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IoM To Simplify Company Residency Regime

Thursday, April 5, 2012

The Isle of Man government has launched a consultation on a proposed legislative change that would simplify the income tax position for companies with dual residence.

A company resident in the Isle of Man for income tax purposes is taxable on its worldwide income. However, a company can be resident in more than one country for income tax purposes, and in those circumstances it will be taxable in each jurisdiction in accordance with relevant domestic law.

A company is deemed to be resident in the Isle of Man for income tax purposes if:

  • It is incorporated under the Isle of Man Companies Acts; or
  • The company is managed and controlled in the Isle of Man.

If a company is incorporated in the Isle of Man, but managed and controlled in another jurisdiction, it will usually be dual-resident for income tax purposes.

To simplify the tax affairs of companies with dual residency, the Isle of Man government has proposed that if a company is incorporated in the Isle of Man, but managed and controlled in another country, it will be accepted as only resident in that other country for Manx income tax purposes. This treatment will depend upon the following additional conditions being met:

  • The company is tax resident in the other country under that country’s law; and,
  • The company is tax resident in the other country by virtue of a residence tie-breaker in a tax agreement; or
  • The other country has a higher rate of income tax than the Isle of Man.

Although a company will be regarded as non-resident for income tax purposes under the proposals, if the above conditions are met, its incorporation in the Isle of Man will require that certain accountancy information is available and, therefore, it may be necessary for the company to continue to file an annual tax return, the government said.

The Isle of Man government has invited responses to the proposes until May 14, 2012.