Isle of Man

Corporate - Significant developments

Last reviewed - 09 February 2021

Tax treaties

As of 31 December 2020, 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

The Isle of Man government announced a series of measures on 31 March 2020 intended to ease the completion and submission of tax returns during the coronavirus outbreak.

Companies

For any company tax returns due to be submitted between 1 April 2020 and 5 June 2020, the filing date for these returns is extended to 5 June 2020.

Employers

The deadline for employers’ tax returns for the year ended 5 April 2020 is extended from 5 May 2020 to 5 June 2020.

The Isle of Man government have also announced a 'National Insurance Holiday' for employers in relevant sectors reducing the rate of Secondary Class 1 National Insurance contributions to zero from March 2020 (until further notice).

Businesses included in the 'relevant sectors' are those with income wholly or mainly from: tourist accommodation, catering and entertainment, leisure, travel and tour operators, and companies involved with logistics (i.e. the movement of goods to and from the Island).