FOREWORD. Isle of Man

Transcription

1 2015/16

2 FOREWORD A country's tax regime is always a key factor for any business considering moving into new markets. What is the corporate tax rate? Are there any incentives for overseas businesses? Are there double tax treaties in place? How will foreign source income be taxed? Since 1994, the PKF network of independent member firms, administered by PKF International Limited, has produced the PKF Worldwide Tax Guide (WWTG) to provide international businesses with the answers to these key tax questions. As you will appreciate, the production of the WWTG is a huge team effort and we would like to thank all tax experts within PKF member firms who gave up their time to contribute the vital information on their country's taxes that forms the heart of this publication. The PKF Worldwide Tax Guide 2015/16 (WWTG) is an annual publication that provides an overview of the taxation and business regulation regimes of the world's most significant trading countries. In compiling this publication, member firms of the PKF network have based their summaries on information current on 1 January 2015, while also noting imminent changes where necessary. On a country-by-country basis, each summary such as this one, addresses the major taxes applicable to business; how taxable income is determined; sundry other related taxation and business issues; and the country's personal tax regime. The final section of each country summary sets out the Double Tax Treaty and Non-Treaty rates of tax withholding relating to the payment of dividends, interest, royalties and other related payments. While the WWTG should not to be regarded as offering a complete explanation of the taxation issues in each country, we hope readers will use the publication as their first point of reference and then use the services of their local PKF member firm to provide specific information and advice. Services provided by member firms include: Assurance & Advisory; Financial Planning / Wealth Management; Corporate Finance; Management Consultancy; IT Consultancy; Insolvency - Corporate and Personal; Taxation; Forensic Accounting; and, Hotel Consultancy. In addition to the printed version of the WWTG, individual country taxation guides such as this are available in PDF format which can be downloaded from the PKF website at PKF Worldwide Tax Guide 2015/16 1

3 IMPORTANT DISCLAIMER This publication should not be regarded as offering a complete explanation of the taxation matters that are contained within this publication. This publication has been sold or distributed on the express terms and understanding that the publishers and the authors are not responsible for the results of any actions which are undertaken on the basis of the information which is contained within this publication, nor for any error in, or omission from, this publication. The publishers and the authors expressly disclaim all and any liability and responsibility to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication. Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances. PKF International is a family of legally independent member firms administered by PKF International Limited (PKFI). Neither PKFI nor the member firms of the network generally accept any responsibility or liability for the actions or inactions on the part of any individual member firm or firms. PKF INTERNATIONAL LIMITED JUNE 2015 PKF INTERNATIONAL LIMITED All RIGHTS RESERVED USE APPROVED WITH ATTRIBUTION PKF Worldwide Tax Guide 2015/16 2

4 STRUCTURE OF COUNTRY DESCRIPTIONS A. TAXES PAYABLE FEDERAL TAXES AND LEVIES COMPANY TAX TAX FREE COMPANIES CAPITAL GAINS TAX BRANCH PROFITS TAX VALUE ADDED TAX (VAT) FRINGE BENEFITS TAX LOCAL TAXES OTHER TAXES FOUNDATIONS B. DETERMINATION OF TAXABLE INCOME CAPITAL ALLOWANCES DEPRECIATION STOCK / INVENTORY CAPITAL GAINS AND LOSSES DIVIDENDS INTEREST DEDUCTIONS LOSSES FOREIGN SOURCE INCOME TAX INCENTIVES C. FOREIGN TAX RELIEF D. CORPORATE GROUPS E. RELATED PARTY TRANSACTIONS F. WITHHOLDING TAX G. EXCHANGE CONTROL H. PERSONAL TAX BENEFITS TAXATION OF NON-RESIDENT INDIVIDUALS I. TREATY AND NON-TREATY WITHHOLDING TAX RATES PKF Worldwide Tax Guide 2015/16 3

5 MEMBER FIRM For further advice or information please contact Oliver Grosse-Brauckmann, PKFI EMEI Regional Director on or BASIC FACTS Full name: Isle of Man Capital: Douglas Main language: English Population: 86,000 (2013 estimate) Major religion: Christianity Monetary unit: Manx Pound (official); Pound Sterling (GBP) Internet domain:.im Int. dialling code: +44 KEY TAX POINTS Companies resident in the Isle of Man (IOM) are subject to income tax on income derived from all sources. Non-resident companies are required to pay tax on IOM-sourced income only, excluding income from approved financial institutions up until 5 April There is no tax on capital gains and gains are not included in ordinary taxable income. The VAT rules are nearly identical to those applying in the UK. The standard VAT rate is 20% (with the exception of hotel accommodation and certain building works which are taxed at 5%). Double tax relief is available for foreign tax paid. It may be set off against the IOM tax payable. There are no specific transfer pricing rules. Non-residents are subject to IOM non-resident income tax on all IOM-sourced income except income received from approved financial institutions such as banks and fund managers. Income tax is payable by IOM resident individuals on their worldwide income from all sources. Non-resident individuals are only required to pay IOM income tax on IOM-sourced income excluding income from approved financial institutions and most sources of income from IOM companies. There is no tax on gifts and no inheritance tax liability for the estates of resident individuals.. A. TAXES PAYABLE FEDERAL TAXES AND LEVIES COMPANY TAX Income tax is payable by Isle of Man (IOM) resident companies on income derived from all sources. Non-resident companies are required to pay tax on IOM-sourced income only. PKF Worldwide Tax Guide 2015/16 4

6 In general, resident companies are companies incorporated in the IOM and companies whose central management and control is in the IOM. All companies incorporated in the IOM are resident there. The general rate of income tax for companies is 0%. Income from banking business and retail businesses with local profits exceeding 500,000 are taxed at 10%. Profits on Land & Property in the Isle of Man are taxed at 20%. The rate of tax on these two sources of income will be 20% from 6 April Profits can, in certain circumstances, be attributed to and taxed upon Isle of Man resident shareholders. This attribution of IOM company profits does not apply to non-resident shareholders. This attribution regime is being abolished for company profits accruing after 5 April From this date, resident shareholders are taxed upon dividends actually declared by a resident company (not dividends attributed to them). The declaring company is required to classify how much of the dividend arises from taxable retained income profits and how much arises from other sources. The tax year runs from 6 April to 5 April. Company tax returns are due one year and one day after the end of the accounting period and the tax is due by the same date. TAX FREE COMPANIES The special types of tax-free companies such as exempt companies were withdrawn from 6 April 2006 and replaced by general zero-rating as above. CAPITAL GAINS TAX There is no tax on capital gains in the IOM and gains are not included in ordinary taxable income. BRANCH PROFITS TAX IOM companies with foreign branches remain taxable on their worldwide income although relief for foreign tax paid may be available. IOM branches of foreign companies will be subject to IOM income tax on the profits attributable to the branch. The rates of tax above apply to all companies, including branches of foreign companies, so that the zero rate applies where applicable. VALUE ADDED TAX (VAT) Value Added Tax is imposed on items at a standard rate of 20% (with the exception of hotel accommodation and certain building works which are taxed at 5%). The VAT rules are nearly identical to those applying in the UK. Both the UK and IOM form a common area for the purposes of VAT and Customs Duties. FRINGE BENEFITS TAX There is no fringe benefits tax on employers in the IOM. Employees may be subject to income tax on any benefits they receive from their employers. LOCAL TAXES Local rates are imposed on properties. Local authorities determine the rate. PKF Worldwide Tax Guide 2015/16 5

7 OTHER TAXES The IOM government also imposes customs and excise duties. For these purposes, the IOM is regarded as being part of the European Union. The UK and the IOM form a common area for customs duties purposes. National Insurance contributions are payable by employers in the IOM. Contribution rates are similar to those that apply in the UK. Employees also pay contributions. FOUNDATIONS Foundation legislation has been introduced to create a new separate legal entity which has the power to manage its own assets, arrange its own funding and can operate and be taxed in a fashion similar to a local company, incurring 0% IOM tax on all sources other than profits made on IOM land. B. DETERMINATION OF TAXABLE INCOME The taxable income of a company is determined by aggregating its taxable income and then subtracting all allowable deductions. Generally, to be deductible, the outgoings must be incurred wholly and exclusively for the purpose of a trade. Statute provides that some items are specifically non-deductible, e.g. depreciation. Special rules apply in relation to the categories listed below. CAPITAL ALLOWANCES Tax relief is given for the cost of plant and machinery acquired for the purposes of a business in the form of capital allowances. Capital allowances are also available for certain industrial and agricultural buildings and tourist premises. A 100% allowance is available in the first year in which the expenditure is incurred. Where the 100% allowance is not claimed in full, a writing-down allowance is available in subsequent years, at the following rates: Plant and machinery used in a trade: Industrial buildings: Agricultural buildings: Tourist premises: 25% reducing balance basis. 4% straight-line basis. 10% straight-line basis. 10% straight-line basis. DEPRECIATION Depreciation is not available as a tax deduction. Instead, capital allowances can be claimed as a deduction against taxable profits. STOCK / INVENTORY Stock levels are normally taken into account in determining the profits of the trade in accordance with normal commercial principles of accounting. PKF Worldwide Tax Guide 2015/16 6

8 CAPITAL GAINS AND LOSSES There is no capital gains tax in the IOM. DIVIDENDS Dividends received by IOM resident companies are generally taxable at the 0% rate. INTEREST DEDUCTIONS All types of interest paid by IOM resident companies to IOM lenders are tax deductible. Interest paid to non-iom lenders is tax deductible if incurred for the purposes of the company s trade. There are no thin capitalisation rules but there are anti-avoidance provisions which may be in point where interest is incurred purely to mitigate tax. One of these provisions disallows tax deductions for interest arising on loans, the purpose or one of the purposes of which is the reduction of the liability of any person to income tax. A maximum deductible amount of 7,500 per individual applies from 6 April 2011 for borrowings other than those of a trade or property rental business. This limit does not apply to companies. LOSSES Trading losses can be carried forward indefinitely provided a continuity of business test is satisfied. There are also provisions for loss relief within groups of companies (see below). FOREIGN SOURCE INCOME The IOM does not have CFC legislation. However, it does have general anti-avoidance legislation which will tax an IOM resident on income received by a non-resident entity in which the IOM resident has an interest if the income arises to the non-resident entity as a result of steps taken to avoid IOM tax. TAX INCENTIVES It is possible for certain industrial undertakings to obtain a tax holiday for up to five years. C. FOREIGN TAX RELIEF Double tax relief is available for foreign tax paid. It may be set off against any IOM tax payable. Where the income is received from the UK, relief may be available under the UK-IOM Double Tax agreement. In addition to the Double Tax Agreement with the UK, the IOM has full Double Tax Agreements with Bahrain, Qatar, Malta and Estonia and limited Agreements covering aspects of the avoidance of double taxation for individuals with the following countries: Australia Denmark Faroe Islands Finland Greenland Iceland PKF Worldwide Tax Guide 2015/16 7

9 Ireland New Zealand Norway Poland Slovenia Sweden The IOM also has Tax Information Exchange Agreements (TIEAs) currently in force with the following countries: Australia Canada China Czech Republic Denmark Estonia Faroe Islands Finland France Germany Greenland Iceland India Ireland Japan Mexico Netherlands New Zealand Norway Poland Portugal Slovenia Sweden United Kingdom United States D. CORPORATE GROUPS Losses including capital allowances in respect of trading companies may be transferred from one IOM resident company to another IOM company within a group. Two companies are members of a group if one is a 75% subsidiary of the other or both are 75% subsidiaries of a third company. Consolidated tax returns cannot be submitted. E. RELATED PARTY TRANSACTIONS The IOM does not have any specific transfer pricing rules. However, as noted above, where expenditure has not been incurred wholly or exclusively for the purposes of a trade, a tax deduction may not be available. F. WITHHOLDING TAX Non-residents are subject to IOM non-resident income tax on all IOM-sourced income except income received from approved financial institutions such as banks and fund managers. The Assessor of Income Tax may require a person who makes a payment of taxable income to a nonresident to deduct income tax from it at a rate specified by the Assessor. The general rate of withholding tax for payments by companies is zero. A 20% rate applies to rents of Isle of Man land paid to non-resident individuals. A 20% rate applies to rents of IOM land paid to non-resident companies. These rates also apply to interest paid out of rents of IOM land. The Isle of Man Government announced its intention to move to automatic exchange of information for bank accounts held in the Isle of Man where the beneficial owner is resident in the EU rather than operate withholding taxes under the EU Savings Directive. This policy came into effect from 1 July 2011 and thereafter there is no option for account holders to opt for tax retention rather than information exchange. G. EXCHANGE CONTROL There are no exchange control rules in the IOM. PKF Worldwide Tax Guide 2015/16 8

10 H. PERSONAL TAX Income tax is payable by IOM resident individuals on their worldwide income from all sources. Nonresident individuals are only required to pay IOM income tax on IOM-sourced income excluding income from approved financial institutions and most sources of income from IOM companies. An individual is regarded as a resident in the IOM if he spends an aggregate of six months in any tax year in the IOM. In addition, an individual who visits the IOM over four or more consecutive years for an average of three months in each year will also be considered an IOM resident. Income tax is assessable on income less any allowable deductions. The rules for allowable deductions for individuals engaged in a trade are similar to those for companies. In addition, individuals are able to take advantage of deductions in respect of pension premiums, interest paid to an IOM lender of up to 7,500 per person per annum, nursing expenses (up to 9,300 per annum) and private medical insurance payments of up to 1,800 per annum made by taxpayers aged over 60. Employees have tax deducted from each salary and wage payment by their employers under the Income Tax Instalment Payments (ITIP) scheme. Taxpayers are assessed on a current year basis with tax due on 6 January following the end of the year assessment. A payment on account is made based on 105% of the previous year's liability (less ITIP) which is payable by 6 January in the year of assessment. Spouses are taxed as separate individuals, unless the couple elect to be jointly assessed. If they do, they will be jointly assessed on both their incomes with both personal allowances being available in the joint assessment. Where, immediately prior to 6 April 2006, husband and wife were jointly assessed, they will be deemed to have made the election to continue to be jointly assessed. The tax rates are as follows: 0 10,500 Taxable Income ( ) 0 21,000 for jointly assessed married couples Above 10,500 or above 21,000 as applicable Rate (%) 10 due to be abolished from 6 April due to be abolished from 6 April The 10% tax rate and the above personal allowances are not available to non-resident individuals (but see below). There is a cap on personal income tax liabilities. No one individual can have a liability for a tax year of more than 125,000. Personal allowances are available for taxpayers at the following amounts for the tax year commencing 5 April 2012: Single person: 9,500 (to be increased to around 14,000 from 6 April 2016); Married couple, jointly elected: 19,000; Additional age allowance (age 65+): 1,000 per person due to be abolished from 6 April PKF Worldwide Tax Guide 2015/16 9

11 There is no tax in the IOM on gifts and no inheritance tax liability for the estates of IOM resident individuals. BENEFITS Chargeable benefits with an aggregate value of under 400 for the year are exempt from tax. Exempt benefits: Accommodation used solely for duties of employment. Approved Profit Sharing or Savings Related Share Options Schemes. Car Parking space at or near place of work. Medical/dental insurance. Christmas party expenses up to 100 per head. Provision of a personal computer for use at home up to benefit value of 1,000. Nursery or crèche facility expenses necessary for employees to attend work. TAXATION OF NON-RESIDENT INDIVIDUALS Non-residents are only charged to income tax on IOM source earned income. From the tax year ending 5 April 2010, the small personal allowance available to non-residents has been abolished. Previously an individual receiving IOM income but who was not resident in the Isle of Man was entitled to a personal allowance of 2,120. As an alternative to taxing the total income less personal allowance, tax may be charged on the IOM source income of a non-resident subject to a limit of: (1) Tax due on IOM income reduced by any excluded income plus; (2) Tax deducted at source from any excluded income (likely to be nil). If this alternative is lower, the alternative will apply. Excluded income includes dividends, bank interest, social security benefits and National Insurance retirement pension I. TREATY AND NON-TREATY WITHHOLDING TAX RATES Dividends (%) Interest (%) Royalties (%) (a) Companies: Bahrain PKF Worldwide Tax Guide 2015/16 10

12 Estonia Malta Qatar UK Non-Treaty (b) Individuals: Bahrain N/A Estonia N/A Malta N/A Qatar N/A UK N/A Non-Treaty N/A PKF Worldwide Tax Guide 2015/16 11

13