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ISLE OF MAN
LINKS IN THIS SECTION
DOUBLE TAX TREATIES
INTERNATIONAL AGREEMENTS
RELATED INFORMATION

International Agreements

Isle of Man Double Tax Treaties

Until recently, the Island had only one Double Taxation Agreement, which was entered into with the United Kingdom in 1955. This treaty is very similar to the equivalent agreements between the UK and Jersey and Guernsey.

The treaty does not conform to the OECD standard model treaty. Its main features are as follows:

  • the profits derived from an industrial or commercial enterprise in one country will not be taxed in the other country except to the extent that they are attributable to a permanent establishment;
  • profits of shipping or air transport attributable to a resident of either country are not taxed in the other country, regardless of 1;
  • an individual resident in only one of the two countries is exempt from tax in the other country on personal, including professional services performed in the other country on behalf of a resident of his own country (but they must be taxed in his own country); and
  • if despite the above, tax is payable in both countries, the tax paid in one country is allowed as a credit against tax due in the other.

The agreement specifically excludes dividends and debenture interest from its provisions.

Exempt companies, International Companies and International Limited Partnerships were not entitled to the benefits of the treaty.

A Tax Information Exchange Agreement (TIEA) and an arrangement amending the 1955 Double Taxation Arrangement between the UK and the Isle of Man, signed in Douglas on September 29, 2008, entered into force on April 2, 2009. The provisions of the TIEA also took effect in the UK and the Isle of Man on April 2, 2009.

The agreement amends the provisions of the 1955 double taxation treaty by adding provisions on the taxation of income from pensions and a mutual agreement procedure.

Under the revised agreement, many pensions paid from the United Kingdom to people living in the Isle of Man are taxed in the Isle of Man only.

In addition taxpayers have new rights under the agreement to ask one government to intervene in order to resolve problems arising from the application of the agreement.

The negotiation, signing and ratification of tax co-operation agreements is part of the Isle of Man’s commitment to international standards and the global effort to establish a system based on co-operation between countries, transparency and effective exchange of information in tax matters.

The Isle of Man was one of the first international financial centres to make a commitment to the OECD principles of transparency and exchange of information and has since then taken the lead among smaller international financial centres in implementing these principles.

The Isle of Man has signed double tax avoidance agreements with the following countries (all of which are in force as of December 2010, except where otherwise indicated):

  • Australia (Agreement for allocation of taxing rights with respect to certain income of individuals)
  • Bahrain (Double Tax Agreemen, awaiting ratification)
  • Belgium (Double Tax Agreement, awaiting ratification)
  • Denmark (Agreement for the avoidance of double taxation on individuals)
  • Estonia (Double Tax Agreement)
  • Faroe Islands (Agreement for the avoidance of double taxation on individuals)
  • Finland (Agreement for the avoidance of double taxation on individuals)
  • Greenland (Agreement for the avoidance of double taxation on individuals)
  • Iceland (Agreement for the avoidance of double taxation on individuals)
  • Ireland (Agreement for affording relief from double taxation in respect of certain income of individuals and a MAP for the adjustment of profits)
  • Malta (Double Tax Agreement)
  • New Zealand (Agreement for the allocation of taxing rights with respect to certain income of individuals)
  • Norway (Agreement for the avoidance of double taxation on individuals)
  • Sweden (Agreement for the avoidance of double taxation on individuals)
  • UK (Double Tax Agreement)

According to the Isle of Man Income Tax Division, the Island is in active tax treaty negotiations with a number of countries, including Canada, Italy, the Netherlands, and Spain.

The Isle of Man has also signed a number of tax agreements with respect to income from shipping and aviation. As of December 2010, these include:

  • Denmark (shipping and aviation)
  • Faroe Islands (shipping and aviation)
  • Finland (shipping and aviation)
  • France (shipping and aviation)
  • Germany (shipping)
  • Greenland (shipping and aircraft)
  • Iceland (shipping and aviation)
  • The Netherlands (shipping and aviation)
  • Norway (shipping and aviation)
  • Sweden (shipping and aviation)
  • United States (shipping)

The Isle of Man and the Netherlands broke new ground in October, 2005, as representatives from both governments signed a bilateral economic cooperation treaty, the first of its kind between a small international financial centre and an OECD member.

The agreements are part of a Manx/Dutch economic deal aimed at supporting business opportunities between the two countries.

According to the Manx government, the deal with the Netherlands is seen as confirming the economic recognition of the Isle of Man by an important European state. It also opens up international business opportunities and paves the way for similar agreements with other countries.

The agreement has been endorsed by the OECD.

Included within the framework of the agreement are:

  • A shipping and aircraft taxation agreement ensuring that a relevant business based in the Isle of Man will not be taxed in the Netherlands so long as it is conducting international trade;
  • A ‘transfer pricing’ agreement, meaning that the Isle of Man and the Netherlands will work together to ensure certainty of treatment when companies having operations in the two territories move goods and services between them;
  • An agreement that Manx subsidiaries of Dutch companies will not experience any tax issues now that the Isle of Man has introduced its ‘0/10’ company tax system;
  • A commitment to work towards a full double taxation agreement between the Isle of Man and the Netherlands which will further support Manx-Dutch business relationships; and
  • A tax information exchange agreement.

In April 2008, the Isle of Man announced that it had concluded two tax cooperation agreements with Australia. The signing ceremony took place at Australia House in London, and the agreements were signed by the Isle of Man’s Treasury Minister, Allan Bell, and the Australian High Commissioner to the United Kingdom, John Dauth.

The two agreements comprised:

  • A tax information exchange agreement based on the OECD model; and
  • An agreement for the allocation of taxing rights over certain income of individuals and to establish a mutual agreement procedure in respect of transfer pricing adjustments.

Minister Bell commented following the signature of the treaties that:

"It would be naive in the current world economic climate not to be aware of the drive by many countries to raise the levels of transparency and co-operation so as to increase the stability of financial markets."

"The Isle of Man understands what is required of a financial centre that is part of the global economic community. These agreements show once again that we work well with other countries and deliver against our promises."

The agreement entered into force on January 5, 2010, after the Australian side announced the ratification of the agreement. The Isle of Man ratified the agreement back in March 17, 2009.

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Isle of Man Other International Agreements

In October, 2002, Treasury Minister, Allan Bell, signed a bilateral agreement with the United States of America which provides for the exchange of information on tax matters between the two countries. The agreement provides for exchange of information by specific case request.

Allan Bell said: “Today co-operation between governments is more important than ever as we work to ensure that no safe haven exists - either onshore or offshore - for funds associated with activities such as money laundering, terrorist financing or tax evasion.

“Equally the Isle of Man believes that the expansion of the global economy depends on both onshore and offshore international financial centres combining highly competitive entrepreneurial environments for business with a quality of regulation and stability.”

The Isle of Man sets out to be a well regulated and responsible jurisdiction and is financially strong, as evidenced by its Triple A rating with Moody’s and Standard & Poors. It has been recognized by the FATF as being ‘at the forefront of international efforts to prevent the abuse of company structures for criminal purposes’.

Allan Bell continued: “The ability to exchange information in relation to criminal matters already exists between our countries via the Department of Justice in the United States and the Attorney General in the Isle of Man.

“The Island’s early commitment to OECD has permitted us to play an active role with the United States and other member countries in the development of a model agreement on which the agreement being signed here today is based. This provides an alternative route to obtain information in relation to criminal tax matters and also provides for a timetable for this to be extended to include civil tax matters.

“The development of a network of such agreements between member states and committed jurisdictions, whether on a multilateral basis, or a bilateral basis as adopted by the Isle of Man, will in due course evidence the existence of a new and truly international standard on Exchange of Information.

“The Isle of Man will continue to support the development of such international standards and seek to foster business relationships with other countries based on those standards and we look forward to participating in the ongoing discussions with the United States to further develop and establish closer economic and fiscal ties.”

The IOM's agreement with the US forms part of the jurisdiction's efforts to implement its commitments to the OECD, given in early 2001, which included a commitment to develop effective exchange of information. Over the following 12 months the Isle of Man, together with other jurisdictions, negotiated a Model Tax Information Exchange Agreement.

The Model being adopted provides for exchange of information based upon a formal request being received by the Competent Authority in the Isle of Man. A request must be made on an individual case basis and the subject of the request must be under investigation in the requesting jurisdiction. Other safeguards are included to prevent ‘fishing expeditions’ for example, the requesting party must first take all means available in its own jurisdiction to obtain the information. All information that is exchanged may not be passed on to third parties and there are strict confidentiality measures.

The US Treasury Department announced in September, 2006, that the Tax Information Exchange Agreement had entered into force.

According to the Treasury: "An exchange of letters between the United States and the Isle of Man was completed on June 26, 2006, thus bringing into force an agreement that allows for the exchange of information on tax matters between the United States and the Isle of Man."

In October 2007, an association of seven Nordic countries (including Greenland, Finland, the Faroe Islands, Norway, Denmark, Sweden and Iceland) concluded a package of Tax and Information Exchange Agreements (TIEA) and economic agreements with the Isle of Man. By the end of 2008, all 28 of the tax and economic cooperation agreements had been ratified and become operational.

The complete list of TIEAs entered into by the Isle of Man as of May 2011 is as follows:

  • Australia (effective January 5, 2010)
  • Canada (awaiting ratification)
  • China (awaiting ratification)
  • Denmark (effective October 26, 2008)
  • Faroe Islands (effective August 3, 2008)
  • Finland (effective June 14, 2008)
  • France (effective October 4, 2010)
  • Germany (effective November 5, 2010)
  • Greenland (effective April 11, 2008)
  • Iceland (effective December 28, 2008)
  • India (effective March 17, 2011)
  • Ireland (effective December 31, 2008)
  • Mexico (awaiting ratification)
  • The Netherlands (effective July 6, 2006)
  • New Zealand (effective July 27, 2010)
  • Norway (effective August 23, 2008)
  • Poland (awaiting ratification)
  • Portugal (awaiting ratification)
  • Sweden (effective December 27, 2010)
  • United Kingdom (effective April 2, 2009)
  • United States (effective January 1, 2004)

The Isle of Man was one of the first nations to make a clear commitment to OECD standards on tax co-operation in 2000 and was recognised by the OECD as a ‘committed jurisdiction’ in 2001.

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.”

Treasury Minister Allen Bell added:

“The OECD lists are a significant step forward in the debate about tax, as countries are now being judged and separated on the basis of agreed international criteria – not just size. The Isle of Man has always supported an objective, global approach to this issue and the G20 summit has confirmed this as the way forward.”

“Inclusion on the white list represents a major endorsement of the Isle of Man and of our long-term strategy of positive engagement with the OECD. This can only reinforce the island’s reputation and confidence in our future as an international business centre of quality.”

“The island has long been committed to the international standards of tax transparency developed by the OECD in 2000. We are at the forefront of small nations in delivering on that commitment.”

“Over the past seven years we have signed more tax information exchange agreements than any of our counterparts, including agreements with the UK, France and Germany.

“The island also has a strong track record of complying with international standards of financial regulation, as assessed by the IMF and others. A series of independent, external reviews over the past decade have enhanced our reputation as a well regulated centre for international finance,” noted Bell.

The Chief Minister, meanwhile, stressed that the Island would continue to work with the OECD and other bodies promoting international standards on tax and financial regulation.

“The Isle of Man has a long-term policy of positive engagement with international initiatives and of supporting international standards,” declared Brown, adding: “At a time of global economic crisis this responsible, co-operative approach is particularly relevant and vitally important.”

“The G20 summit is clearly more of a beginning than an end. As work continues towards solutions to the global economic crisis, the Isle of Man is ready to play a constructive part,” concluded Brown.

MoUs

In February, 2005, agreements were signed with the Dubai Financial Services Authority, the UAE Central Bank, and the Bahrain Monetary Agency. The DFSA signed two memoranda of understanding with the Isle of Man's Financial Supervision Commission and Insurance and Pensions Authority.

The two agreements aim to provide a framework for the provision of mutual assistance and information exchange between the two jurisdictions with regard to cross-border transactions. In addition, the agreements are designed to improve compliance, thereby helping to prevent money laundering and fraud.

Under each agreement, the Middle East Agencies, the FSC and IPA will consult with each other on an on-going basis to enhance regulatory co-operation and to collaborate on international supervision between the regions.

The MOUs also provide a framework for regulatory cooperation through the exchange of information and mutual cooperation in the field of on-site examinations of entities, subject to regulation in both jurisdictions.

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