Isle of Man: Country and Foreign Investment
Economy and Currency
This page was last updated on 23 January 2020.
The Manx economy is stable. Unemployment is very low and inflation, though averaging 1.9% in 2019, a little above the 1.3% EU average, is stable. Tourism and agriculture, forestry and fishing, the traditional mainstays of the island's economy, have declined in importance recently. The island's government has encouraged economic growth by creating a beneficial tax regime and by offering incentives to manufacturing and financial services./p>
The Manx economy enjoyed an average of over 6% GDP growth in real terms from 1990 to 2014. There was a slight dip in 2015-16 (-0.9%), but since then growth has returned, with 7.4% growth in 2016-17 and 7.7% in 2017-18./p>
In 2018, Manx government national income figures showed that the five largest sectors in the Manx economy were e-gaming (21.1%), insurance (17.6%), ICT (9.1%), ‘other finance and business services’ (8%) and banking (6%). In total, finance accounts for nearly 53% of the island’s income./p>
E-gaming exhibited GDP growth of 18% and insurance grew by nearly 12%. The expansion of these two sectors accounts for most of the Isle of Man’s economic growth. However, the other three top 5 sectors – ICT (-6%), ‘other finance and business services’ (-25%) and banking (-19%) – did not fare as well. The government is currently taking measures to help slow this decrease. Out of the other sectors, the largest growth figure was for ‘other professional services’, which shot up by 81%./p>
In 2014, the Isle of Man withdrew from Standard and Poor’s ratings system and has subsequently used Moody’s Investors Service. In October 2017, Moody’s downgraded the island’s credit rating from Aa1 to Aa2. The agency stated that this was due to "continued instability and uncertainty over the Brexit process"./p>
In November 2019, Moody’s changed the outlook of both the Isle of Man and the UK from ‘stable’ to ‘negative’. Again, Brexit was cited as the cause, the rationale for the Isle of Man’s outlook also being lowered being due to its close economic ties with the UK. Nevertheless, the Isle of Man is still regarded as having “very strong public finances.”/p>
With a low population density and plenty of development land, the Isle of Man is in a better position to sustain future population and economic growth than some other small international offshore financial centres (the Channel Islands, for example). The local currency, the Manx pound, is on a par with the pound sterling, which is also legal tender and commonly used. (Note, however, that the Manx pound is not legal tender in the UK). There are no exchange controls.
Import of Foreign Capital/p>
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 non-residents receive interest payments without any withholding tax deduction.
Investments by Foreigners/p>
The government encourages the development of new businesses and industries. Assistance is available to both existing and new businesses if all 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
- there will be a good level of profitability and high return on capital investment.
If these conditions are met, 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./p>
In February 2019, Tynwald announced the introduction of a £4,000 rebate on national insurance contributions to attract immigrants to the Isle of Man. The national insurance holiday scheme is open on or after 6 April 2019 to anyone who takes up residence on the island and obtains a full-time permanent position there. The applicant’s gross salary must be £21,000 or more (this does not apply to returning Manx graduates) and they must not have been tax resident on the island in the last five tax years.
The Manx government has established a 20-acre freeport next to 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./p>
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 within the freeport. Currently 10 companies have been established in the freeport, the only such area in a European offshore financial centre.
EU and OECD Scrutiny/p>
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 island’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 increased pressure on the island./p>
In December 2000 the Isle of Man 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./p>
Along with Jersey and Guernsey, however, the Isle of Man responded to its inclusion on the OECD's blacklist by making it clear that it will not be pushed around to the detriment of its offshore sector, and in making its 'commitment' to the OECD in December 2001 the island made it clear it would only agree to information-sharing if its major offshore competitors did so too. However, the Isle of Man has since won the praise of the OECD for being at the forefront of the tax transparency drive following the G20 summit in London in April 2009, and sits proudly in the OECD's 'whitelist' of cooperative jurisdictions./p>
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. However, the Isle of Man 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 from 1 July 2011.