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Isle of Man: Domestic Corporate Taxion

Taxation of Trusts

In the normal trust situation, ie with settlor, life tenants and beneficiaries all being non-resident, full exemption from Isle of Man taxation is given to foreign income and local bank interest, by concession.

A Manx resident who receives income from a trust, whether Manx or foreign, will be taxed on it; however, if income is accumulated in a Manx trust with Manx beneficiaries, the trustee(s) will be assessed on the income.

In October 2009, the Isle of Man Treasury released additional guidance on the taxation of trusts in a practice note which set out the Assessor's view of when trustees and beneficiaries of trusts may be subject to Isle of Man income tax.

The Practice Note provides guidance on: filing requirements; the Resident Exclusion Clause; changes in trustees, and the trustees’ tax positions; trustee management expenses; income distributions to non-resident beneficiaries; and Purpose Trusts. The practice note also stipulated that the tax rate on trusts for the fiscal year 2009/10 was 18%.

The Treasury has reminded interested parties that the practice note, which should be read in conjunction with PN 141/07 – The Taxation of Trusts in the Isle of Man, is intended only as a general guide, and reference should also be made to the appropriate legislation.



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