Formation of Companies in the Isle of Man Companies Act 1931
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.
- Moody’s Investment – 23 October 2020 – The Isle of Man’s (IoM, Aa3 stable) credit profile reflects the very high wealth levels, which provide a significant buffer against shocks. The IoM has a long track record of strong GDP growth, with very low volatility. Fiscal policies are forward-looking and prudent, exemplified by the large fiscal buffers accumulated over many years and status as a whitelisted jurisdiction. Moreover, the IoM has no direct debt. Linkages between the IoM and the United Kingdom (UK, Aa3 stable) are substantial; these also fortify the IoM’s institutional strength.
- 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 1931 (as amended). A second Jurisdiction Note is available which details companies governed by the Isle of Man Companies Act of 2006. Please request this second note if you wish to consider both types of Isle of Man company.
Standard incorporation of a Company occurs within 48 hours of receipt of the relevant documents to the Isle of Man Registry, however for an additional fee companies can be incorporated in 2 hours or “while you wait”.
- Company Name
The proposed name must be approved by the Companies Registry. The Company can have its name ending in any of the following:
- Public Limited Company
Companies may be incorporated with a single share, which can have a par value as low as one pence. There are thereforefe no thin capitalisation rules.
Companies can be incorporated with only one shareholder. Shareholders need to be recorded at the registered office of the company and at the Companies Registry.
- Nominee Shareholders
These are permitted and can be provided by Dixcart.
- 6. Minimum Number of Directors
The minimum number of directors is two. Directors do not need to be resident in the Isle of Man.
A company secretary is required. The secretary does not need to be resident in the Isle of Man.
- Registered Office
The registered office must be situated in the Isle of Man a service of which Dixcart can provide.
- Annual Return
There is a requirement to file an annual return.
Accounts must be prepared but these do not need to be filed with the Companies Registry.
- Audit of Accounts
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
A tax return must be prepared and filed at the Isle of Man Treasury. These are not publicly available.
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%.
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 businesses as if the transactions originated in or were intended for the UK.
- Beneficial Ownership Register and Nominated Officer
The Isle of Man operates a non-public Beneficial Ownership Register and a nominated officer is required for each entity, a service which can be provided by Dixcart. The register is only accessible by Isle of Man regulatory bodies and/or law enforcement agencies for a permitted purpose. It is not available to the public.
Dixcart Management (IOM) Limited is licensed by the Isle of Man Financial Services Authority