International agreements and double taxation relief

International Agreements

The Isle of Man has recently concluded a number of taxation agreements with various countries. Full details of all the agreements can be found on our International Agreements page.

A Practice Note has also been published on the Taxation of UK and Republic of Ireland Pensions.

Double Taxation Agreement with the UK

The recent changes to this agreement affect private pensions and occupational pensions paid from the UK or Isle of Man.

Guidance has been prepared to explain the changes to the agreement and the potential impact on Isle of Man residents.

If your pension is affected by the changes, then subject to HMRC’s agreement, you should no longer have to pay any tax to the UK in respect of your pension. Your pension will still be subject to Isle of Man income tax and included in your assessment.

If you believe that you are affected by the changes to the agreement and wish to apply for your UK pension to be paid without the deduction of UK tax, then please complete the HMRC Form DT/Individual and submit it to the Income Tax Division in order that we can verify your residency in the Isle of Man. This form will be sent back to you and should then be submitted to HMRC. The Income Tax Division will not submit this form to HMRC on your behalf.

Taxation agreement with Ireland

If you are in receipt of a relevant occupational pension from Ireland then you may be able to benefit from the new taxation agreement with Ireland. A relevant occupational pension is one which you receive as a result of your past employment in Ireland. It usually involves your employer, and possibly you, contributing to a scheme designed to provide you with retirement benefits.

If you are in receipt of a relevant occupational pension, then subject to the Irish Revenue’s agreement, you should no longer have to pay any tax to Ireland in respect of your pension. Your pension will still be subject to Isle of Man income tax and included in your assessment.

If you believe that you are affected by the changes to the agreement then please complete the IC2 Individual form and submit it to the Income Tax Division in order that we can verify your residency in the Isle of Man. This form will be sent back to you and should then be submitted to the Irish Revenue. The Income Tax Division will not submit this form to the Irish Revenue your behalf.

Irish Universal Social Charge

The Universal Social Charge (USC) was introduced in Ireland with effect from 1 January 2011. The governments of the Isle of Man and Ireland have agreed that the USC is covered by the Tax Information Exchange Agreement and the Agreement for Affording Relief from Double Taxation with respect to the Income of Certain Individuals.

The USC is an additional tax paid by individuals in receipt of Irish source income, if their gross income exceeds a certain threshold. Isle of Man residents in receipt of income from Ireland are liable to pay the USC in the same manner that they pay income tax on that income. Therefore, if you live in the Isle of Man and are exempt from paying income tax on an occupational pension from Ireland then you will be exempt from the USC. 

Double Taxation Relief

If you are in receipt of income from a country that the Isle of Man does not have a specific double taxation agreement with then you may still be eligible to receive double taxation relief on the foreign income that you have paid tax on.

If you are in receipt of income that has had foreign tax deducted then double taxation relief may be applied in your assessment, however it will be restricted to the lower of the foreign tax suffered or Isle of Man income tax due.

Evidence of taxation suffered in the foreign country will be required before double taxation relief can be applied.