Individual income tax rates in Isle of Man are as follows:
Taxable Income (£) Tax Rate
0 - 10,500 10%
0 - 21,000 for jointly assessed married couples 10%
Above 10,500 or above 21,000 as applicable 20%
In addition, a personal allowance of £9,300 (£18,600 for jointly assessed married couples) is also granted. The 10% tax rate and the above personal allowances are not available to non-resident individuals.
There is no tax in the Isle of Man on gifts and no inheritance tax liability for the estates of Isle of Man resident individuals.
A Tax Cap was introduced for Isle of Man resident individuals in 2006/07. Following the Tax Cap, an Isle of Man resident individual's income tax liability could not exceed £100,000 irrespective of their worldwide income.
The Tax Cap has been since been raised to £115,000 for 2010/11.
Manx income tax is payable by Isle of Man resident individuals on their worldwide income from all sources. Non-resident individuals are only required to pay Isle of Man income tax on Isle of Man sourced income excluding income from approved financial institutions.
An individual is regarded as a resident in the Isle of Man if he spends an aggregate of six months in any tax year in the Isle of Man. In addition, an individual who visits the Isle of Man over four or more consecutive years for an average of three months in each year will also be considered an Isle of Man resident.
Income tax is assessable on income less any allowable deductions. The rules for allowable deductions for individuals engaged in a trade are similar to those for companies. In addition, individuals are able to take advantage of deductions in respect of pension premiums, generous personal allowances and interest paid to an Isle of Man lender of up to £10,000 per person per annum.
Employees have tax deducted from each salary and wage payment by their employers under the Income Tax Instalment Payments (ITIP) scheme.
The basis of assessment for individuals changed with effect from 5 April 2004. Selfemployed individuals and individuals with income other than salaries now pay income tax on a current year basis within 30 days of the issue of an assessment. A payment on account is made based on 105% of the previous year's liability (less ITIP) which is payable by 6 January in the year of assessment.
With effect from 6 April 2006, the income of a married woman is no longer automatically aggregated with that of her husband. Wives are now taxed as separate individuals. However, a couple can elect to be jointly assessed. If they do so, they will be jointly assessed on both their incomes with both personal allowances and 10% bands being available in the joint assessment. Where, immediately prior to 6 April 2006, husband and wife were jointly assessed, they will be deemed to have made the election to continue to be jointly assessed.
TAXATION OF NON-RESIDENT INDIVIDUALS
An individual receiving Isle of Man income but who is not resident in the Isle of Man is no longer entitled to a personal allowance. A personal allowance of £2,120 was given to non-residents in 2009/10. Non-residents will only be charged to income tax on Isle of Man source income.
From 2006/07 onwards, as an alternative to taxing the total income less personal allowance, tax may be charged on the Isle of Man source income of a non-resident subject to a limit of:
(1) tax due on Isle of Man income reduced by any excluded income plus
(2) tax deducted at source from any excluded income (likely to be nil).
If this alternative is lower, the alternative will apply.
Excluded income includes dividends, bank interest, social security benefits and National Insurance retirement pension.
The standard rate of income tax for resident and nonresident companies in Isle of Man is 0%, applicable to all types of income received by companies, except income received by licensed banks from deposit-taking business and income from land and property in the Isle of Man, both of which are taxed at a rate of 10%.
In general, resident companies are companies incorporated in the Isle of Man and companies whose central management and control is in the Isle of Man. All companies incorporated in the Isle of Man are resident there.
With effect from 6 April 2022 the general rate of income tax for companies is 0%. Only income from banking business and income from Isle of Man land have a positive rate of tax. The rate of tax on these two sources of income is 10%. For accounting periods commencing on or before 5 April 2022 companies may have to pay a distributable profits charge in respect of profits accuring for the behalf of Isle of Man resident shareholders.
There are special rules for the application of this charge. If the charge does apply, the rate is 18% of investment profits and 9.9% of trading profits. Distributable profit charge was abolished for accounting periods commencing on or after 6 April 2008.
From 6 April 2022 profits can, in certain circumstances, be attributed and taxed upon Isle of Man resident shareholders. The tax year runs from 6 April to 5 April. For accounting periods ending on or after 6 April 2007, tax returns are due one year and one day after the end of the accounting period and the tax is due by the same date.
TAX FREE COMPANIES
The special types of tax-free companies such as exempt and non-resident companies were withdrawn from 6 April 2022 and replaced by general zero-rating as above.
CAPITAL GAINS TAX
There is no tax on capital gains in the Isle of Man and gains are not included in ordinary taxable income.
BRANCH PROFITS TAX
Isle of Man companies with foreign branches remain taxable on their worldwide income although relief for foreign tax paid may be available. Isle of Man branches of foreign companies will be subject to Isle of Man income tax on the profits attributable to the branch. The rates of tax above apply to all companies, including branches of foreign companies, so that the zero rate applies where applicable.
FRINGE BENEFITS TAX (FBT)
There is no fringe benefits tax on employers in the Isle of Man. Employees may be subject to income tax on any benefits they receive from their employers.
Local rates are imposed on properties. Local authorities determine the rate.
The Isle of Man government also imposes customs and excise duties. For these purposes, the Isle of Man is regarded as being part of the European Union. The UK and the Isle of Man form a common area for customs duties purposes.
National Insurance contributions are payable by employers in the Isle of Man. Contribution rates are similar to those that apply in the UK. Employees also pay contributions.
DETERMINATION OF TAXABLE INCOME
The taxable income of a company is determined by aggregating its taxable income and then subtracting all allowable deductions. Generally, to be deductible, the outgoings must be incurred wholly and exclusively for the purpose of a trade. Statute provides that some items are specifically non-deductible, e.g. depreciation. Special rules apply in relation to the categories listed below.
Tax relief is given for the cost of plant and machinery acquired for the purposes of a business in the form of capital allowances. Capital allowances are also available for certain industrial and agricultural buildings and tourist premises. A 100% allowance is available in the first year in which the expenditure is incurred. Where the 100% allowance is not claimed in full, a writing-down allowance is available in subsequent years, at the following rates:
Plant and machinery used in a trade 25% reducing balance basis
Industrial buildings 4% straight-line basis
Agricultural buildings 4% straight-line basis
Tourist premises 10% straight-line basis
Depreciation is not available as a tax deduction. Instead, capital allowances can be claimed as a deduction against taxable profits.
Stock levels are normally taken into account in determining the profits of the trade in accordance with normal commercial principles of accounting.
CAPITAL GAINS AND LOSSES
There is no capital gains tax in the Isle of Man.
Dividends received by Isle of Man resident companies are generally taxable at the zero % rate.
All interest paid by Isle of Man resident companies to Isle of Man lenders is tax deductible. Interest paid to non-Isle of Man lenders is tax deductible if incurred for the purposes of the company's trade. There are no thin capitalisation rules but there are anti-avoidance provisions which may be in point where interest is incurred purely to mitigate tax.
One of these provisions disallows tax deductions for interest arising on loans, the purpose or one of the purposes of which is the reduction of the liability of any person to income tax.
A maximum deductible amount of £10,000 per individual applies from 6 April 2010. This limit does not apply to companies.
Trading losses can be carried forward indefinitely provided a continuity of business test is satisfied. There are also provisions for loss relief within groups of companies.
FOREIGN SOURCED INCOME
The Isle of Man does not have CFC legislation. However, it does have general antiavoidance legislation which will tax an Isle of Man resident on income received by a nonresident entity in which the Isle of Man resident has an interest if the income arises to the non-resident entity as a result of steps taken to avoid Isle of Man tax.
It is possible for certain industrial undertakings to obtain a tax holiday for up to five years.
FOREIGN TAX RELIEF
Double tax relief is available for foreign tax paid. It may be set off against the Isle of Man tax payable. Where the income is received from the UK, relief may be available under the UK-Isle of Man Double Tax agreement.
Losses including capital allowances in respect of trading companies may be transferred from one Isle of Man resident company to another Isle of Man company within a group. Two companies are members of a group if one is a 75% subsidiary of the other or both are 75% subsidiaries of a third company. Consolidated tax returns cannot be submitted.
RELATED PARTY TRANSACTIONS
The Isle of Man does not have any specific transfer pricing rules. However, as noted above, where expenditure has not been incurred wholly or exclusively for the purposes of a trade, a tax deduction may not be available.
Non-residents are subject to Isle of Man non-resident income tax on all Isle of Man-sourced income except income received from approved financial institutions such as banks and fund managers. The Assessor of Income Tax may require a person who makes a payment of taxable income to a non-resident to deduct income tax from it at a rate specified by the Assessor. The general rate of withholding tax for payments by companies has been reduced to zero with effect from 6 April 2006. An 20% rate applies to rents of Isle of Man land paid to non-resident individuals. A 10% rate applies to rents of Isle of Man land paid to non-resident companies.
There are no exchange control rules in the Isle of Man.
With effect from 1 January 2010, the standard rate of VAT is 17.5%, with a reduced rate of 5% for some items, including fuel and power for domestic use and installation of certain energy-saving materials. Zero-rating can apply to the export of goods, international services, food, water, books and newspapers, construction of new dwellings, passenger transport and other items when the relevant conditions are satisfied. Exemptions include aspects of transactions in land, some financial services, insurance, health and education.
The VAT rules in Isle of Man are identical to those applying in the UK. Both the UK and Isle of Man form a common area for the purposes of VAT and Customs Duties.
VAT Registration - Registration for VAT is compulsory for businesses whose taxable supplies are over GBP 68,000; voluntary registration is possible below that threshold.
Filing and VAT payment - Quarterly returns and settlement of any outstanding liability (annual filing for corporations with turnover below GBP 1.35 million, but with monthly payments on account, if they so elect).
0 or 10%
Isle of Man
Income Tax Rate
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Sales Tax / VAT Rate
Last Update: Nov 2010
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