Isle of Man is deemed as a highly regarded jurisdiction due to its stringent compliance law. With strong connections with the United Kingdom, setting up a business in Isle of Man is ideal due to its great investment environment in sectors such as finance, insurance and online gaming. Hence, in order to start a business in Isle of Man, it is important to understand the account and tax obligations in Isle of Man. In this article, our team at Tetra Consultants has highlighted 5 accounting and tax obligations you should know about Isle of Man company set up before you register company in Isle of Man.
1. Annual return filing requirement:
It is required to file the annual return where it includes a summary document of the directors, secretary, shareholders and share capital at a point in time. There are three different forms of annual returns and this depends on the type of company namely 1931 Act company, 2006 Act company and a foreign company.
The filing of the annual return applies to all businesses including offshore businesses where activities are not conducted within the jurisdiction.
The annual return would be due annually and one day after the end of the company’s accounting period.
2. Accounting obligations:
According to the law of Isle of Man, companies are required to prepare their financial statements under United Kingdom Generally Accepted Accounting Principles (UK GAAP), United Kingdom International Financial Reporting Standards (UK IFRS), or United States Generally Accepted Accounting Principles (US GAAP).
For 2006 Act companies, only the keeping of accounting records is required. However, the preparation of financial statements is not compulsory. In addition, private and offshore companies are exempt from audits.
For 1931 Act company, it is required to file financial statements. In addition, the annual financial statement must be audited. It is however exempted from audit under the following conditions:
- Turnover for a year under 5.6 million euro
- Balance sheet for a year under 2.8 million euro
- The number of employees for a year does not exceed 50 people
3. Corporate tax:
Isle of Man have a long corporate tax rate of 0%. This excludes the banks and real estate sector which rate is 10% and 20% respectively.
4. Other taxes:
As a non-resident of Isle of Man, one is not subjected to withholding tax on dividends paid to Shareholders, withholding tax on any payments. In addition, there is also no capital gains tax, stamp duty or inheritance tax.
Furthermore, if the company does not have shareholders within the Isle of Man, it is not subjected to any tax. The company formation fee still applies and has to be paid annually.
5. Value-added Tax (VAT):
The VAT applies for non-essential goods and services at the rate of 20%. The VAT is rather similar to the United Kingdom. Moreover, the imports and exports from Isle of Man to United Kingdom are subjected to VAT instead of import.
Apart from the accounting and tax benefits in Isle of Man which attracts foreign investors to set up a company in Isle of Man, foreign investors can also benefit from the business-friendly environment.
In an effort from the government to support the setting up of business in Isle of Man, the government had put forward the following schemes:
- Microbusiness grant scheme:
Applies for all business sectors
Only for first-time investors in which the company has only operated for less than 18 months with an annual turnover of 5,000 to100,000 euros.
- Business improvement scheme
Applies for both existing and new businesses offering consultancy and mentorship in areas like marketing, social media, business advisory services, environmental efficiency, and others.
- Vocational training assistance scheme:
Applies for businesses with a registered office in the Isle of Man, providing direct employment in the jurisdiction.
- The town and village regeneration scheme:
Applies for businesses within regeneration zones, with the property being destined for commercial use and public use in those areas.
- Business energy saving scheme:
Applies for companies in all business fields that have projects on saving the energy.
- Investors in People:
Applies for businesses that focus on their people with a minimum of two employees and no government debts.
- Enterprise development scheme:
Applies for companies engaged primarily in mainly conducting export-focused activities in certain sectors
Business Formation Process:
If you have decided in setting up a company in the isle of man, you may proceed with the process of isle of man company set up:
Step 1: Planning of your business idea
Step 2: Choosing a suitable corporate entity
- After accessing your business goals and activities, you can choose the most suitable corporate entity for your business.
- The most popular type of entity for foreign investors is Limited Liability Company.
Step 3: Reserving of the company name
After you have decided on a suitable corporate entity, you may proceed to the next step which is reserving a business name in the Company Registry through the Isle of Man government website.
Step 4: Registration of the company
- Before proceeding to register a business isle of man, you will have to prepare the necessary incorporation documents such as Memorandum and Articles of Association (MOA/AOA) and business proposal.
Step 5: Corporate bank account opening
Step 6: Staying compliant
- This includes the annual return filings, tax obligations and VAT return filings.
The information about accounting and tax obligations you should know about Isle of Man company set up may seem intimidating. With Tetra Consultants by your side, the registration process of your business in Isle of Man will be smooth and hassle-free. Our comprehensive service package includes planning and strategizing with our clients to select a suitable business entity, completing the registration process, obtaining required licenses, opening a corporate bank account, and ensuring your compliance with the government regulations.
Contact us to find out more about isle of man company set up and our dedicated and experienced team will revert within the next 24 hours.