Choice of Structures
The Isle of Man offers a full range of vehicles for use as fund structures and wealth management including open and closed-ended investment companies, protected cell companies, limited partnerships, foundations and unit trusts.
There are two co-existing company regimes in operation in the Isle of Man, with the Companies Acts 1931–2004 providing a more traditional form of company and the less prescriptive Companies Act 2006 offering a very popular form of flexible company with no requirement for authorised share capital, no capital maintenance rules, reduced compulsory registry filings and less prescriptive accounting requirements.
Protected cell companies (“PCCs”) can be incorporated under either Act. Assets and liabilities can be attributed to a particular cell of the PCC and kept separate from one another, so each cell can be used as a separate sub-fund. By segregating the interests of investors and other stakeholders within each cell, PCCs provide a low-cost and quick-to-launch means of creating legally robust new sub-funds.
Limited partnerships offer flexibility and tax transparency while retaining limited liability for investors and may be established with separate legal personality.
The trust is an important feature of Manx common law that is also supported by legislation with unit trusts being popular fund structures. There is no requirement for a perpetuity period under Manx law.
A foundation is a simple, practical alternative to a trust and may be particularly attractive to private clients from civil law jurisdictions who are not familiar with the trust concept or who would like a wealth management entity which will be easily recognised by third parties in their home jurisdiction. An Isle of Man foundation has its own separate legal personality although, unlike a company, it does not have shareholders. It holds assets in its own name in order to further the objects of the foundation which do not have to be charitable.
Regulation
The Isle of Man Financial Services Authority is the Island's financial services regulator.
The regulatory objectives of the Authority are:
1. securing an appropriate degree of protection of policyholders, members of retirement benefits schemes and the customers of persons carrying on a regulated activity;
2. the reduction of financial crime; and
3. the maintenance of confidence in the Island's financial services, insurance and pensions industries through effective regulation, thereby supporting the Island's economy and its development as an international financial centre.
Tax
The Isle of Man operates a very favourable tax regime, with no capital gains tax, no inheritance tax and no stamp duties. While corporation tax does exist, it is levied at zero per cent, save in respect of income derived from deposit-taking activity (subject to a 10 per cent rate) and from real estate in the Isle of Man (subject to a 20 per cent rate). This means that a corporate fund vehicle will automatically benefit from a zero rate of corporation tax without having to apply through an exemption process, as will its Isle of Man-based fund manager and administrators.
Investors will be subject to tax on their dividends and capital gains under the laws of their home jurisdictions. The Isle of Man has a number of double taxation treaties and tax information exchange agreements in place that reduce the risk of any double charge. The Isle of Man has signed intergovernmental agreements to improve international tax compliance with both the UK and the USA amongst many others, and has been proactive in developing measures for compliance with FATCA and CRS.
Fees charged by fund administrators and investment managers based in the Isle of Man in respect of services to funds (other than exempt schemes) are not subject to VAT. Fees payable in respect of an exempt scheme are subject to VAT, but if the fund is established in a jurisdiction outside the scope of VAT then no VAT will be charged.
Please note that the IOMWFSA does not provide legal or tax advice, please contact one of the legal services providers or tax advisors in our Member Directory