Portuguese: A Ilha de Man – Vantagens Para Individuos E Sociedades Comercias

A ILHA DE MAN – VANTAGENS PARA INDÍVIDUOS E SOCIEDADES COMERCIAIS

Considerações

A Ilha de Man oferece um conjunto de infra-estruturas altamente atraentes para sociedades comerciais bem como um ambiente estável, seguro e acessível para indivíduos e famílias.

a ilha acolhe uma série de indústrias diversas dos sectores aeroespacial, bancário, de serviços financeiros, industriais, matricula de navios e aviões, da indústria espacial e da produção cinematográfica.

PORQUÊ ESCOLHER A ILHA DE MAN PARA OS SEUS NEGÓCIOS?

Localização: A Ilha de Man está situada no Mar da Irlanda, a meio caminho entre a costa noroeste da Inglaterra e da Irlanda. Beneficia de estar no mesmo fuso horário do Reino Unido e de ficar a uma hora de Londres de avião, o que contribui para torná-la o local preferido para a incorporação de empresas que não pertencem ao Reino Unido mas que pretendam obter uma listagem no AIM.

Taxa de Imposto sobre Sociedades de 0%: A Ilha de Man aplica uma taxa de 0% sobre o rendimento de sociedades comerciais ai sediadas com a excepção  de empresas no setor bancário ou cujo rendimento derive de imóveis sitos na Ilha de Man. Além disso, a Ilha de Man não tributa mais valias, nem aplica imposto de retenção na fonte ou imposto sobre a transferência de capital social.

Estabilidade política e econômica: em 2014, a Ilha de Man foi classificada como o oitavo país mais rico “per capita” pelo Banco Mundial sendo uma dependência autônoma da Coroa desde 1866. A estratégia econômica adoptada pela Ilha de Man permitiu-lhe beneficiar de trinta e um anos de crescimento econômico ininterrupto. A ilha também possui uma classificação de longo prazo Aa1 pela agencia “Moody’s”.

Localização vantajosa para negócios: a ilha goza de um acordo com a União Européia que permite a circulação de mercadorias dentro da UE sem impostos o que, em conjunto com um acordo sobre impostos alfandegários e de consumo com o Reino Unido, facilita o livre comércio com o Reino Unido. Os cidadãos da UE têm direito a viajar e residir na ilha sem restrições. O Governo da Ilha de Man também assegura um ambiente vantajoso para as empresas.

Subsídios à Deslocação: As empresas que escolham estabelecer-se na ilha têm à sua disposição uma grande variedade de subsidios.

Infraestrutura de classe mundial: a Ilha de Man possui infra-estrutura avançada de telecomunicações, o que atrai organizações relacionadas com as novas tecnologias.

E-gaming: O quadro regulatório da ilha, bastante vantajoso, estebelece um regime de licenciamento pragmático que pretende proteger o consumidor e potenciar o crescimento económico, levou a que empresas de jogos como a Pokerstars e a Microgaming se estabelecessem na Ilha de Man.

“Family Office”: A Ilha de Man tem-se vindo a tornar um local cada vez mais popular para o estabelecimento de escritórios de gestão de patrimónios familiares, ou “family offices”.

FinTech: nos últimos dez anos, o mundo assitiu a uma expansão tecnológica significativa, com uma percentagem cada vez maior das vendas de retalho realizadas pela internet. Muitas indústrias desenvolveram plataformas on-line e chegaram ao mercado novos conceitos em sistemas de pagamento informáticos, bases de dados de marketing e bases de dados de informações de clientes. A infra-estrutura da Ilha de Man fomenta esses tipos de organização.

PORQUE DEVEM INDIVÍDUOS E FAMÍLIAS ESCOLHER A ILHA DE MAN?

A substância é um factor cada vez mais importante no estabelecimento de um negócio internacional. A escolha de uma jurisdição atraente quer para o proprietário da empresa quer para os seus empregados de maior importância, que irão gerir o negócio desde esse local, é vital.

A Ilha de Man é consistentemente classificada como tendo um dos mais altos padrões de vida no Reino Unido e não há restrições à compra de imóveis para aqueles que não nasceram ou cresceram na ilha. Beneficia de uma excelente infra-estrutura e de um forte espírito comunitário, oferecendo educação de excelente qualidade combinada com uma das menores taxas de criminalidade no Reino Unido.

Regime fiscal competitive para individuos

  • A taxa geral de imposto sobre o rendimento na Ilha de Man é de 10%, com uma taxa especial de 20%. Existem também limites de impostos disponíveis para individuos de elevado património.
  • A Ilha de Man não tributa a sucessão ou a transferência de imóveis.

Como pode a Dixcart ajudar?

  1. A Dixcart fornece uma gama completa de serviços fiduciários, desde a incorporação de sociedades até a assistência no estabelecimento de uma rede de escritórios de gestão de patrimónios familiares, ou “family offices”.
  2. A Dixcart possui uma forte rede de contactos entre os sectores profissionais e comerciais da ilha e pode providênciar apresentações a indivíduos relevantes.
  3. A Dixcart opera um “Business Center” situado numa localização privilegiada no principal bairro financeiro e legal da ilha na capital, Douglas. O “Business Center” oferece escritórios a empresas que procurem estabelecer-se na Ilha de Man, beneficiando de sofisticados sistemas informáticos e de comunicação (1 Gbps de conectividade de rede). A Dixcart também pode fornecer uma ampla gama de serviços profissionais quando necessário.
  4. A Dixcart pode assistir indivíduos que pretendam mudar-se para a Ilha de Man. Podemos coordenar pesquisas de propriedades, seleção de escolas outros aspectos práticos.

Informação adicional

Se pretende obter mais informações sobre as vantagens oferecidas pela Ilha de Man, fale com Steve Doyle no escritório da Dixcart na Ilha de Man: steve.doyle@dixcart.com.

A Dixcart Management (IOM) Limited é licenciada pela “Isle of Man Financial Services Authority”

Portugal 1

Why the Madeira International Shipping Register (MAR) is so Attractive and the Advantages of Registering a Vessel in Madeira

Background

The objective of the Madeira International Shipping Register (MAR) is to offer a credible alternative to other international registers. The high quality and safety standards of a conventional register have been maintained within an attractive tax environment designed to encourage inward investment to the island of Madeira. Vessels registered with MAR carry the Portuguese flag and are subject to the International Treaties and Conventions entered into by Portugal.

Over half a million vessels are now registered with MAR and it is ranked the fourth international shipping register in the EU. Four of the largest ship-owners in the world, APM-Maersk, the Mediterranean Shipping Company (MSC), CMA CGM Group and Cosco Shipping, have ships registered with MAR, as recorded by the international analyst firm, Alphaliner.

Recent Developments of MAR

In 2017 a number of significant developments took place, increasing the attractiveness of registering a vessel in MAR:

  • The Madeira Shipping Register was “White Listed” on both the Paris MOU and the Tokyo MOU.*
  • Vessels under the Portuguese flag are included in the Qualship 21 Index of the United States of America. This certificate recognises the exceptional standards of the Register
  • The Korean Register (KR), a member of the International Association of Classification Societies (IACS), was granted authorisation by the Portugal Maritime Authority (DGRM) to deliver statutory services on behalf of the Portuguese flag. This authorisation enables the Korean Register to act as a Recognised Organisation (RO), conducting surveys and audits, and issuing certificates to Portuguese flagged ships, including those in Madeira, to ensure full compliance with SOLAS, MARPOL, ITC, ILL and MLC regulations.

*MOU: Paris Memorandum of Understanding on Port State Control (MoU) and Tokyo (MoU).

Advantages of Registering a Vessel with MAR

The key advantages of ship registration in MAR are detailed below:

  • Shipping companies licenced to operate within MAR benefit from a corporate income tax rate of 5% until 2027. They also enjoy automatic VAT registration and have access to the Portuguese double taxation treaty network.
  • The Register is of a high standard, has EU credibility and full access to EU cabotage.
  • It is not regarded by the International Transport Workers’ Federation as a flag of convenience.
  • There are no nationality requirements for ship owners of vessels registered in MAR and they are not required to have their head office in Madeira; it is sufficient to have local legal representation with adequate powers. Dixcart in Madeira can provide this service.
  • The existence of a flexible mortgage system allows the mortgagor and the mortgagee, by written agreement, to choose the legal system of a particular country that will govern the terms of the mortgage.
  • Registration fees are competitive and there are no annual tonnage taxes.
  • Generally, the captain and 50% of the crew of the ship must be “European”. This includes nationalities such as Polish, Russian and Ukrainian, as well as citizens of Portuguese-speaking countries, which allows for flexible manning.
  • Crew wages are exempt from income tax and social security charges in Portugal.
  • Temporary registration is allowed by law (bareboat charter: “In” and “Out”).
  • Eight International Classification Societies are recognised in Portugal. MAR can delegate some of its functions to these societies. This can be simpler and more convenient for ship owners.

Additional Tax Advantages for Shipping Companies in Madeira

In addition, to the reduced corporate tax rates, Madeira shipping companies also enjoy exemption from withholding taxes on the distribution of dividends, exemption from withholding taxes on interest, royalties and service fees paid to non-residents, and exemption from capital duty, notary and registration fees. If certain requirements are met, shipping companies may also be exempt from capital gains tax when subsidiaries are sold.

Shipping companies can benefit from the Double Taxation Treaties with Portugal and Investment Protection Treaties signed by Portugal.

Summary

The approach adopted by MAR allows for flexibility. Depending on the circumstances, the ship can be registered on MAR with the shipping company licensed in another jurisdiction, OR the shipping company can be registered in Madeira with the vessel registered elsewhere, OR both the vessel and the shipping company can be licensed in Madeira. Each of these options offer various advantages.

How Can Dixcart Help?

Dixcart has extensive experience working with the owners and operators of commercial vessels as well as pleasure and commercial yachts. We can assist with the permanent and/or bareboat registration of vessels, re-flagging, mortgages, and the establishment of corporate owning or operational structures for the holding or management of vessels.

Additional Information

If you require additional information regarding the International Shipping Register of Madeira and the tax efficiencies available to ships owned by Portuguese companies registered in MAR, please contact Gisela Martins at the Dixcart office in Madeira: advice.portugal@dixcart.com

See our Air Marine service.

Move out of the UK

A Consideration of Shipping Regimes in the Jurisdictions of Cyprus, the Isle of Man, Madeira (Portugal) and Malta

Dixcart can provide clients with a number of alternative ship registration solutions.

This note provides a brief overview of the shipping regimes in Cyprus, the Isle of Man, Madeira (Portugal) and Malta. More detailed information is available on request regarding shipping in each of the jurisdictions considered in this Article.

Cyprus

Cyprus is a major ship management centre attracting foreign ship owners through the highly favourable tax provisions available for shipping companies on the island. It is recognised as one of the most accessible registries in the EU.

The Cyprus shipping registry has not only grown in size in the last two decades but has also made a considerable effort to increase the quality of its fleet and related services. As a result the Cyprus flag is now classified on the white list of the Paris and Tokyo MOUs*.

Key advantages relating to the shipping sector in Cyprus include:

  • Cyprus exempts international transport services from value added tax when these services are supplied outside of the EU.
  • The income of officers and crew on Cypriot registered vessels is not subject to income tax.
  • Cyprus offers a competitive rate of corporate income tax at 12.5%.
  • There is no estate duty on the inheritance of shares in a Cyprus shipping company and no stamp duty is payable on ship mortgage deeds.
  • A new tonnage tax system was enacted in May 2010. The tax system is in full compliance with EU requirements. The tonnage tax (TT) is calculated on the net tonnage of the ship according to a broad range of band rates proscribed in legislation. The Cypriot approved tonnage tax system provides for TT on the net tonnage of the vessel rather than corporation tax on the actual profit. This allows for mixed activities within a group, shipping activities are subject to TT and other activities are subject to 12.5% corporation tax.
  • Cyprus also offers a series of tax advantages which are applicable to ship and ship management companies: exemption from tax of dividend income (subject to limited conditions), exemption from tax on profits from foreign permanent establishments, and exemption from withholding tax on the repatriation of income (dividends, interest and nearly all royalties).

The Isle of Man

The Isle of Man Registry is a Category One British Registry, and can therefore maintain international safety convention status for vessels of all sizes and classes. As a British ship, an Isle of Man flagged vessel is entitled to protection and assistance from the British Royal Navy and access to British consular services worldwide.

The Isle of Man shipping registry has a reputation for quality and for a customer focused approach:

  • The Isle of Man registry is on the Paris and Tokyo MOU white lists. It is recognised by the United States Coast Guard as a Qualship 21 flag and it is at the top of the industry’s flags by country performance table.
  • The ship registry in the Isle of Man offers in-house expertise and availability 24 hours of every day and provides a fast response to any queries.
  • The Isle of Man registry offers reasonable costs. There are no annual tonnage dues and in terms of tax obligations, corporate income tax in the Isle of Man is zero.
  • There is flexibility in the requirements for registered owners, with a comprehensive list of accepted countries for ownership.
  • The Isle of Man shipping registry allows ships to demise-in, enabling a transfer of registry and also allows ships to register on a demise charter registry other than in the Isle of Man (demise-out).
  • It is a flag of choice for merchant vessels and commercial yachts and it is not designated as a flag of convenience.

Dixcart Management (IOM) Limited is licensed by the Isle of Man Financial Services Authority  

Madeira (Portugal)  

The International Shipping Register of Madeira (MAR) was established in 1989 as part of the Madeira International Business Centre (“MIBC”) “package” of taxation benefits. Vessels registered with MAR carry the Portuguese flag and are subject to the International Treaties and Conventions entered into by Portugal.

The key advantages of ship registration in MAR are detailed below:

  • The register is of a high standard, has EU credibility, is not regarded as a flag of convenience and is included in the Paris MOU white list.
  • There are no nationality requirements for ship-owners of vessels registered in MAR. They are not required to have their head office in Madeira. It is sufficient to have local legal representation with adequate powers.
  • Only 30% of the safe manning must be “European”. This includes nationalities such as Polish, Russian and Ukrainian, as well as citizens of Portuguese-speaking countries. This requirement may also be derogated if duly justified. This allows for flexible manning.
  • Crew wages are exempt from income tax and from social security charges in Portugal.
  • The existence of a flexible mortgage system allows the mortgagor and the mortgagee, by written agreement, to choose the legal system of a particular country that will govern the terms of the mortgage.
  • Competitive registration fees, there are no annual tonnage taxes.
  • Eight International Classification Societies are recognised in Portugal. MAR can delegate some of its functions to these societies. This can be simpler and more convenient for ship owners.
  • Temporary registration is allowed by law (bareboat charter: “In” and “Out”).
  • Shipping companies licensed to operate within MAR benefit from a corporate income tax rate of 5% until 2027. They also enjoy automatic VAT registration and have access to the Portuguese double taxation treaty network.

Malta

Malta provides a reputable flag and ensures compliance with international and European standards. Registration of vessels under the Maltese flag take place in two stages. A vessel is provisionally registered for a six month period. During this provisional registration period, the owner is required to submit additional documentation and the vessel is then permanently registered under the Maltese flag.

There are a number of attractive tax reasons to consider ship registration in Malta:

  • The standard corporate tax rules do not apply to shipping activities in Malta, due to a specific exemption. No tax on profits from shipping activities is therefore due. Following recent amendments this exemption has also been extended to ship management companies.
  • Shipping operations are subject to an annual tax comprising an annual registration fee and a tonnage tax based on the net tonnage of the vessel. The rates of tonnage tax are reduced according to the age of the vessel.
  • There is an exemption from stamp duty in Malta on the registration or sale of a ship, shares relating to a licensed shipping organisation and the registration of a mortgage relating to a ship.
  • Individuals not resident in Malta who are officers or employees of a licensed shipping organisation, and the organisation that they work for, are exempt from social security contributions.

Dixcart Shipping Services

Dixcart can assist in all aspects of registering a ship in Cyprus, the Isle of Man, Madeira and Malta.

Services include the incorporation of the owner entity, coordinating the appropriate corporate and tax compliance, and registration of the vessel.

*White List Paris and Tokyo MOUs: Flags securing the highest rating in relation to the Memorandum of Understandings on Port State Control.

Additional Information

If you would like additional information on this topic, please see our Air Marine page or speak to your usual Dixcart contact or to:

Updated September 2018

New Substance Requirements for Isle of Man Companies – Effective January 2019

The Isle of Man Treasury has published a draft of the proposed Income Tax (Substance Requirements) Order 2018. This draft Order will, once final, and if approved by Tynwald (in December 2018), have effect in respect of accounting periods commencing on or after 1 January 2019.

This means that from January 2019, companies engaging in “relevant activities” will have to demonstrate that they meet specific substance requirements, to avoid sanctions.

This Order is in response to a comprehensive review that was carried out by the EU Code of Conduct Group on Business Taxation (COCG) in order to assess over 90 jurisdictions, including the Isle of Man (IOM) against standards of:

– Tax transparency;

– Fair taxation;

– Compliance with anti-BEPS (base-erosion profit shifting)

The review process took place in 2017 and although the COCG were satisfied that the IOM met the standards for tax transparency and compliance with anti-BEPS measures, the COGC raised concerns that the IOM, and other Crown Dependencies did not have:

“A legal substance requirement for entities doing business in or through the jurisdiction.”

High Level Principles

The purpose of the proposed legislation is to address the concerns that companies in the IOM (and other Crown Dependencies) could be used to attract profits that are not commensurate with economic activities and substantial economic presence in the IOM.

The proposed legislation therefore requires relevant sector companies to demonstrate they have substance in the Island by:

  • Being directed and managed in the Island; and
  • Conducting Core Income Generating Activities (CIGA) in the Island; and
  • Having adequate people, premises and expenditure in the

Each of these requirements is discussed in further detail below.

The IOM’s Response

In late 2017, along with many other jurisdictions facing potential blacklisting, the IOM committed to address these concerns by the end of December 2018.

Due to identical concerns being raised in Guernsey and Jersey, the governments of the IOM, Guernsey and Jersey have been working closely together to develop proposals to meet their commitments.

As a result of the work published in Guernsey and Jersey, the IOM has published its legislation and limited guidance, in draft. Please note further guidance will be forthcoming in due course.

The legislation is similar across the three jurisdictions.

The remainder of this article focuses specifically on the IOM draft legislation.

The Income Tax (Substance Requirements) Order 2018

This Order will be made by the Treasury and is an amendment to the Income Tax Act 1970.

This new legislation sets out to address EU Commission and COCG concerns by way of a three-stage process:

  1. To identify companies carrying out “relevant activities”; and
  2. To impose substance requirements on companies undertaking relevant activities; and
  3. To enforce the substance

Each of these stages and their ramifications are discussed below.

Stage 1: To identify companies carrying out “relevant activities”

The Order will apply to IOM tax resident companies engaged in relevant sectors. The relevant sectors are as follows:

a. banking

b. insurance

c. shipping

d. fund management (this does not include companies that are Collective Investment Vehicles)

e. financing and leasing

f. headquartering

g. operation of a holding company

h. holding intellectual property (IP)

i. distribution and service centres

These are the sectors identified as a result of the work, by the Organisation for Economic Cooperation and Development’s (OECD) Forum on Harmful Tax Practices (FHTP), on preferential regimes. This list represents the categories of geographically mobile income i.e. these are the sectors which are at risk of operating and deriving their income from jurisdictions other than those in which they are registered.

There is no de minimus in terms of income, the legislation will apply to all companies carrying on relevant activities where any level of income is received.

A key determinant is tax residence and the Assessor has indicated that existing practice will prevail, i.e. the rules set out in PN 144/07. Therefore where non-IOM incorporated companies are engaged in relevant sectors they will only be brought within the scope of the Order if they are IOM tax resident. This is clearly an important consideration: if resident elsewhere the rules relevant to that country of residence are likely to be the binding rules.

Stage 2: To impose substance requirements on companies undertaking relevant activities

The specific substance requirements vary by relevant sector. Broadly speaking, for a relevant sector company (other than a pure equity holding company) to have adequate substance it must ensure that:

a. It is directed and managedin the island.

The Order specifies that the company is directed and managed* in the Island. Regular board meetings should take place on the Island, there must be a quorum of directors physically present at the meeting, strategic decisions must be made at the meetings, the minutes of the board meetings must be kept on Island and the directors present at these meetings must have the necessary knowledge and expertise ensure that the board can discharge its’ duties.

* Note that the test for “directed and managed” is a separate test to the “management and control” test which is used to determine the tax residence of a company. The aim of the directed and managed test is to ensure that there are an adequate number of Board meetings held and attended in the Island. Not all Board meetings need to be held on Island, we discuss the meaning of “adequate” later in this article.

b. There is an adequate number of qualified employees in the Island.

This stipulation appears to be rather vague as the legislation specifically states that the employees do not need to be employed by the company, this condition focuses on there being an adequate number of skilled workers present on Island, whether or not they are employed elsewhere does not matter.

In addition, what is meant by ‘adequate’ in terms of numbers is very subjective and for the purpose of this proposed legislation, ‘adequate’ will take its ordinary meaning, as discussed below.

c. It has adequate expenditure, proportionate to the level of activity carried on inthe Island.

Again, another subjective measure. It would, however, be unrealistic to apply a specific formula across all businesses, as each business is unique in its own right and it is the responsibility of the Board of Directors to ensure that such conditions are met.

d. It has adequate physical presence in the Island.

Although not defined, this is likely to include owning or leasing an office, having ‘adequate’ number of staff, both administrative and specialist or qualified staff working in the office, computers, telephone and internet connection etc.

e. It conducts core income-generating activity in the Island

The Order attempts to specify what is meant by ‘core income-generating    activity’ (CIGA) for each of the relevant sectors, the list of activities are intended as a guide, not all companies will carry out all of the activities specified, but they must carry out some in order to comply.

If an activity is not part of the CIGA, for example, back office IT functions, the company may outsource all or part of this activity without there being an effect upon the company’s ability to comply with the substance requirement. Likewise, the company may seek expert professional advice or engage specialists in other jurisdictions without effecting its compliance with the substance requirements.

In essence, CIGA ensures that the main operations of the business, i.e. the operations which produce the bulk of the income are carried out in the Island.

Outsourcing

Further to that mentioned above, a company may outsource, i.e. contract or delegate to a third party or group company, some or all of its activities. Outsourcing is only a potential issue if it relates to CIGA. If some, or all, of the CIGA are outsourced, the company must be able to demonstrate that there is adequate supervision of the outsourced activity and that the outsourcing is to an IOM businesses (which themselves have adequate resources to perform such duties). Precise details of the outsourced activity, including, for example, timesheets must be kept by the contracting company.

The key here is the value that the activities outsourced generate, if CIGA.  In some instances, for example, outsourcing coding activities, very little might be generated in terms of value, but it could be design, marketing and other activities carried out locally that are integral to value creation. Companies will need to look closely at where the value comes from, ie who generates it to assess whether outsourced activities are an issue.

“Adequate”

The term ‘adequate’ is intended to take its dictionary definition:

“Enough or satisfactory for a particular purpose.”

The Assessor has advised that:

“What is adequate for each company will be dependent upon the particular facts of the company and its business activity.”

This will vary for each relevant sector entity and the onus is on the relevant company to ensure that it maintains and retains sufficient records which demonstrate that it has adequate resources in the Island.

Stage 3: To enforce the substance requirements

The Order provides the Assessor with the power to request any information required to satisfy her that a relevant sector company meets the substance requirements. Where the Assessor is not satisfied that the substance requirements have been met for a particular period, sanctions will apply.

Verification of Substance Requirements

The draft legislation provides the Assessor with the power to request further information from a relevant sector company in order to satisfy herself that the substance requirements have been met.

Failure to comply with the request can result in a fine not exceeding £10,000. Where the Assessor is not satisfied that the substance requirements have been met, sanctions will apply.

High-risk IP Companies

Generally speaking, the designation ‘high-risk IP companies’ refers to companies holding IP where (a) the IP has been transferred into the Island post-development and/ or the main utilisation of the IP is off-Island or (b) where IP is held on Island but the CIGA are carried out off-island.

As the risks of profit shifting are considered to be greater, the legislation has taken a rather hard approach to high risk IP companies, it takes the position of ‘guilty unless proven otherwise’.

High-risk IP companies will have to prove for each period that the adequate substance requirements in respect of conducting core income-generating activity have been met in the Island. For each high risk IP company, the tax authorities of the IOM will exchange all of the information provided by the company with the relevant EU Member State authority where the immediate and/or ultimate parent and beneficial owner is/are resident. This will be in accordance with the existing international tax exchange agreements.

“To rebut the presumption and not incur further sanctions, the high risk IP company will have to provide evidence explaining how the DEMPE (development, enhancement, maintenance, protection and exploitation) functions have been under its control and this had involved people who are highly skilled and perform their core activities in the Island”.

The high evidential threshold includes detailed business plans, concrete evidence that decision making occurs in the Island and detailed information regarding their IOM employees.

Sanctions

In line with the tougher approach taken towards IP companies detailed above, sanctions are somewhat harsher for such companies.

Whether or not the substance requirements have been met, in accordance with international arrangement, the Assessor will disclose to a relevant EU tax official any relevant information concerning a high-risk IP company.

If a high-risk IP company is unable to rebut the presumption that it has failed to meet the substance requirements, the sanctions are as follows, (stated by the number of consecutive years of non-compliance):

– 1st year, a civil penalty of £50,000

– 2nd year, a civil penalty of £100,000 and may be struck off the company register

– 3rd year, strike the company off the company register

If the high-risk IP company is unable to provide the Assessor with any additional information requested, the company will be fined a maximum £10,000.

For all other companies engaged in relevant sectors (other than high risk IP), the sanctions are as follows, (stated by the number of consecutive years of non-compliance):

– 1st year, a civil penalty of £10,000

– 2nd year, a civil penalty of £50,000

– 3rd year, a civil penalty of £100,000 and may be struck off the company register

– 4th year, strike the company off the company register

For any year of non-compliance of a company operating in a relevant sector, the Assessor will disclose to an EU tax official any relevant information which relates to the company, this could represent a serious reputational risk to the company.

Anti-avoidance

If the Assessor finds that in any accounting period a company has avoided or attempted to avoid the application of this Order, the Assessor may:

– Disclose information to a foreign tax official

– Issue to the company a civil penalty of £10,000

A person (note that “a person” is not defined within this legislation) who has fraudulently avoided or seeks to avoid the application is liable to:

– On conviction: custody for a maximum of 7 years, a fine or both

– On summary conviction: custody for a maximum of 6 months, a fine not exceeding £10,000,or both

– Disclosure of information to a foreign tax official

Any appeals will be heard by the Commissioners who may confirm, vary or reverse the Assessor’s decision.

Conclusion

Companies operating in relevant sector industries are now under pressure to ensure that they comply with the new legislation which will commence at the start of 2019.

This will have a significant affect upon many IOM businesses who have only a short amount of time to demonstrate to the authorities that they are compliant. The potential penalties of non-compliance may cause detrimental reputational risk, fines of up to £100,000 and could even cause a company to eventually be struck off, after potentially, as little as two years of continuous non-compliance for high risk IP companies and three years of non-compliance for other relevant sector companies.

Where does this leave us?

All companies must consider whether they fall within the relevant sectors, if not then there are no obligations falling upon them by this Order. However, if they are in a relevant sector then they will need to assess their position.

Many companies will be easily able to identify whether or not they fall within a relevant sector and companies managed by CSPs may need to assess whether they have the necessary substance.

What might change?

We are on the brink of Brexit and, to date, much of the discussions have taken place with the EU commission and the draft legislation has been reviewed by them; however, the COCG will only meet to discuss such matters as blacklisting in February 2019.

It therefore remains to be seen whether the COCG agree that the proposals go far enough. What is clear, is that this legislation is here to stay in some shape or form and therefore companies need to consider their position as soon as possible.

Reporting

The earliest reporting date would be accounting period ended 31 December 2019 and therefore reporting by 1 January 2020.

Corporate tax returns will be amended to include sections which will gather the information in relation to the substance requirements for companies operating within relevant sector industries.

How can we help?

If you think that your business may be affected by the new legislation, it is important that you begin assessing and taking appropriate action now. Please contact the Dixcart office in the Isle of Man to discuss substance requirements in more detail: advice.iom@dixcart.com.

Dixcart Management (IOM) Limited is licensed by the Isle of Man Financial Services Authority.