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Multi-Jurisdictional Structuring

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The Isle of Man – A Place To Make Things Happen

1024 768 Ita McArdle

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As a tax neutral domicile the Isle of Man is perfectly situated geographically, fiscally, politically and constitutionally to form part of a structure that wishes to access Europe or indeed any other part of the world.

The Isle of Man is what is termed a Crown Dependency and thus has the Queen of England as its titular head. The basis of law is common law and statute-based and therefore English case law is usually persuasive. With the ever-increasing international influence on domestic legislation, aspects of EU law can be applicable in relevant areas also.

The Isle of Man service providers – lawyers, accountants, trust and corporate service providers (TSPs), Fund Administrators and investment fraternity – pride themselves on having a proactive approach to business wrapped around a pragmatic, value-for-money and professional approach. This ethos is heavily endorsed by both Government through its marketing body, the Department of Economic Development, and the Regulator (Isle of Man Financial Services Authority) and is encapsulated in the Isle of Man marketing approach strap line of “Isle of Man. Where you can”.

Import and Export
The Isle of Man, by virtue of its unique Customs and Excise Agreement with the United Kingdom and European Law, is treated as part of the UK and European Union (EU) for Customs , Excise and Value Added Tax (VAT ) purposes. The benefit of this is that the Isle of Man Customs and Excise can, through its Entry Processing Unit (EPU) housed within the UK’s Customs Handling of Import and Export Freight (CHIEF) Computer system, provide importers and their agents with the Ability to electronically declare goods imported to or exported from the United Kingdom / Isle of Man. Currently the system allows for electronic clearance without the need for the goods to physically travel to the Isle of Man. It is expected that a system of “Centralised Clearance” will be introduced across the EU.

Structures
The Isle of Man has two prime bodies of company law – the Companies Act 1931–2004 and the Companies Act 2006. There is some overlap between the sets of legislation, but essentially a company formed under the 1931 Act is a more traditional style of company with extensive legislative provisions. The 2006 Act company legislation is designed to be more flexible and modern. That being said, 2006 companies are being used for a comprehensive variety of transactions including listing on exchanges throughout the world, owning property, trading and general investment vehicles. Both vehicles can be registered for VAT as mentioned above.

There are no restrictions on who can own the shares in Isle of Man companies and there are no permissions required for the raising of capital. There are applicable provisions in respect of the public distribution and promotion of the shares in Isle of Man companies. The 1931 provisions are more formalised in the traditional prospectus sense whilst the requirements under the 2006 Company in simple terms require the prospectus to contain sufficient information for an investor to make an informed decision.

The Isle of Man also has Limited Partnership legislation, limited liability companies and Protected Cell Legislation which can be very useful for structuring.

As a Common Law jurisdiction Trust law is well established in the Isle of Man and can be part of the structure to hold shares. The Isle of Man also has the concept of Purpose Trusts which works well for structuring joint venture arrangements. Foundations are another vehicle that can be very useful for structuring as an alternative to a trust or company. The foundation is a statute based entity and is a favourable option for certain jurisdictions which are familiar with the concept.

Taxation Generally
The Isle of Man does not tax the income or capital gains of companies domiciled on the Isle of Man if they are owned by non-IOM residents.

Additionally, there is no stamp duty, inheritance tax or withholding tax. Probate fees are minimal.

However, there are various tax considerations regarding remittance of income that are imposed by the UK tax authorities. The advice in respect of any structure would need to be tailored according to the details of the structure.

Multi-Jurisdictional Structuring
There are no prohibitions on an Isle of Man company or other structure either being owned by non-IOM structures or individuals and similarly there are no restrictions on what an Isle of Man structure can own.

Isle of Man structures are involved in many structures and there are some well-established examples involving Canada, Ireland, UK Mauritius, Delaware, Hong Kong and Singapore, as well as European companies to name a few.

The reasoning can be both legal and for fiscal efficiencies as well as simply being pragmatic. For example, an investment may be in a company and it could be more efficient to buy the company rather than the investment directly.

Recent changes in the regulatory approach in the Isle of Man have seen the combining of the former pensions authority and financial services commission into one body known as the Isle of Man Financial Services Authority (FSA). This move is part of a response to the legal and financial services industry support for a commercial and progressive environment to support growth sectors while maintaining and enhancing the Isle of Man’s reputation as a jurisdiction of excellence.

FSA is now responsible for the Captive Insurance Industry which will not be governed by Solvency ɪɪ as well as the Life Industry that will be subject to Solvency ɪɪ. This two tier approach is indicative of the pragmatic and resourceful approach of the Government and the FSA to meet industry needs.

A product which has had strong legal input has been the development of a crowd funding regime and new banking model to support traditional banking partners.

The Isle of Man has a lot to offer: a well-run regime with strong growth and forward-thinking that makes it the place to make things happen.