Isle Of Man Issues Guidance On Tax Treatment Of Pensions

by Jason Gorringe, Tax-News.com, London

19 August 2009

The Income Tax Division of the Isle of Man Treasury on August 13 published a practice note relating to the taxation of Isle of Man pensions paid to non-residents.

As part of its program of developing closer economic and taxation cooperation with other countries, the Isle of Man has concluded new tax information exchange agreements with a number of other countries. Many of the new agreements provide that the Isle of Man can continue to tax pensions paid to a non-resident (i.e. there is no change to the current position), but some of the agreements provide that pensions should only be taxed in the recipient’s country of residence.

In order to maintain the Isle of Man’s competitiveness, the Treasury is to allow non-resident recipients deductions from paying income tax on pensions in the Isle of Man where tax of greater value is paid in the third country.

To be eligible to receive a pension without having Isle of Man income tax deducted, an individual must:

• not be tax resident in the Isle of Man;
• be tax resident in a country with which the Isle of Man has an agreement which provides that pensions are taxable only in the country of residence; and
• meet any other conditions set out in the relevant agreement, such as receiving a particular type of pension.

Non-resident individuals will only be able to receive their pension without the deduction of Isle of Man tax if they make a claim to the Income Tax Division, that claim is accepted by the Division, and the Division instructs the pension provider to stop deducting Isle of Man tax.

To make a claim, non–resident individuals must complete form R221, "Pensions Income – Application for relief from Isle of Man Income Tax", and send it to the tax authority in their country of residence.

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