Isle of Man

Corporate - Significant developments

Last reviewed - 24 August 2021

Tax treaties

As of 30 June 2021, the Isle of Man has entered into 11 comprehensive double tax agreements (DTAs), 13 limited scope DTAs, and 39 tax information exchange agreements (TIEAs) based on the Organisation for Economic Co-operation and Development (OECD) models.

Substance test

In order to comply with commitments made to the European Union (EU) Code of Conduct Group, legislation has been passed by the Isle of Man government in relation to the introduction of a 'substance test' for tax residency of corporate entities in the Isle of Man. The legislation is targeted at those companies in the Island that receive income from certain 'relevant activities' identified by the European Union and do not have any real economic activity and substantial economic presence in the Island.

The legislation is effective for accounting periods commencing on or after 1 January 2019.

Relevant activities are defined as follows:

  • Banking
  • Insurance
  • Shipping
  • Fund management
  • Finance and leasing
  • Headquarters
  • Distribution and service centres
  • Operation of a holding company
  • Holding intangible property (intellectual property)

If a company in a relevant sector does not meet the economic substance requirement in an accounting period, it will be subject to sanctions. Financial penalties will be charged in respect of each period in which the company fails to meet the economic substance requirements and will increase in cases of repeated periods of failure.

COVID-19 updates

A number of financial measures were introduced by the Isle of Man government to support businesses and individuals during the COVID-19 pandemic.  The financial measures included :

  • Salary support scheme;
  • Manx Earnings replacement allowance (MERA);
  • Business and Fisheries support schemes;
  • Strategic capacity scheme.

All amounts received under the above measures are treated as taxable income for tax purposes with the specific exception of MERA.

Limited Liability Companies

With effect from 17 June 2021, it is a legal requirement for partnerships to register with the Assessor of Income Tax. 

This includes limited partnerships and LLCs formed outside the Isle of Man where the partnership is tax resident due to it's management and control being exercised in the IoM or it having a place of business in the IoM.

Transitional arrangements are in place for partnerships that were in operation prior to the legislation coming into force.