Isle of Man: An International Finance Centre of Excellence

Last Updated: 5 July 1999

For the past fifteen years the Isle of Man has enjoyed steady growth and continues to cement its position as a leading international finance centre. Its image as the jurisdiction for professionals has been enhanced by sophisticated international business attracted by the versatility and effectiveness of vehicles like Professional Investor Funds (PIFs), Limited Liability Companies (LLCs) and Purpose Trusts.


Geographically the Isle of Man is part of the British Isles. The Isle of Man is a Crown Dependency and does not form part of the United Kingdom. The UK Government is responsible only for the Island's foreign representation and defence which are services paid for by the Isle of Man. Dating back to Viking origins over one thousand years ago, the Island's parliament (Tynwald) is the oldest legislature in the world in continuous existence. Tynwald legislates on all internal matters, including fiscal affairs. The majority of members are independents, and the virtual absence of party politics encourages a high degree of consensus. This has contributed to the remarkable stability of the Isle of Man's political system.

The Isle of Man is not a member of he EU, but enjoys a special relationship with the EU as set out in Protocol 3 of the UK's Treaty of Accession, which allows free trade in industrial and agricultural products with the Single Market. The Island is not a participant in the European Single Market programme, and, as a fiscally independent country, is not subject to any harmonisation of direct taxation within the EU. However, by virtue of Protocol 3 and the Common Purse Agreement with the UK, the Island effectively enjoys customs union with the EU. As well as streamlining regular business trading, the combination of low taxation and ability to participate in the European VAT system, facilitates the conduct of EU wide triangular transactions using an Isle of Man company as intermediary.


Established in 1983, the Isle of Man Financial Supervision Commission was set up to develop and operate systems for the protection of, the interests of depositors and investors, and the good name of the Isle of Man. It licences and supervises all banks, investment businesses, collective investment schemes and building societies carrying on business in the Island.

The Island's Financial Supervision Commission continues to strive to further protect and enhance the Island's reputation as a well regulated finance centre. They have recently issued proposals to license corporate service providers, regulating and supervising those who form and administer companies in the Isle of Man. The aim of the legislation is to increase and develop the level of confidence which those in the international finance community have in relation to such providers. The legislation will probably come into effect from the year 2000 and licence holders will be required to comply with a code of conduct. The key responsibilities would include "Know your Customer" and, where directors are provided, the taking of reasonable steps to ensure that those directors are suitable for their role and that they understand their duties, responsibilities and liabilities as directors.

Regulation of the Island’s insurance and pensions sector is undertaken by the Isle of Man Insurance and Pensions Authority .


The cornerstone of the Isle of Man’s economic success has undoubtedly been a system of low taxation to which the Government is firmly committed. The Isle of Man offers attractive rates of taxation with personal tax at a standard rate of 15% with a higher rate of 20%, and generous allowances for individuals.

Local companies and trusts generally are assessable to tax at a flat rate of 20% on their taxable income which in the case of companies is charged on their profits after distribution of dividends. However there is an extensive system of exemptions and reliefs.

Non residents receiving interest and certain other forms of income paid by banks, and from other approved institutions in the Island receive payment gross without deduction of withholding tax.

However, of significance to offshore businesses is the availability of two forms of corporate entity which do not pay local tax (the "Exempt Company" and "Non Resident Company" ) while a third form, the "International Company" introduced in 1994 may elect whether or not to pay a minimum level of tax (1%) or agree a higher rate (up to 35%) to suit its international circumstances.


To maintain its position as a leading and reputable quality business base the Island is proactive in introducing new innovative legislation. The Isle of Man's International Business Act 1994 introduced both the concept of the International Company and the International Limited Partnership (ILP). The ILP is a tax-favoured structure for the international ownership of vessels, collective investment schemes and other joint ventures where the limited partners have no liability to Manx income tax. The status of the ILP is that of a non-resident for tax purposes, but which has a place of business within the Isle of Man and is subject to an annual fee of £400. ILPs can be formed by limited partners who are non resident individuals or companies, or a combination.

The Isle of Man further enhanced its capacity to provide effective solutions, in particular to its American client base, by introducing the Limited Liability Companies Act 1996. Based on the Wyoming model the LLC extends the limited liability concept further by creating an incorporated entity with separate legal identity. But, in other respects, it operates as a limited partnership and, if US international revenue service policy is followed, an LLC will be treated accordingly by other jurisdictions. The LLC is flexible and easy to operate and has proved both useful and popular in areas ranging from US tax planning to transatlantic mergers.

Another recent addition to the Island's corporate legislation is the Companies (Transfer of Domicile) Act 1998 which provides for the migration of certain qualifying companies between the Isle of Man and other jurisdictions without the need for dissolution and winding up. The legislation facilitates the ease of migration and reduces the costs of moving domicile where this is commercially desirable.


Although the Island’s banking industry has been dominated primarily by subsidiaries and branches of the main UK clearing banks, there are a growing number of top foreign banks.

Whilst the Island's currency is sterling, deposits are accepted in all major currencies of the world. Operating within a statutory framework laid down under the Banking Acts, most banks offer a full range of services, including private and retail banking, treasury, investment management and trust administration.


The Island is able to offer a full range of trust and trustee services under its long established common law based system of trust law. Key features are security, confidentiality and continuity and an absence of restriction on the accumulation of income throughout the perpetuity period.

The Trusts Act 1995 provides for certainty in trusts formed for forced heirship planning purposes and under the Purpose Trust Act 1996, trusts can now be created to fulfil a specified commercial purpose. This has contributed to the Isle of Man becoming a significant centre for aircraft leasing and financing arrangements with many high value international finance transactions taking place


The Island has a thriving fund management industry which was further boosted by the reduction of taxation on fund manager profits to 5%. In addition there is no VAT on professional fees for handling Isle of Man domiciled funds. Mutual funds on the Isle of Man can take the form of companies (open or closed-ended), trusts, limited partnerships (more than 20 limited partners are allowed) or pure contractual arrangements, whilst investors can participate through the holding of shares, debt securities, units or basic contractual rights.

Most of the funds run from the Isle of Man are also "SIB-recognised" which means that they meet the strict supervision criteria for sale in the UK as well as internationally. The UK Government has recognised that Isle of Man-authorised funds are protected to standards at least as good as those in the UK. Indeed, the Island was the first offshore centre to achieve recognition as a designated territory under the terms of the UK Financial Services Act.

The Island's authorities have also responded to the international demand for fast-track collective investments with the Professional Investor Fund (PIF). PIFs allow like-minded sophisticated investors to be grouped together and offered the equivalent of custom-made vehicles with individually-tailored investment risk profiles. PIFs are subject to minimal regulation and are both quick and inexpensive to establish. PIF managers have the freedom and flexibility to invest as they like within any self-imposed constraints.


The Isle of Man's financial services sector is probably best known for its international life companies. The services on offer from these insurance companies comprise insurance protection, regular savings, capital investment, pensions and some standalone collective investment funds, asset management and trust facilities. The Isle of Man was chosen as a location for these companies for a variety of reasons, principally the beneficial tax environment, but also because the Island has designated territory status under the UK's Financial Services Act. The Island also has a well-qualified labour force which is experienced in the insurance industry.

In addition, captive insurance whereby major corporations form their own subsidiaries to insure and manage their own risks are also an important form of business for the Island which now has in excess of 159 captives.

The Isle of Man insurance regulator has been comprehensively restructured to encompass pensions business as well as life and captive insurance. The Insurance and Pensions Authority will oversee the new major developments which are being planned for the sector. This includes proposals to implement primary and secondary legislation for the regulation of pension schemes. The new pensions legislation will develop a model for international arrangements which can be adapted to conform with host country regulations. Under the new regime all pension schemes set up in the Isle of Man will be authorised by the Insurance and Pensions Authority. The major targets are the world's large multinationals who will be able to take advantage of tax breaks if they base their occupational pension plans on the Island.


The Isle of Man has a traditional Manx Shipping Register which although over 200 years old, has only been actively promoted to ship owners and their managers since 1984. A notable feature of the Isle of Man Register is that there is no registration or tonnage tax, the only fees chargeable being those connected with the administration costs of registration, survey and certification. It should be stressed that the Isle of Man is not a flag of convenience and that Manx ships fly the British Red Ensign.


As demonstrated above, the Isle of Man has made great progress in recent years in gaining international recognition as a centre of excellence and maturity in financial services and is servicing the top end of the international financial market. Together with the space and tightly regulated but flexible systems, the overriding attractions of the Isle of Man are sound legal and regulatory systems, wide professional and commercial expertise and political stability.

Two main benefits afforded by the Isle of Man for businesses requiring a real presence offshore are the Island's relatively low operating costs and abundant room for expansion. Factors such as availability of low cost office accommodation and a well educated pool of labour, which can also be drawn from outside the Island if necessary, are of increasing importance to major corporations seeking an offshore base. Probably the most understated attraction of the Isle of Man is the quality of life, which extends from the excellence of its scenic environment to its low crime rate, and is highly valued by the local population as well as incoming residents.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

This article also appears in the 'International Offshore and Financial Centres Handbook 1999/2000'. For further information about this highly informative guide to offshore centres, or to order your copy, please phone +44 (0) 207 820 7733 or send an email to

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions