The agreement
specifically excludes dividends and debenture interest from
its provisions.
Exempt companies,
International
Companies and International Limited Partnerships are not
entitled to the benefits of the treaty.
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 – the
first of its kind between a small international business
centre and an OECD member – aimed at supporting business
opportunities between the two countries.
They
were signed in the Manx capital, Douglas, on 12 October
2005 by Mr Bell and the Deputy Finance Minister of the Netherlands,
Joop Wijn. The agreements were ratified by the Isle of Man's
parliament, the Tynwald, at its May 2006 sitting, and on
21 July 2006, the Isle of Man Government received confirmation
that the Netherlands had also ratified the agreements. In
accordance with the wording of the agreements, they came
into force following receipt of the notification from the
Netherlands.
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.
“Normal
relations between countries are based on respect, understanding
and appropriate agreements. Fiscal agreements, in particular,
foster bilateral trade and investor confidence in both countries.
The Isle of Man has negotiated skillfully a good package
with the Netherlands and has never ignored its international
obligations during those negotiations," observed Bell.
“We
have come out of this as friends of the Netherlands and
look forward to working closely with them going forward.
We invite other countries that we are also in negotiation
with now to finalise agreements with the Isle of Man underpinned
by mutual benefits, respect and understanding as they would
with any other well-regulated member of the international
economic community," he added.
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
December, 2005, Australia's Deputy Commissioner of Taxation,
Paul Duffus informed the Senate Economics Legislative Committee
that the Australian Tax Office (ATO) had been conducting
talks with the Isle of Man and other 'low-tax' jurisdictions
with a view to completing tax information exchange agreements.
International Agreements
In
June 2000 the Isle of Man Government wrote a 'Letter of
Commitment' to the OECD's Financial Action Task Force in
which it promised to comply with international standards
of transparency and mutual assistance. The Government has
not revealed what specific legislative consequences may
follow, but it is supposed that there may be some changes
to company law, and a strengthening of international treaty
obligations which may be reflected in domestic law
In
September 2000, an inter-governmental report was published
by the Offshore Group of Banking Supervisors and the Financial
Action Task Force (FATF) which praised the Isle of Man authorities
for their successful endeavours in countering money laundering
and related criminal activities with a 'robust arsenal'
of pro-active initiatives. The report examined the effectiveness
of the island's legislation, regulations and administration
activities directed against money laundering. The authors
were particularly impressed with plans to strenghten company
sector regulations, saying that these enabled the Island
to be 'at the forefront of international efforts to prevent
the abuse of company structures for criminal purposes.'
The
report also welcomed the creation of a new financial crime
unit which draws on the combined efforts and expertise of
the police, customs and regulators with a pro-active enforcement
strategy. And financial professionals and institutions on
the island have also been praised by the report - it says
that the financial sector has a 'good compliance culture'
which allows it to quickly highlight potentially suspicious
transactions.
In
October, 2002, the Isle of Man’s 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
February, 2005, agreements were signed with the Dubai Financial
Services Authority, the UAE Central Bank, and the Bahrain
Monetary Agency.
Dubai
Financial Services Authority (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.
In
October, 2007, an association of Nordic countries concluded
a package of Tax and Information Exchange Agreements (TIEA)
with the Isle of Man, providing for the exchange of information
between governments on a case-by-case basis, as the Manx
government seeks to reinforce its global reputation as a
well-regulated financial centre.
The
Nordic countries started joint negotiations in July 2006
to conclude tax information exchange arrangements with jurisdictions
that have made a commitment to apply the OECD standards
on transparency and exchange of information in the tax area.
The taxation and economic co-operation agreements have been
signed with the seven members of the Nordic Council, namely
Norway, Sweden, Finland, Iceland, Denmark, Greenland and
the Faroe Islands. The package of 28 agreements was signed
at a ceremony in Oslo. The package include tax information
exchange agreements based on the OECD model of exchange
of information on request on a case by case basis, and shipping
and aircraft taxation agreements ensuring that a relevant
business based in the Isle of Man will not be taxed in the
Nordic countries so long as it is conducting international
trade.
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