Isle of Man

The general rules for the calculation of taxable income are the same whether a company is liable to tax at 0%, 10%, 20%, or a combination of these rates.

Inventory valuation

Inventories are generally stated at the lower of cost or market value. Any method of valuation that accords with sound commercial principles is acceptable for tax purposes, provided it is adopted consistently at the beginning and end of the accounting period and does not conflict with tax law. In practice, inventories are normally valued for tax purposes at the lower of cost or net realisable value. A first in first out (FIFO) basis of determining cost where items cannot be identified is acceptable, but not the base stock method or the last in first out (LIFO) method.

In general, the book and tax methods of inventory valuation must conform.

Capital gains

There is no capital gains tax in the Isle of Man.

Dividend income

Dividends are taxed at the standard rate of 0%. Dividends received from Isle of Man companies do not suffer withholding tax (WHT).

Banking income

Licensed banks are taxed at 10% on income from deposit taking, any related activities, and interest earned from the investment of regulatory reserves only.

Income earned on capital and reserves in excess of the regulatory capital, group funded lending, fiduciary deposits, assurance, insurance, custody, trust, and corporate services is not classified as banking business and is taxed at the 0% rate.

General expenses are allocated against 0% and 10% income streams on a pro rata basis.

The 20% rate applies to income earned by banks from real estate situated in the Isle of Man.

For 2024/25, a new 15% rate will be applied to certain banking business and large retailers. This rate will only apply to those banks and retailers whose profits would otherwise be subject to a top-up tax outside the Isle of Man under the OECD’s Pillar 2 Global Minimum Tax initiative.

Royalty income

Royalties are taxed at the standard rate of 0%.

Rental income

Companies with profits arising on rental income in respect of land or property situated in the Isle of Man are charged to income tax at a rate of 20%. This rate applies whether or not the company is resident in the Isle of Man.

Foreign income

Resident corporations are liable to tax on their worldwide income (albeit the relevant rate of tax is often 0%).