Manx Budget Continues Reduction Of Corporate Taxation

by Jason Gorringe, Tax-News.com, London

19 February 2003

Delivering his budget for the next year, Isle of Man Treasury Minister Allan Bell yesterday revealed an extension of the ten per cent corporate income tax band - cutting business costs by a further £7 million - and the introduction of personal tax credits for people on low incomes.

Mr Bell said the package aimed to encourage business to sustain the success of the economy, and therefore employment opportunities at a time of change and slowdown throughout the world.

For businesses, the lower rate for resident trading companies is to remain at 10%, but the threshold at which the standard rate of 15% becomes payable is increased from £500,000 to £100,000,000 (one hundred million), effectively resulting in all taxable trading income being charged at the 10% rate. The higher rate will remain at 18% for all other companies.

For individuals, the standard rate will stay at 10%, with the higher rate remaining at 18%. Personal allowances are being frozen for 2003-04 following an increase of 3.9% last year, which was well above the inflation rate at that time.

From 6 April 2003, a Personal Tax Credit will be introduced to provide lump sum payments of up to £200 to individuals who do not fully utilise personal allowances. The annual cost of this measure is estimated to be £2 million.

At the same time, the Minister announced a 7.6% or £29.4 million increase in net spending on public services, to a total of £418 million, as well as a £5 million estimated surplus and a £104 million capital projects programme. Nearly £32 million is to be transferred to various Reserves over the current and next year.

Other Budget measures include:

• A major package of measures to stimulate and develop the Island's Funds Industry;
• A concession and relocation package to be introduced, in conjunction with the Department of Trade and Industry, to assist companies requiring to bring key employees to the Island to establish a new business operation;
• Extension of a zero rate tax to companies operating aircraft to and from the Island;
• An increase in Non-Resident Company Duty from £830 to £1,000;
• Provision for an additional 165 Government employees

Mr Bell said: 'This is a two-pronged Budget. It aims to sustain the success of our economy - and therefore employment opportunities - and it provides additional support for people on low incomes. It is a responsive Budget for changing times, and an investment in the future of the Isle of Man.'

Describing his package of measures for the funds industry, Mr Bell said: "I am determined to ensure that we continue to provide our finance industry with a sound platform from which to compete for business in international markets. Notwithstanding the current downturn in equity markets, the global funds industry continues to experience significant and sustained growth. I wish to see the Isle of Man competing for business in this vital sector of the global finance industry. To this end I am pleased to announce today a major reform package for the Island's fund industry."

The package announced consists in the main of three core measures:

• Zero Rate Tax for all Third Party Fund Administrators, and for Managers of EIFs and PIFs - representing an extension of the existing zero rate tax regime on fund managers' profits to both fund administrators and to managers of Experienced and Professional Investor Funds;
• VAT Exemption for Experienced and Professional Investor Funds - representing an extension of the VAT exemption on management fees. The relevant Order to enable this will be presented at the March sitting of Tynwald for implementation on 1st April 2003.
• Overseas Funds Exemption in the context of Isle of Man regulation - such that an overseas fund may be administered in the Isle of Man without "dual regulation" where it is incorporated in a jurisdiction having an appropriate regulatory framework. This measure will be subject to a final round of consultation with the industry with a view to presenting the relevant Order to the April sitting of Tynwald.

The measures are expected to be in place by the summer of 2003. Oher measures include: changes to the Partnership Act to help attract funds established as Limited Partnerships; and changes to the Companies (Transfer of Domicile) Act to facilitate the easier migration of funds to the Island from other jurisdictions.

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