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Isle of Man Double Tax Treaties

The Island only has one Double Taxation Agreement which was entered into with the United Kingdom in 1955 and 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)
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 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.

Isle of Man Other International Agreements

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.

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Isle of Man Double Tax Treaties

Isle of Man Other International Agreements