Isle of Man

Taxation System

The Isle of Man has low rates of personal income tax (ranging from 0% with a higher rate of 20%) and generous personal allowances and allowable deductions.

There are no capital taxes such as Capital Gains Tax, Inheritance Tax, Gift Tax or Wealth Tax.

Companies pay income tax on profits unless they are exempt. Exemption is granted on payment of a flat fee and can only be applied for by companies that are owned by non-island residents.

This has led to criticism from various bodies as an "unfair tax practice", specifically on the grounds that non-residents are treated differently from residents. The Isle of Man Government has reacted to this by abolishing tax exempt companies with effect from 5th April 2007 and initiating a "zero tax strategy". This has gradually reduced the tax charged on the profits of various categories of companies to nil, and from 6 April 2006 companies are treated as resident for tax purposes and the rate of tax charged on profits is nil (except for licensed deposit-takers and certain specified trades who will pay tax at the rate of 10% on the first £1,000,000,000 and 15% thereafter).

This strategy has been successful in addressing the criticisms and has placed a number of competitor jurisdictions in the situation where they will have to follow suit. However, the Island is the first jurisdiction to achieve this status and it will be some years before some other jurisdictions will be able to do the same as they do not have the benefit of the significant revenues that the Island enjoys, particularly from indirect taxation such as VAT.