Isle Of Man Revises Property Speculation Tax Proposals

by Robert Lee, Tax-News.com, London

13 October 2005

The Isle of Man Treasury has released a consultation document on new proposals to tax income made from the buying and selling of property on the island.

The proposals revise legislation introduced in the Income Tax (Amendment) Act Bill 2005 after business groups sharply criticised the original proposals.

The new law intends to tax those who derive income from successively improving properties and selling them on for a profit. In its original form, those who bought a property and then sold within five years could have been obliged to pay the tax, and opposition to the proposals centred around a 'tax trap' which may have led to cases of people being taxed on the sale of their own homes.

Another clause which placed upon advocates the responsibility for collecting tax from non-residents who sold property or land in the Island, was also contested.

As a result, the Treasury has revised the original proposals and put them out for public consultation until November 1.

The document states that:

"The buying, selling and development of land and property and the effect that these may have on prices is of genuine concern to the Isle of Man Government."

"Treasury and the Income Tax Division are also concerned that there should be certainty in respect of the taxability of transactions in land and property. Many land transactions result in a capital profit and Treasury has no intention of taxing them. Certain transactions however, are of an income nature and may be escaping tax."

With the move to a general 0% rate of income tax for companies, the Treasury believes it "inappropriate" that non-resident owners could potentially extract profits from land transactions or Manx property rental income without paying Manx income tax. It has therefore proposed the introduction of a schedular tax system for income derived from land and property in the Isle of Man.

"When using the term ‘schedular’, we mean that the Taxes Acts would define a class of income and how that class of income would be taxed separately from the rules applying to general income," the Treasury explained.

It is intended that the relevant legislation will be presented as a stand-alone Bill incorporating revised clauses that had originally been presented in the first Income Tax (Amendment) Bill 2005. The introduction of this legislation in the House of Keys will come after the new company tax legislation.

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