IOM RESIDENCE

 

There is no general definition of residence for tax purposes in the Isle of Man. determining a person’s residence status is important, however, in view of the underlying basis of our taxation system. A Manx resident is taxed on worldwide income whereas a non-resident is taxed on Manx-source income only (unless that Manx-source income is otherwise excluded from income tax when paid to a non-resident by virtue of statute, order or regulation

 

As is common in many countries, the Isle of Man treats those individuals having a ‘view or intent of establishing residence’ as tax resident from the date of their arrival here. The opposite is that individuals who permanently cease residence are treated as tax non-resident from the date of their departure.

 

The Assessor will look at evidence of a ‘view or intent of establishing residence’ as opposed to presence on the Island for a temporary purpose. New Residents are asked to complete a form registering themselves for Income Tax purposes on arrival to the Island.   In most circumstances, completion of this form and evidence of the person having accommodation in the Isle of Man is sufficient for the Assessor to accept that person as resident.

 

RESIDENCE TESTS

 

The following  tests can also be applied but do not apply where a person’s residence has been accepted

 

 

An individual will be resident if on the Island for a period in the whole equal to more than six months in any tax year

 

Individuals whose visits to the Island over a period of four or more consecutive years exceed an average of three months (90 days) in each tax year will be treated as resident.  Where this ‘three month average rule’ is broken, the Assessor will regard the person as resident from the fifth year. However, where it is clear when an individual first visits the Isle of Man that they intend to make visits exceeding an average of 90 days in each tax year over a period of four or more years, they will be treated as resident from the beginning of the first year. Similarly, an individual will be treated as resident from the beginning of the tax year in which they decide that they will make such visits.

 

 If an individual needs to spend days in the Isle of Man for exceptional circumstances beyond their control, those days will not be counted when considering this rule.

The Assessor does not count days of arrival and departure when determining the number of days that a person has spent in the Isle of Man.

 

DUAL RESIDENCE

It should be noted that other countries often have similar rules, and it is possible for an

individual to be tax resident in more than one country as a consequence.  In such instances double taxation relief is available.

 

Where an individual leaves the Island for occasional residence elsewhere they are treated as IOM resident

 

One Full or more Tax years abroad

where a normally-resident person is abroad for a complete tax year they will be treated for tax purposes as non-resident for that tax year. Furthermore, it is the practice of the Assessor to treat as permanently non-resident those individuals who are abroad for two complete tax years or more. Where a length of absence exceeding two tax years does not become clear until after the individual is already abroad, the Assessor may need to revise the person’s tax position from the date that they left the Island.

An individual returning to live in the Isle of Man after an absence of more than two complete tax years will be treated by the Assessor as a new resident.

 

 

CORPORATE RESIDENCE

 

A company formed in the Isle of Man is resident here for tax purposes

 

A company incorporated outside the Isle of Man is regarded as tax resident in the Isle of Man where its management and control is in the Island. This rule is not in statute but derives from UK case law. Article 2 (1g) of the 1955 Isle of Man – UK double taxation agreement is based on the same principle, where it says:

 

“…a company shall be regarded as resident in the United Kingdom if its business is managed and controlled in the United Kingdom and as resident of the Island if its business is managed and controlled in the Island…”.

 

Companies incorporated outside and not resident in the Isle of Man but having a branch in the Isle of Man are taxed to the extent of the business conducted in the Island, and at either the standard 0% rate or the 10% rate of corporate income tax depending on the nature of the income, although the company itself remains tax non-resident.