Offshore Company Formation: setting up a company in the Isle of Man

Caitlyn Buchanan, 25th July 2019

Taxes are a major burden for small businesses and many entrepreneurs seek ways to reduce taxes and decrease overhead expenses incurred by their businesses. An offshore company formation is a legitimate, legal option to reduce a company’s taxes; the term ‘offshore’ simply means outside of one’s jurisdiction. Therefore, an offshore company is a company which has been established in a different country to where the owners/managers reside.

The Benefits of an Isle of Man Company Formation

Setting up a company in the Isle of Man is a very attractive option for international entrepreneurs looking to reduce the taxes incurred by their business. The Isle of Man offers 0% corporate tax (for both resident and no resident businesses), no capital gains tax, no wealth tax, no stamp duty, no withholding taxes and no taxes on trading or investment income. Additionally, Isle of Man companies are not required to register for VAT until the registration threshold is met; VAT taxable turnover is more than £85,000 in the next 30-day period. Retail business profits above £500,000 and banking business income are taxable at the rate of 10%, while rental or other income from land or buildings on the Isle of Man is taxed at 20%. The Isle of Man is a prime location for an offshore company formation.

Is the Isle of Man Part of the UK?

No, the Isle of Man does not belong to the United Kingdom or the European Union but is rather classified as a British crown dependency. The Isle of Man governs all its internal affairs, such as its law and justice under the supervision of the British Home Office.

However, under the 1979 Customs and Excise Agreement, the Isle of Man is treated as part of the UK for VAT purposes. So, goods imported from the UK to the Isle of Man are not treated as exports, and VAT is charged at the UK VAT rate. The customs agreement between the UK and the Isle of Man effectively treats the two territories as one so that customs duties are not applicable. Under European Union law, the Isle of Man is currently free from any trade restrictions and free trade between the United Kingdom and the British crown dependency status is set to continue after Brexit.

Isle of Man Company Formation Requirements

An Isle of Man company can be incorporated with only one director who does not need to be resident, a single shareholder and as little as one share with no minimum value. An offshore company formation in the Isle of Man needs to file an annual return to the Companies Registry on the Island which must be prepared by the director(s) and submitted by an agent on the Island.

When a non-resident is setting up a company in the Isle of Man, formation agents would require a nominee director to manage and represent the company. Although this is not required by law this is essential for practical compliance and security reasons. For example, it would be very difficult to open a bank account without an Isle of Man a nominee director representing the business. Contact us for our company package pricing which covers all the annual requirements.

Other Benefits for Isle of Man Companies

There are no capital gains tax, wealth tax, stamp duty, or inheritance tax applicable in the Isle of Man. The standard corporation tax rate for residents and non-resident businesses is 0%. Retail business profits above £500,000 and banking business income are taxable at the rate of 10%, while rental or other income from land or buildings on the Isle of Man is taxed at 20%.

Isle of Man companies enjoy other benefits as well; there is a well-established legal system, political stability, and a sophisticated financial and banking industry with no limitations or exchange controls on financial transactions. Additionally, most start-up companies don’t require audited accounts, this is only necessary for companies of a certain size that are above the threshold for audit. The audit threshold is a turnover of more than £5.6 million, balance sheet totals more than £2.8 million, and more than 50 employees.

The Isle of Man is a viable option offering many benefits when considering an offshore company formation. Offshore centres are an integral part of a globalised economy which enabling money to move across borders relatively easily thanks to well-regulated financial institutions. For more information on setting up a company in the Isle of Man please contact the experts at Company Bureau on +353 1 6461625 or e-mail formations@companybureau.ie.

Disclaimer This article is for guidance purposes only. It does not constitute legal or professional advice. No liability is accepted by Company Bureau for any action taken or not taken in reliance on the information set out in this article. Professional or legal advice should be obtained before taking or refraining from any action as a result of this article. Any and all information is subject to change.