.

Account opening for nonresidents is almost never done in person on the Isle of Man; all banks accepting account opening remotely or by a visit to a branch of the bank in another location.

Private banking is the primary service offered to nonresidents. Minimum deposits are fairly humble, rarely going as high as £100,000, but this of course varies and is negotiable.

Corporate accounts are available, but companies registered in disreputable jurisdictions will find it challenging to open an account without good justification and thorough vetting. Few banks enforce any minimum deposit or balance and instead look at each client on a case-by-case basis.

Trusts and foundations are accepted with open arms.

Personal accounts aren’t commonly opened for nonresidents. Standard Bank and Lloyds have been known to do it, but they are very selective about it.

Because nearly all the banks present on the Isle of Man are large international banks, the quality and sophistication of services are generally very high.

Fees for typical day-to-day banking are relatively low.

The Isle of Man depositors’ compensation scheme (DSC) is the island’s deposit insurance. It insures up to £50,000 per person per bank, but there are stipulations in place relieving the DSC from obligation to pay in a timely manner in case of a very large bank failing.

Living on the Isle of Man

If you can stand the relative isolation and poor weather (remember, it’s right in the middle of the United Kingdom and Ireland), life on the Isle of Man can be very comfortable.

Infrastructure is very strong, ranging from the quality of getting around to health care to utilities. A couple of strategically placed cables across the Irish Sea have given the Isle of Man Internet capacity comparable to even mainland Europe.

Crime is virtually unheard of.

Personal taxation is low, but normal income tax is not zero (unless you earn less than £9,300 per annum). Income over £19,800 is subject to 20% tax, but there’s a cap of at most £120,000 tax paid per year.

The Isle of Man does not tax capital gains, wealth, and inheritance. There is no stamp duty.

EU and EEA citizens can relocate to the Isle of Man and take up work freely. Swiss nationals are included in this group despite Switzerland not being an EU or EEA member.

Other nationals face much stricter requirements. Highly advanced and sought-after skills which cannot be satisfied by Isle of the Man nationals are one of few ways non-EU/EEA/Swiss nationals have of migrating to the Isle of Man.

Finding a place to live can be difficult, but rental prices are generally affordable. A comfortable apartment near the center of Douglas can be found for under £1,200 per month.

The Isle of Man issues its own passports, which perhaps counterintuitively do not mention the United Kingdom, but do mention the European Union.

Conclusion

The Isle of Man is a reputable, transparent, and stable tax haven.

EU, EEA, and Swiss citizens who can tolerate the aforementioned isolation and poor weather may find the Isle of Man to be a veritable business paradise, especially for high earners as income over £600,000 is free of tax due to the tax cap.

Banking is one of the island’s main sources of income and therefore of high quality. The banking sector can be enjoyed equally by citizens from both within and outside of EU, EEA, and Switzerland.

Editor’s Note: Things can change quickly. New options emerge, while others disappear. This is why it’s so important to have the most up-to-date and accurate information possible. That’s where International Man comes in. Be sure to check out our free special reports to keep up with the latest on the best international diversification options to maximize your personal freedom and financial opportunity.

The information in this article is based on Streber’s personal experiences and has not been independently verified. As always, do your own due diligence.


Streber works as a consultant and director for a wide range of companies and has broad experience in offshore banking, offshore incorporation (formation and maintenance of offshore companies), taxation, privacy, ecommerce, merchant accounts, online payments, and all other things the privacy-minded entrepreneur might find interesting. You can read Streber’s blog here.

Tags: tax haven, offshore company, offshore banking, isle of man,