Isle of Man: Country and Foreign Investment
Economy and Currency
The Manx economy is stable. Unemployment is low and inflation is below that of the EU average. Agriculture, fishing and tourism were traditional mainstays of the island's economy, but they have declined in importance. The Island's government has encouraged economic growth by creating a beneficial tax regime and by offering financial incentives to manufacturing and tourism.
The Isle of Man economy has enjoyed an average of over 6% growth in real terms over the past 26 years. The 2010/11 national income figures produced by the Treasury’s Economic Affairs Division, show there to be have been real growth that year in e-gaming, an increase of nearly 19% in the ICT sector, a much improved insurance sector has led to the financial sector accounting for 35% of national income. The value of goods and services produced (or gross domestic product) in the Isle of Man economy over the year rose to over GBP3.5bn, a 2.1% increase over the previous year. With price inflation stripped out, real growth stood at 1.8%. The banking sector remained steady following contractions in the previous years brought about by the global financial crisis.
With a low population density and plenty of development land, the Island is in a better position than some other physically smaller IOFCs (International Offshore Financial Centres) to sustain population and economic growth for years to come. The local currency is the Manx pound, which is on a par with the British pound. There is no exchange control.
In November 2011, international ratings agency Standard & Poor's reduced its 'AAA' international credit rating on the Isle of Man to AA+, citing external vulnerabilities and lack of monetary flexibility as credit weaknesses.
Commenting on the downgrade, S&P said the island's ability to diversify its economy further away from financial-sector-related activities could potentially trigger an upgrade.
The rating was affirmed in November 2012, S&P said the island's high per capita income and strong government balance sheet made the outlook stable.
Isle of Man Import of Foreign Capital
There are no capital or exchange controls on the Isle of Man. The Island's currency is Sterling and deposits are accepted in all major international currencies. The banking system is similar to that in the UK. Current accounts, deposit accounts and most other services offered by UK and international banks are also offered from the Isle of Man. Interest rates are comparable to those in the London Money Market. Competitive returns are available in all currencies and interest is paid without any withholding tax deduction to non-residents.
Isle of Man Investments by Foreigners
The government encourages the development of new businesses and industries. Assistance is available to both existing and new businesses if the following criteria are met:
- the development does not adversely affect the existing amenities of the Isle of Man or its environment;
- the goods produced will have a high added value; and
- there will be a good level of profitability and high return on capital investment.
If these conditions are met then the following incentives are available:
- Investment grants: 40% of the cost of new building and plant and machinery
- First year grants: 40% of non-recurring commissioning and running-in expenditure, including business plan preparation costs and personnel transfer costs.
- Training costs: 50% of approved training costs
- Loans: 50% of working capital requirements
- Rent reduction: a rental grant is available where premises are rented, rather than purchased or built, to reflect the capital grant forgone.
The government subsidises the film industry and has established the Isle of Man Film Commission. Attractive tax incentives are available for both companies and film-makers wishing to use the island as a location and production base and for film management companies or co-ordinating producers of offshore productions.
Isle of Man Ronaldsway Freeport
The Manx Government has established a 20-acre freeport next to the Ronaldsway airport. The area is secure and patrolled, and has good support services including excellent telecommunications. A wide variety of manufacturing, processing and assembly operations can take place inside the freeport, the only such area in a European offshore financial centre. No customs duties are payable on goods for the Isle of Man or member states of the EU until they enter their country of final destination. Goods can be stored in the freeport until they are required for use. Planning controls are very light inside the freeport.
Isle of Man The OECD
The Isle of Man was included in the OECD's list of jurisdictions practising 'unfair tax competition' in June, 2000, and the EU's Code of Conduct Committee included the Isle of Man's International Companies in its list of 'unfair tax practices'. In addition, the EU's agreement to information-sharing procedures in place of a common withholding tax, at Feira in June, was made dependent on the agreement of key offshore centres to participate, and this increased pressure on the Isle of Man.
In December 2000 the island issued a 'commitment' letter to the OECD which resulted in its removal from the blacklist. The commitments made included the abolition of the international company form by 2005. In 2001 the Treasury announced a package of measures intended to reduce the discriminatory nature of parts of the island's tax regime.
The Isle of Man, in common with Jersey and Guernsey, has stated very definitely that it does not propose to undermine the success of its financial sector by introducing major changes to its offshore regime, or adopting information exchange procedures unless other main centres participate.
After the EU agreed to a mixed information-sharing and withholding tax regime under its Savings Tax Directive in early 2003, the Isle of Man decided, along with Jersey and Guernsey, to apply a withholding tax to the returns on personal savings for citizens of EU Member States. However, the Isle of Man along with Guernsey, opted for the automatic exchange of information with regards to interest gained on the accounts held by depositors resident in countries within the European Union under the EU Savings Tax Directive from July 1, 2011.
The Isle of Man government on April 3, 2009, released a statement welcoming the island’s inclusion on the OECD ‘white list’ of countries complying with the global standard for tax co-operation and exchange of information.
The list, produced following the G20 summit in London, places the Isle of Man in the top tier of jurisdictions – along with nations such as the UK, USA, Germany, France, Sweden and Ireland – that have ‘substantially implemented the internationally agreed tax standard.’
Welcoming the Isle of Man’s recognition as a cooperative jurisdiction, Chief Minister Tony Brown said:
"The OECD white list provides recognition at the highest level of the Isle of Man’s place in the mainstream of economies that comply with the global standard on tax. This is a defining moment for us, confirming our position amongst the most responsible and co-operative countries of the world.”
On June 3, 2011, the Isle of Man government reported that, following a peer review by the OECD, the island was praised for the way it exchanges information with other countries. The report stated: "The feedback provided by the Isle of Man’s information exchange partners is very positive. The information requested is provided quickly and exchange of information partners are appreciative of the open and transparent relationship they have with the Isle of Man competent authority."
Commenting on the outcome of the review, Treasury Minister Anne Craine said: "The peer review report for the OECD’s Global Forum provides authoritative confirmation that the Isle of Man is actively supporting international standards on tax transparency and exchange of information. It shows that the Isle of Man is walking the walk, as well as talking the talk, when it comes to sharing information with our international partners. The Island is already recognised on the OECD White List as being in the top tier of countries for transparency and information exchange. This latest report is a further vindication of the approach taken by the Isle of Man, underlining our status as a nation that is both enterprising and internationally responsible."
At the time of writing, the Isle of Man has signed 29 OECD model Tax Information Exchange Agreements.