Business and Corporations
The information published in this section is of particular interest to corporate service providers, the accountancy and legal professions and to any individuals managing the income tax affairs of their own company.
Introduction of Compulsory Online Filing for Corporate Taxpayers
Corporate taxpayer income tax returns for accounting periods ending on or after 5 April 2015 must be filed online.
The statutory basis for compulsory online filing and specific exemptions are included within the legislation, which can be found in Statutory Document 2015/16 - Income_Tax_(Corporate_Taxpayers)_(Temporary_Taxation)_Order_2015.
A consultation exercise was undertaken prior to the implementation of this legislation and the relevant documentation is available.
The standard rate of corporate income tax in the Isle of Man is 0%. The 0% rate was introduced on 6 April 2006 and applies to the profits of accounts that form the basis of a company’s 2006/07 income tax assessments and any subsequent accounting periods. See Corporate Tax Rates for rates prior to 2006/07.
Also with effect from 6 April 2006, a 10% rate of tax applies to income received by a company from any of the following sources:
- banking business
- land and property in the Isle of Man (including property development, residential and commercial rental or property letting and mining & quarrying).
With effect from 6 April 2013 a 10% rate of tax applies to companies who carry on retail business in the Isle of Man and have taxable income of more than £500,000 from such business. Further details may be found in Practice Note 181/13.
With effect from 6 April 2015 the rate of tax applying to income from land and property in the Isle of Man was increased to 20%.
Certain companies subject to Manx income tax at the standard 0% rate can elect to pay tax at the 10% rate. Practice Note 134/06 sets out the criteria for making an election and the effect that the election will have on the company’s income tax responsibilities.
Resident companies are subject to tax on their worldwide income, non-resident companies are subject to tax on their Manx source income only. Both resident and non-resident companies are taxed on their income at the same rates.
The Distributable Profits Charge was introduced at the same time as the 0% rate of corporate income tax to ensure Treasury revenue cash flow and as an anti-avoidance measure. Some companies that do not distribute their profits may be required to pay the Distributable Profits Charge on behalf of their Manx-resident shareholders. See Distributable Profits Charge for further details.
The Distributable Profits Charge was replaced by the Attribution Regime for Individuals (ARI) for companies with accounting periods commencing on or after 6 April 2008. The ARI applies to all resident individuals with an interest in a relevant company.
Resident individuals with an interest in a relevant company will be charged to income tax on their share of the attributed profits from that company. This will in essence remove the corporate veil for income tax purposes as individuals will be taxed directly as if they had received the income attributable to their share of the annual profits of a relevant company. This is known as the attributed income.
The ARI was abolished for accounting periods commencing after 6 April 2012.
With effect from 6 April 2007, the Income Tax (Corporate Taxpayers) Act 2006 changed the way in which companies in the Isle of Man are taxed; from a year of assessment basis to an accounting period basis 'pay and file' system. See Pay and File for further details.
A number of Practice Notes and Guidance Notes have been published regarding the changes to the taxation of companies and are listed in the pay and file section.