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- ISLE
OF MAN E-COMMERCE LEGISLATION
- ISLE OF MAN E-COMMERCE
FACILITIES
- TAX EFFICIENT E-COMMERCE
INTHE ISLE OF MAN
There
is something of a competition between a number
of offshore jurisdictions to offer the most advanced
e-commerce environment to businesses seeking an
offshore base for part or all of their operations.
The Isle of Man is clearly one of the leading
jurisdictions, being one of the few which have
enacted e-commerce legislation and which is already
host to an active e-commerce community of providers
and users.
The
Isle of Man's first Director of E-Commerce took
office in late September 2000, with responsibility
for co-ordinating the development, promotion and
implementation of an e-commerce strategy for the
island. As part of this programme to encourage
e-businesses to set-up on the island, the government
also aims to offer tax breaks.
In
June 2001, the government's e-commerce division
published a report which set out in detail the
Island's approach to becoming one of the world's
leading e-commerce centres and most advanced 'e-societies'.
Entitled 'The E-Commerce and E-Society Strategy
Report,' it has obtained the approval of Tynwald
and is now being actively promoted by the government.
The
island has set itself an ambitious goal, since
the world, both onshore and offshore, is full
of countries which have said they mean to become
global e-commerce leaders. The UK may have shot
itself in the foot with its misconceived 'RIP'
legislation and its general slowness, but Ireland,
Bermuda and Malta are just three of the competitors
which are arguably ahead of the Isle of Man in
various respects. In the Far East the authorities
in Manila have earmarked the equivalent of $250
million to create a computer mini-city which they
hope to establish as the global 'capital' of E-commerce,
while Hong Kong and Singapore are forces to be
reckoned with.
The
Isle of Man's advantages are its position in the
EU, both geographically and structurally, an established
base of professionals, liberal legislation, good
telecommunications and the Ronaldsway Freeport.
Although the island has been criticised for some
of its offshore tax practices, it has been able
to adjust its regime without unduly restricting
offshore business operations, and, like Ireland,
is able to offer a secure and stable home to international
businesses wanting to serve EU and international
markets. The problem for the Isle of Man alongside
Ireland is that it is small, and inevitably has
less depth in terms of infrastructure, skilled
workers and support services.
In
many countries, the distribution of goods from
a warehousing facility does not constitute the
carrying on of a trade or business in that jurisdiction,
so that even for physical goods, in many cases
it will be possible to avoid a permanent establishment
(taxable presence) altogether in many high-tax
jurisdictions where trading activities currently
take place.
This
section of the e-commerce site explores how businesses
can optimise their tax structure by using the
Isle of Man as a base while still keeping to sensible
commercial principles of operation.
The
Isle of Man has close to 100% broadband coverage
after Manx telecom upgraded six remaining telephone
exchanges with ADSL-enabling equipment making
the island potentially one of the most attractive
high speed internet locations in Europe.
Like
other offshore jurisdictions, the Isle of Man
can take advantage of the natural link between
the Internet and Offshore stemming from the fact
that both, of their nature, manage to avoid tax
and the regulatory blanket that tends to smother
larger countries (Ireland, unlike the Isle of
Man, can do nothing about its membership of the
EU). Businesses which can operate on the Internet
without, so to speak, touching ground in a high-tax
jurisdiction will naturally migrate to offshore
jurisdictions; while businesses that already have
offshore existence will find it highly convenient
to be able to use the Internet to trade with their
high-tax customers without having to make a landing
in their countries.
By
locating websites in the Isle of Man to carry
out functions previously based in high-tax jurisdictions
such as sales and marketing, treasury management,
supply of financial services, and most of all,
the supply of digital goods such as music, video,
training, software etc, businesses can take advantage
of low rates of taxation for increasingly substantial
parts of their operation.
In
March, 2006, a report by Charteris, the IT consulting
firm, said that the Isle of Man has both maintained
and improved its competitiveness and currently
stands as one of the world’s leading jurisdictions
for e-business.
“Amongst
those who are aware of the Isle of Man’s positioning,
it is seen as a good example of how to get things
right, and the standard to be achieved – a number
of official publications by competitor jurisdictions
explicitly say so," the report observed.
Charteris
noted that the decision to introduce a 0% corporate
tax regime, coupled with a cap on personal income
tax at a maximum level of £100,000 per annum,
have been key in transforming the Island into
a leader on the e-commerce front.
Other
factors crucial to the growth of e-commerce in
the jurisdiction include increased off-Island
competition as a result of the licensing of Cable
& Wireless, which has led to lower bandwidth costs;
provision of new world-class hosting facilities
in the form of Manx Telecom’s new Douglas North
facility; evidence of clustering in the online
gambling sector and the beginnings of “stickiness”
of operators in the sector; a number of “excellent
sales wins”, including Microgaming, Poker Stars
and Inca Gold; and clear signs of significant
improvement in collaboration between business
and Government on e-business and economic development
issues.
Tim
Craine, Isle of Man Government Director of E-Business
and Space Commerce, commented that the Charteris
report was a "clear endorsement of the e-business
strategy pursued by Government over the last 5
years".
"The
report itself highlights how we have developed
the Island’s proposition, increased our lead over
our competitors and placed ourselves in an ideal
position to take our share of new and emerging
opportunities in the area of converging technologies,"
Mr Craine noted.
"However,
we are not complacent and the report also highlights
how and where we can make further improvements,"
he added.
In
June, 2006, the Isle of Man was chosen by the
South Korean island of Jeju as an example of an
exceptional role model for e-commerce development.
In
a television programme aired on South Korea's
national network, the Isle of Man was described
as "an IT paradise created on a tourist island",
following a visit by reporters from Jeju's television
station.
The
report went on to state that: “The economy, which
has been led by tourism and finance, has seen
the special targeting of IT industries over the
last ten years. Its industrial structure is making
sustained economic growth possible even in a global
recession."
“The
Isle of Man’s core strategy to develop IT industries
is to attract foreign companies by drastically
reducing taxes. Corporate taxes will be reduced
to 0%, giving the Island the world’s lowest corporate
tax rate."
The
report also praised the Manx government's policy
of placing education at the centre of its IT strategy.
In
August, 2004, the Isle of Man Financial Supervision
Commission launched an online company search facility
of the Island’s Companies Registry allowing easier
access for the public to search and view information
about registered firms. According to the FSC,
the service provides details of all Isle of Man
Companies, Overseas Companies registered in the
Isle of Man, LLCs and Business Names. Users can
also purchase company documents, check the availability
of company names and submit an application to
reserve a company name.
In
the same month, the government announced that
it had been actively pursuing measures that could
propel the Island towards assuming the mantle
of the world’s IT disaster recovery hub in the
field of financial services. The Island’s authorities
are seeking to agree memoranda of understanding
(MOU) with multiple offshore jurisdictions which
would allow firms using an Island-based disaster
recovery service to operate under the same regulations
as in their home jurisdictions.
Legislation has been passed with the aid of the
Financial Supervision Commission, and it is said
that the measures are the first of their type
anywhere in the world. Tim Craine, director of
e-business, said: “It was a perfect example of
government working very closely with the private
sector. There was an opportunity for the Isle
of Man to become a world leader for disaster recovery
if we could make it simple and easy for offshore
companies to use.”
He added: “The FSC was happy to comply as long
as the businesses using the service were subject
to adequate supervision in their own jurisdictions,
in order to protect the reputation of the Island.”
The initiative is to target offshore jurisdictions
that may be vulnerable to natural disasters, such
as the Caribbean Islands, in addition to locations
vulnerable to attack by viruses or hackers.
The
Isle of Man has targeted betting and gaming among
other offshore e-commerce sectors, with some success.
Purpose-built legislation was introduced in 2001
and a number of (quite expensive) licenses were
issued to international gaming consortia. Problems
with payment mechanisms in the light of US antipathy
towards on-line gaming led to some closures in
2002, but by 2005 it appeared that the sector
had become established on a long-term basis.
Following
the announcement in August, 2005, of the granting
of a gambling licence to Poker Stars, the second
largest operator of its type in the world, the
resulting publicity both in the business and trade
media helped to raise considerably the Isle of
Man's profile in the international e-gaming industry.
The
Isle of Man government's head of e-gaming Bill
Mummery told the London Stock Exchange in February,
2006, that new regulations governing online gaming
had been introduced in an attempt to establish
the Island as an "e-gaming centre of excellence."
"In
the past year the Island has become a significant
recognised force in global gaming – the industry
is increasingly dynamic," Mr Mummery told a conference,
which included potential investors, as he outlined
changes to regulations in three key areas: software
testing, disaster recovery provision and advertising
and marketing.
The
change to software testing will improve the process
for testing online gambling technology, such as
the fairness of Random Number Generators used
to deal cards or spin a roulette wheel, and implements
a need for continuous monitoring of the operators'
systems to ensure fairness is maintained.
Under
the new regulations, operators who are licensed
and regulated in other jurisdictions can use the
Island to provide disaster recovery and off-line
data storage facilities to support their global
operations.
Rules
governing advertising and marketing have also
been established on how Island-based online gaming
businesses in this regard can support their clients.
"These
changes will help the Isle of Man to win more
business and respond to the changes needed as
industry develops," Mr Mummery stated, adding
that the Island had already made "significant
progress," in developing an e-gaming industry,
having attracted leaders from key sectors, including
Microgaming and PokerStars.
He
added that these legislative changes – produced
with the support of Berwin Leighton-Paisner, the
London based international law firm – will increase
the competitive advantage for the Island's economy
and the operators.
Furthermore,
a world-class telecommunications infrastructure
and the introduction of zero rate corporate tax
will also help the Island gain a competitive edge
in the offshore e-gaming stakes.
- ISLE
OF MAN THE ELECTRONIC TRANSACTIONS ACT 2000
- ISLE
OF MAN HOSTING AND ISP FACILITIES
- ISLE OF MAN
E-COMMERCE FACILITIES
- ISLE OF MAN BANKING
AND PAYMENT PROCESSING FACILITIES
- ISLE
OF MAN PLANNING THE TAX STRUCTURE
- WHAT TO LOCATE
IN THE ISLE OF MAN
- ISLE OF MAN OFFSHORE
OPTIONS FOR E-BUSINESSPEOPLE
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