Tax Benefits of Using the Isle of Man

A Taxing Question - Why Use the Isle of Man?

ExpatMoneyChannel identifies the tax implications of using the Isle of Man as a base for your savings and investments.

Like many offshore financial centres, the Isle of Man benefits from a low tax regime. There is no capital gains tax, wealth tax, stamp duty, death duty or inheritance tax, all of which allows your savings to grow on the island without the deduction of taxes. This doesn’t mean you are exempt from paying tax on your savings and investments in your current country of residence, it simply means there are no Isle of Man taxes applicable. For example, if you are an expat in a European Union country, you are required to pay certain taxes on your savings wherever they are held.

So if you have savings in the Isle of Man and reside in an EU country you have the option to have withholding tax automatically deducted at source from interest earned on savings at a current rate of 20% rising to 35% in July 2011, or opt for disclosure of interest payments and not have the withholding tax applied. However, in July 2011, the Isle of Man will no longer offer the withholding tax option and will move to automatic exchange of information. If you do not reside in an EU country then the EU savings directive does not apply to you. In addition, taxes such as death duties or inheritance taxes may well be bound by your domicile, rather than residence.

But for expats juggling with at least two tax regimes initially, possibly more if you have to move for employment purposes, placing your savings and investments in a reputable offshore centre not only gives you the potential to grow your savings in a largely tax free environment, it also gives you the flexibility of having all your savings and investments in one place. For many expats this is a much better option than having lots of little savings and pension pots in different countries suffering a wide variety of different tax regimes and potential access problems.