The Isle of Man offers a unique combination of space to thrive, financial reward, simple taxation and a well-connected, safe community, all set within a sustainable UNESCO Biosphere.
A self-governing British Crown dependency located in the Irish Sea; the Isle of Man is an independent jurisdiction with its own legal and tax system. This independence in respect of its laws and fiscus offers advantages to local residents and to individuals and companies from overseas.
The legal system is based on English common law and the Island follows the precedents set by the English Courts very closely, but Manx law has also developed to fit the Isle of Man’s own needs and circumstances, particularly in relation to tax, company law and financial supervision.
The island’s clear and simple tax system includes a standard rate of corporate income tax of 0%, while the top rate of individual personal income tax is 21% up to a maximum of £220,000 per year.
The Isle of Man does not levy capital gains tax, inheritance tax, wealth tax or stamp duty, and there is no withholding on dividends. Uniquely, however, individuals and businesses have the ability to register for VAT.
The Isle of Man has developed into a tax-efficient, responsible and dynamic international business centre, that is built on the model of political stability, democracy and transparency. The government has fostered a pro-business environment and tailors its laws and regulations to the needs of the jurisdiction and its clients and has.
The Isle of Man has a first-class reputation as a well-regulated, responsible and co-operative financial centre s compliance with global standards for tax co-operation and exchange of information has been validated by a series of external reviews over the past decade, confirming its ‘white list’ status.
Its geographical proximity to the UK and good connectivity makes it highly accessible to global clients, and it has the modern infrastructure, wide variety of investment structures, financial institutions and expert professional advisers to service the needs of the most sophisticated clients.
Residents enjoy short commuting times, excellent standards in both healthcare and education, and some of the lowest personal tax rates in Europe. The island is recognised as one of the safest places in the British Isles, making it an ideal place for families to live and work.
Isle of Man Corporate Services
The Isle of Man has a modern Companies Registry and Isle of Man law allows for a wide range of traditional and non-traditional corporate vehicles to be used for businesses. These include Limited Partnerships (LPs), Limited Liability Companies (LLCs) and Protected Cell Companies (PCCs), as well as the more traditional forms of company being companies limited by shares or by guarantee.
Isle of Man entities can be used for all types of business including holding and trading companies, estate and succession planning, family office, funds, local and international property holding and insurance. Clients who are not resident in the Isle of Man for tax purposes can utilise a tax-resident Isle of Man company for trading purposes, which will not be subject to Isle of Man tax on profits or on distributions.
Alongside the traditional Isle of Man company, the Companies Act 2006 introduced a simplified corporate vehicle – the New Manx Vehicle (NMV) – and a streamlined process for setting up and managing companies designed to complement the zero-rate company tax regime, which was introduced the same year. Companies can still be registered under the old legislation, and these are known as 1931 Act companies.
The NMV is based on the international business company (IBC) model and was designed for a range of corporate transactions and is well-suited for use as a special purpose vehicle (SPV) for investing or holding assets. It provides for a simple and quick incorporation process with no requirement to specify an authorised share capital or for an Isle of Man resident director or member.
Shares can be denominated in any currency and issued without pre-emption rights, par value or share premium. The ability to declare and pay dividends or capital contributions is subject only to the meeting of a statutory solvency test, allowing for a streamlined return of capital to investors.
Corporate directors are permitted and NMVs are subject to less prescriptive accounting and filing requirements, and no annual general meeting obligation. There is no statutory requirement for a company secretary, but an NMV must have a registered agent.
Sovereign can provide director services, either through Financial Services Authority-vetted staff members or corporate directors. The use of corporate directors ensures continuity and availability for signing documents, even during staff absences.
Economic Substance
All entities that are resident in the Isle of Man for tax purposes must comply with economic substance requirements in order to demonstrate that they have real substance and activity in the jurisdiction.
However, substance rules only apply to entities that have income arising in the accounting period from ‘Relevant Sectors’.
The ‘Relevant Sectors’ comprise banking, insurance, shipping, fund management, shipping, headquarters, distribution and services centres, finance and leasing, holding companies, and intellectual property (IP) companies.
Sovereign has the capacity to provide fully managed structures with local directors and banking services. This ensures compliance with regulatory requirements and offers clients the necessary substance for their operations.
VAT Compatibility
The Isle of Man is unique among the UK’s Crown Dependencies and Overseas Territories in being treated as being part of the UK for VAT purposes. Having a VAT registration not only gives credibility and substance to a company but can also be highly beneficial for clients with UK tax points, such as British expats or those investing in the UK commercial property market.
For trading purposes, businesses and individuals involved in economic activities within the EU, including non-resident companies selling in an EU country, require a VAT number. These VAT numbers enable tax authorities to track VAT transactions within their respective tax systems and maintain adherence to VAT regulations.
Businesses must abide by the VAT registration requirements of individual countries, so the availability of VAT registration in the Isle of Man enables businesses to maintain compliance with tax laws.
The Isle of Man is the jurisdiction of choice in respect of a wide variety of UK property investment structures for non-UK investors, including property funds and property holding special purpose vehicles (SPVs). Generally, the supply of buildings is exempt for VAT purposes, but owners of commercial real estate typically choose to ‘opt to tax’ their interest so they can recover the VAT on acquisition, maintenance and management costs that it is charged by suppliers.
Isle of Man companies can access both the benefits of the Isle of Man tax system – no capital gains tax, no withholding tax on dividends, no stamp duty (including on share transfers) or SDLT, and a standard 0% corporate tax rate – while also benefitting from the availability of VAT registration and the ability to VAT group with companies from other jurisdictions.
Isle of Man Trust Services
The Isle of Man is at the forefront of best practice development in the area of trusts. The Trusts Act 1995 was specifically drafted to protect against claims under forced heirship rights in other countries, while the Trust and Trustees Act 2023 brought Manx trust legislation into line with contemporary trust law and practice, particularly in respect of trustees’ duties, powers and liabilities.
If all beneficiaries are resident outside of the Isle of Man, a trust will be exempt from both Isle of Man income tax on income arising outside the Isle of Man and income on bank deposit interest arising within the Isle of Man. A trustee can therefore make distributions out of a trust fund established in the Isle of Man without any withholding or deduction of Isle of Man income tax. There is no inheritance, wealth, gift or capital gains tax in the Isle of Man.
The uses of Isle of Man trusts include the management and preservation of wealth, succession planning, support and provision for vulnerable beneficiaries, tax planning as well as philanthropic and charitable purposes. Regulations require the trustees to know the identity of the settlor and ultimate beneficiaries of a trust, but there is currently no public register of trusts in the Isle of Man, so the ownership of trust assets remains confidential in most circumstances.
Until recently, Isle of Man trusts were generally not efficient for UK-domiciled individuals because the transfer of assets to a trust gave rise to an immediate UK inheritance tax (IHT) liability, as well as 10-year anniversary charges and exit charges. However, with effect from 6 April 2025 the UK government replaced ‘domicile’ as a connecting factor for liability to IHT and adopted a residence-based regime instead.
This has opened new opportunities for British expats who have been non-UK resident for 10 years and are not therefore classified as ‘Long-Term Residents’ (LTRs) in the UK. Such individuals can now set up an overseas excluded property trust (EPT) in the Isle of Man without risk of an upfront IHT charge or ongoing IHT exposures, except in respect of UK situs assets.
Subject to the tax regime in their country of residence, the gains and income accumulated within the EPT may also be free of personal income tax. Many countries, including EU states such as Italy, Greece, Cyprus and Malta, offer ‘non-domicile’ tax regimes that only impose tax on income and gains that are either sourced locally or are remitted to the country of residence. Income and gains that remain within an Isle of Man trust will not therefore be subject to taxation.
Consideration will only need to be given to the IHT treatment of the trust if the expat returns to live in the UK. An EPT trust that was not initially within the scope of IHT would be brought into scope if the settlor later resumed residence in the UK and then met the ‘10 out of 20 years test’ to be reclassified as an LTR.
Isle of Man ‘interest in possession’ trusts settled by non-UK individuals or non-LTR British expats can also invest in UK residential property and benefit from a full or partial exemption from capital gains tax (CGT) on the sale of the residence under the Principal Private Residence (PPR) relief, provided specific conditions are met.
The property must be a dwelling house and one or more of the beneficiaries of the trust must occupy the property as their only or main residence and must be entitled to occupy the property under the terms of the trust. The trustees must make a claim for the relief from CGT.
Sovereign Trust (Isle of Man) is authorised and licensed by the Isle of Man Financial Services Authority has been providing trust management and trust administration services on the Isle of Man for almost four decades. We work closely with our UK office and Sovereign Tax Services to provide tax mitigation strategies and tax advice in respect of UK residence, property, trusts and other structures, pensions and insurance policies. This ensures proper reporting and compliance for clients.
The Isle of Man Foundations Act 2011 provides an alternative to more traditional Isle of Man trust structure, particularly for clients in non-common law jurisdictions. The uses of Isle of Man foundations include succession planning, charitable and philanthropic purposes, as well as holding vehicles for commercial assets such as private jets. Sovereign can assist with all aspects of setting up and registering an Isle of Man Foundation and can act as a council member, an enforcer and a registered agent.
Sovereign is also able to provide full administrative services to trusts or foundations, including the preparation of financial statements, accounts, the completion and filing of tax returns and the opening and maintaining of bank accounts.
Isle of Man Pension Services
The Isle of Man’s pensions legislation provides a regulatory framework that not only encompasses domestic schemes available to local residents, but also provides a broader framework enabling multinational businesses to use the Isle of Man as a centre from which to manage retirement benefits schemes for employees who may reside anywhere in the world.
Its long-established, gold-standard legal and regulatory infrastructure delivers the optimum long-term savings proposition for expatriates and the internationally mobile. It also offers a tax neutral environment in which the assets of a scheme can grow free of taxation and, on drawdown, are paid to scheme members gross.
As a respected and mature international finance centre, the Isle of Man’s scheme administrators, and support services such as banks and investment managers, are well used to the rigours of multi-currency, cross border pension arrangements.
The Island’s pensions regulations are robust but highly flexible, allowing corporate clients the freedom to tailor international retirement solutions to the diverse demands of their international operations. All plans can be adjusted to fulfil the objectives of the scheme sponsors and members.
The Isle of Man is now home to over 1,200 retirement benefit schemes of which more than 200 are International Pension Plans (IPPs) and International Savings Plans (ISPs). Total assets now exceed £14 billion. It is the most popular choice of domicile worldwide for trust-based plans with 25% overall and attracting a staggering 67% of all those set up in the last five years.
IPPs and are designed to safeguard employees’ savings and protect them from any local economic and political turbulence, including countries experiencing high levels of inflation, with trust-based vehicles prevailing as the preferred method to segregate and protect member assets.
They are typically offered where the local savings or retirement plan market is underdeveloped, gives no or minimal tax advantages, restricts investment options or has few local providers. Eligibility is no longer largely limited to expatriate populations and increasingly includes local employees.
All pension schemes and administrators are regulated by the Isle of Man Financial Services Authority and governed by the Isle of Man Tax Division. Trustees are bound by the trust legislation, ensuring strong governance, security and stability in the international pensions and savings market.
Sovereign Pensions is licensed as a Pension Trustee and Administrator and provides a ‘one-stop shop’ for retirement planning, with a selection of innovative international retirement planning products that are backed by consistent service and support. We offer a full range of multi-member retirement benefit solutions from the Isle of Man, including two Qualifying Recognised Overseas Pension Scheme (QROPS), a Qualifying Non-UK Pension Schemes (QNUPS).
Isle of Man Residence
The Isle of Man was designated as a UNESCO Biosphere in 2016 in recognition of its special environment, culture, heritage and economy and its people’s desire to cherish and nurture them. The Island, including its territorial waters, is the only ‘entire nation’ Biosphere.
The Isle of Man is centrally located in the Irish Sea and benefits from more than 200 flights per week, providing direct links to the UK and Ireland, and connections to the rest of the world, as well as regular ferry crossings to the UK and Ireland. In addition, there is a private aircraft terminal and an abundance of helipads.
One of the Isle of Man’s key strengths is its world-class telecommunications infrastructure. The Island has an advanced and diverse telecommunications network providing fixed-line voice and broadband services and two 4G mobile networks. Carrier class connectivity to and from the Isle of Man is provided via five discrete fibre cables that allow the creation of high bandwidth fibre optic rings connecting the Island with the North of England and Ireland.
Healthcare for Isle of Man tax residents is free and there is a reciprocal agreement with the UK. The Island has a high performing education system with public and private schooling up to age 18 and students then follow the same path to university as in the UK. University College Isle of Man (UCM) further offers academic, vocational and recreational courses, including subjects at degree level, through its partner, the University of Chester.
The Island’s mature and globally connected financial sector ensures that there is a comprehensive range of services on offer for those considering relocating their existing business or establishing a new operation in the Isle of Man. Commercial activity within the Island spans a wide range of sectors, including: aviation, digital media, e-business and e-gaming, fintech and emerging technologies, manufacturing, clean-tech, BioMed and the visitor economy.
If you are relocating from the UK, there are no immigration barriers to moving to the Isle of Man. For non-UK individuals and their families, the Immigration Rules align closely with the UK rules to ensure the integrity of the common travel area (CTA), which enables travel between the Isle of Man and the UK to be treated as an internal domestic journey.
There are a number of visa options for investors and entrepreneurs considering a relocation from around the globe. The Key Employee Incentive, which applies to entrepreneurs setting up a new business or key employees hired to develop or expand a new or existing company, provides that an individual will only be liable to tax on their Manx source employment income for three years.
As a British Crown Dependency, the Isle of Man is entitled to, and uses the services of the British Embassies and other diplomatic offices around the world.
There are no restrictions for new residents when purchasing property, whether residential or commercial, and there is no stamp duty payable.
The standard rate of income tax in the Isle of Man is 10% and higher is 21%, with the first £14,750 per annum tax-free. The Isle of Man offers a Tax Cap for new and existing resident individuals of £220,000 (£400,000 for a jointly assessed couple) per annum. A valid Tax Cap election will remain in force for five or ten consecutive tax years.
In addition, there is no capital gains tax, no inheritance or wealth tax and corporate income tax is generally applied at a rate of 0%.
Isle of Man Accounting Services
There is no requirement for private Isle of Man companies to file their accounts with the Companies Registry, but all Isle of Man companies are required to produce accounts and complete a tax return. The annual return should verify that accounts have been prepared up to a specified date.
The Isle of Man Companies Act 2006 requires a company to maintain “reliable accounting records” that are sufficient to correctly explain transactions, enable the company’s financial position to be determined with reasonable accuracy at any time, and allow financial statements to be prepared.
Accounting records and registers must be retained at the office of the Registered Agent. These records should be kept for not less than six years from the end of the financial period to which they relate.
A company incorporated in the Isle of Man is automatically resident for tax purposes and must therefore file an annual income tax return, whether it pays tax at 0%, 10% or 20%, or a combination of these rates. A company that is incorporated elsewhere will be considered resident in the Isle of Man if it is ‘managed and controlled’ in the Isle of Man and will therefore be required to register with the Assessor of Income Tax and be taxed on its worldwide income.
For VAT purposes, the Isle of Man forms a single territory with the UK. The VAT registration threshold, above which persons making taxable supplies are required to register and account for VAT, is £90,000 per year. Businesses can still opt to register voluntarily if their taxable turnover is below this.
Supplies that are exempt from VAT, include insurance and financial services, betting and gaming, education and healthcare.
VAT returns are usually filed on a quarterly basis, although some businesses may be required to file monthly or annually. These must be submitted within one month and seven days after the end of the VAT accounting period along with payment of any VAT liability.
Sovereign provides comprehensive bookkeeping and accounting services to clients, including tax and VAT registration, or can recommend a range of accountancy firms that we work with closely. Acting as a ‘Fiscal Agent’ for your entity, Sovereign will complete and file the necessary returns, assist with the preparation of the accounts, if applicable introduce a suitable auditor, and liaise with the tax department to ensure that all a client’s obligations are met in full.
Isle of Man Banking
All banks now undertake increased due diligence when opening or operating accounts. Many banks will not open accounts for non-resident companies, others will only open bank accounts for companies that have been introduced to them by a recognised and licensed service provider that is on an ‘approved list’.
Your entity will almost certainly require an Isle of Man business bank account and it is therefore strongly recommended that Sovereign is asked to assist with a bank introduction and with the preparation and submission of the necessary paperwork for opening a bank account.
Sovereign Trust (Isle of Man) is licensed by the Isle of Man Financial Services Authority and is able provide introductions to a number of banks in the Isle of Man and elsewhere in the world with which we have long-term relationships.
Our administration team continuously develops new banking relationships to offer clients multiple options, including online banks and investor banks. We have a good understanding of their eligibility criteria and the different bank accounts and banking services that they offer.
