JNB2 - Isle of Man Jurisdiction Note 2006

WHY USE THE ISLE OF MAN?

Isle of Man companies benefit from a zero rate of tax on trading and investment income.  They are also able to register for VAT, and businesses in the Isle of Man are treated by the rest of the EU for VAT purposes as if they are in the UK.

Isle of Man companies are therefore particularly useful for:

• Holding investment portfolios and participations in other companies. This is due to the zero rate of tax on such activities and the lack of withholding taxes on dividend income from such companies.

• Trading within the EU. Due to the zero rate of tax on trading income and the ability to quote an EU accepted VAT number.

• Holding UK commercial property. For VAT purposes the UK and the Isle of Man are treated in the same manner.

• Isle of Man companies wishing to borrow money from banks benefit from being in a well regulated jurisdiction with a public register of mortgages and other charges.

•  As the Isle of Man is a signatory to the Paris Convention on Patents and Trademarks, many intellectual property companies base themselves in the Isle of Man.

The key points  above outline some of the most frequent reasons for the use of Isle of Man companies. Please note it is not a definitive list of reasons for using such companies.

FORMATION OF COMPANIES IN THE ISLE OF MAN

Isle of Man companies can currently be formed and regulated under two separate Acts.

This Jurisdiction Note outlines the formation and regulation of companies as embodied in the Isle of Man Companies Act of 2006.  A second Jurisdiction Note is available which details companies governed by the Isle of Man Companies Act of 1931 (as amended). Please request this second note if you wish to consider both types of Isle of Man company.

1. Incorporation
Incorporation can be effected within three days of company name approval.

2. Company Name
The proposed name must be approved by the Companies Registry. The Company can have its name ending in any of the following:

- Limited
- Ltd
- Public Limited Company
- PLC

3. Capitalisation
A company may be incorporated with a single shareholder. This shareholder need only apply for a single share, which can have a par value of zero. 

4. Shareholders
Companies can be incorporated with only one shareholder. Shareholders need to be recorded at the registered agent of the company. 

5.Nominee Shareholders
These are permitted and can be provided by Dixcart.

6. Minimum Number of Directors
The minimum number of directors is one. Directors do not need to be resident in the Isle of Man. Corporate directors are permitted, however they must be licensed as an Isle of Man corporate service provider or incorporated as the nominee company of an Isle of Man corporate service provider.

7. Secretary
There is no requirement for a company secretary.

8. Registered Agent
A registered agent is required and can be an Isle of Man licensed corporate service provider.

9. Annual Return
There is a requirement to file an annual return. It is the responsibility of the director(s) to prepare the annual return and the responsibility of the registered agent to file the return.

10. Annual General Meeting
There is no requirement to hold an annual general meeting.

11. Accounts
Accounts need not be prepared. However accounting records must be maintained at the address of the Isle of Man registered agent.

A company need not have its accounts audited if it meets two of the three following criteria:

- Its annual turnover is £5.6 million or less
- Its balance sheet total is £2.8 million or less
- Its average number of employees is 50 or fewer

12.  Taxation
A tax return must be prepared and filed at the Isle of Man Treasury.

All Isle of Man companies are now treated as resident companies.  Resident companies are taxed at a rate of 0% on their trading and investment income.  Income derived from land and property situated in the Isle of Man is taxed at a rate of 10% and banks are taxed on their banking business at a rate of 10%.

There is a deemed distribution charge, but this does not apply to non-residents of the Isle or Man or Isle of Man companies owned by non-residents.

13.  VAT
The Isle of Man has a Customs and Excise agreement with the UK. This  means that for VAT, Customs, and most Excise duties, the two territories are treated as one.

The European Union’s VAT Directives instruct other member states to treat transactions involving Isle of Man companies as if the transactions originated in or were intended for the UK.

SUMMARY OF FEES SCHEDULE – ISLE OF MAN COMPANIES

Administration/Time Charges

• Where Dixcart provides directors, full management and administration of the company, day to day management and administration time is charged on a time-occupied basis, in addition to the fixed directors’ fee. It is assumed that the company maintains a bank account.
• The cost of opening a bank account (if applicable) with a local provider as nominated and organised through Dixcart is estimated at £250.
• Time occupied fees will be charged quarterly in arrears. For information on current charge out rates please contact us on 01624 615598 or by email to advice@dixcart.co.im

Where it is agreed that Dixcart provides full management, initial fees of UK £5,055 will be required prior to formation, to cover fixed set up costs, the first year’s annual costs and the provision of directors costs.  Any additional fees for advisory work that was performed in establishing the company will also be required.