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Distributions from Capital Gains

Friday, 24 February 2012

The Isle of Man does not have capital gains tax and there is no intention to introduce such a tax.

The Treasury Minister announced in his Budget speech:

“If I simplify the European Union’s message to us it was this, “Apply your zero-ten regime across the board and without rules which give a different position for international and local investors.” Taking away the attribution regime does this, and leaves us in the situation where company profits can only be taxed when paid out as dividends received by Isle of Man shareholders. That is easy to understand and administer.”

Practice Note 174/12 issued by the Assessor withdraws two concessions which relaxed the strict application of tax law and treated certain income distributions/dividends as though they were capital. The Practice Note also confirms the strict treatment of an income distribution.

The adoption of this strict treatment has become necessary due to the removal of the ARI and the Assessor becoming aware of increased planning to avoid income tax that should be payable.

The Assessor is aware of the misleading information in recent articles following the budget and would like to make it clear that a charge to income tax will not arise to shareholders when capital gains made by a company are distributed.

Further guidance will be issued next week which will hopefully assist.

Minister Teare said,

“It has come to my attention that unacceptable tax planning was being contemplated and I had to take steps to ensure that tax due on income not capital gains was paid. This is not an attempt to introduce a form of capital gains tax; nothing is further from my mind.”

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