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Isle of Man: Offshore Business Sectors

Introduction

The UK's three IOFCs, Jersey, Guernsey and the Isle of Man have developed in different ways; the Isle of Man is not dominated by any one particular activity, but has across-the-board strength in the financial sector, with substantial business in banking, fund management and captive insurance. The Isle of Man has also encouraged manufacturing and trading operations, which can be fiscally offshore while staying within the EU's VAT regime. The island's trust sector is long-established and has a solid backing of law firms, trust managers and advisory practises. The Isle of Man has instituted favourable regimes for ship and aircraft management.

In December 2000 the Isle of Man government introduced the Corporate Service Providers Act 2000, which creates a licensing regime for corporate service providers (CSPs) and empowers the Financial Supervision Commission to process applications for CSP status and to investigate CSP license holders. CSPs must operate client accounts like other professionals. Under the act it is an offence for a CSP to operate without a licence.

In 2001 the government passed the Online Gambling Regulation Act, and the first three licences for international gaming operations were issued in September 2001. Although three more licenses were issued in 2002, the Island's regime came to be seen as too onerous by 2003, and a number of license-holders left. By 2006 however it was clear that changes to the regime had been successful in re-kindling interest in the sector.

Late in 2001 the government completed a new legislative regime for international pension schemes, and this became available for use early in 2002. For details, see the Insurance section via the link below.

The Island's 2003 budget included a major reform package for the Island's fund industry. Key measures included:

  • A zero tax rate for all third party fund administrators, and for Managers of EIFs and PIFs - representing an extension of the existing zero rate tax regime on fund managers' profits to both fund administrators and to managers of Experienced and Professional Investor Funds;
  • VAT Exemption for Experienced and Professional Investor Funds - representing an extension of the VAT exemption on management fees.
  • Overseas Funds Exemption in the context of Isle of Man regulation - such that an overseas fund may be administered in the Isle of Man without "dual regulation" where it is incorporated in a jurisdiction having an appropriate regulatory framework.

The Isle of Man's finance industry has remained stable despite the recent global financial and economic turmoil. Total deposits were GBP44.67bn on June 30, 2013, having fallen from a peak of GBP57.29bn on December 31, 2008. Total bank deposits have, however, just about doubled since 1999. “The global economy has entered one of its worst periods in living memory and the double impact of a banking crisis followed by a global recession which in turn may cause more damage to the banking industry remains a cause for concern. Even with interest rates held at an historic low we are seeing that the cost of credit is still rising. As the recession continues, conditions for businesses will become more difficult as time plays its role. The Isle of Man has nevertheless fared very well so far,” an FSC report observed in 2009.

The Isle of Man's funds industry has grown rapidly over the last decade; funds under management and/or administration grew from GBP6.6bn on December 31, 1999 to almost GBP60bn on June 30, 2008. By December 31, 2012, total funds under management and/or administration had fallen back to GBP22.3bn.

During the first quarter of 2013, a total of 328 new Isle of Man companies were incorporated under the Companies Act 2006, compared with 246 under the 1931 Companies Act, an increase over the last quarter of 2012.

During 2005, the Commission commenced a major project to consolidate and modernise the Isle of Man's financial services legislation, and put forward important proposals to enhance its accountability and transparency as part of this project. The Commission also set out a mechanism under which there would be involvement of the industry in the setting of regulatory strategy.

This project also embraced innovative proposals for the regulation of e-money, to be drawn up in conjunction with the e-business sector which continues to have strong growth potential.

The Isle of Man's invitation to become a full signatory to the IOSCO Multilateral Memorandum of Understanding will also ensure that Manx-based businesses enjoy access into major markets overseas, the report stated.

Other developments during 2005 included the enactment of legislation for the licensing and supervision of trust service providers. The Commission took steps further to strengthen its own arrangements for good corporate governance. During 2006 and 2007 the IOM continued to fine-tune its investment and regulatory regimes with a plethora of legislative measures. Financial Services Act 2008, which received Royal Assent on August 1, 2008 and consolidated a number of legislative acts regulating the financial services industry.

 

 

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