Browne Craine & Co DOING BUSINESS IN THE ISLE OF MAN Stuart Foster – [email protected]@burleigh.co.im Basil Bielich – [email protected]@burleigh.co.im.

Browne Craine & Co

DOING BUSINESS IN THE

ISLE OF MAN

Stuart Foster – [email protected]

Basil Bielich – [email protected]

Browne Craine & Co

The Isle of Man

• Independent from UK but with strong links

• 1000 year old Parliament makes its own laws

• Diverse population of 80,000

• Traditional Industries – Farming & Tourism

• Now – International Financial

Centre of Excellence

Browne Craine & Co

About the IOM: Easily Accessible

Travel By Air

•16 Destinations

•Over 100 flights a day

•1 hour from London City

Serviced By Air:

Browne Craine & Co

About the IOM: International Relations

UK Europe Rest of World• Self governing• Independent• Financially independent• Sterling currency• Common Customs & Excise Agreement - VAT

• EU Relationship governed by Protocol 3• Free movement of goods•Free movement of people• No contributions to or receipts from EU•EU Savings Directive

• Strong feedback IMF, OECD, FATF• International standard regulation• Good international citizen• Strong business links• Independent international representation

Browne Craine & Co

About the IOM: A Proud History

• Oldest continuous parliament in the world – over 1,000 years

• Open consultative government• Strong, stable economy – 25th straight year of

economic growth• Infrastructure investment - over £1bn in health,

education, water, communications, power, etc• Gaelic welcome – diverse population of languages

and cultures

Browne Craine & Co

Why Locate In The Isle of Man

“Simply put, we have all the elements that can support business.

We believe in financial freedom, a strong but pragmatic regulatory regime and giving businesses freedom to flourish.

We have a stable political system, excellent infrastructure, a strong economy and a flexible work permit system.

People and businesses come to the Isle of Man because they are made welcome and because they can thrive.”IOM Government Finance Department

World Famous for TT Races

Browne Craine & Co

World Class Economy: Business Friendly • Total Bank Deposits of £50billion – Dec

2007

• 30,000 registered companies

• Well regulated financial industry

• Common law jurisdiction

• Zero percent corporate tax

• Tax cap for individuals

Browne Craine & Co

Tax Regime – Smart Taxation

• Tax system is EU Code of Conduct compliant

• Zero % rate for majority of corporations

• Low rates for individuals – maximum 18%

• Budgeted and sustainable tax strategy in a robust economy

• Standard & Poor’s and Moody’s AAA sovereign credit rating

Browne Craine & Co

Thorough Yet Pragmatic Regulation• Commitment to quality business and the

reputation of the Isle of Man

• Regulators work in partnership with industry to develop realistic best practices

• Policies developed from close work with OECD, IMF, FATF etc.

Browne Craine & Co

International Profile of The Isle of Man

• Only Offshore financial centre with top ratings from OECD, FATF and Financial Stability Forum

• IMF reports 2003 and 2008• Financial Times award for Best International Territory - 2001• Winner - Best International / Offshore Finance Centre Awards

2006• Winner - European Financial Centre of the Future Awards 2005

(The Banker)• Standard & Poor ‘AAA’ Rated

• FBI Compliments Island – February 2001“…a well-regulated financial industry, money-laundering regulation and…demonstrates the need for global law enforcement co-operation”

Browne Craine & Co

IOM: A Competitive LocationCayman Dublin Channel

IslandsIsle of

ManSquare Miles 22 12 150 225

Population 40,000 1.5 million 160,000 75,000

Detached House Price

£1.2 million

£750,000 £600,000 £300,000

Average Fund Accountant Salary £55,000 £40,000 £40,000 £30,000

Staff Turnover N/A 50% 30% 7%

Average length of time for work/housing permit

3 months N/A 1 month 4 days

Corporate Tax Rate Zero 12.5% 20% (Changing

)

Zero

Browne Craine & Co

SummaryA World Class Economy• Self Governing Crown Dependency• Stable & diversified economy• Standard & Poor’s and Moody’s AAA Sovereign credit rating• Political stable for 1000 years• Diversified Sectors

A Place for Business• Easy access to London & EU• Common VAT area with UK and EU• Tax neutral with 0% taxation for all corporations except banking activity 10%

rate• Corporate Re-Domicile provisions• Leading Non UK AIM listing with GBP9.3bn• Excellent IT and power• Financial Assistance Scheme for new business

As a Place to Live• Low personal tax rate (max 18%) with generous allowances• Excellent education systems• Flexible work permit system• Affordable housing• Low crime

Browne Craine & Co

Business Structures• Companies

– Standard Company– New Manx Vehicle– Limited Liability Company– Protected Cell Company

• Trusts– Discretionary– Life Interest– Accumulation &

Maintenance– Various Others

Browne Craine & Co

1931 Company

• The standard Isle of Man Company• Each company has a memorandum and articles of

association (incorporation) • Types include

– Public companies, which must file accounts– Private companies, which cannot offer shares to the public– Companies limited by shares– Companies limited by guarantee– Unlimited companies.

• Commercial companies are usually limited liability companies having a share capital.

Browne Craine & Co

New Manx Vehicle

• NMV, under the Companies Bill/Act 2005, will be possible– minimal registry filings– unlimited capacity, but restricted objects permissible– no capital maintenance requirements (subject to solvency)– no authorised capital– shares of no par value possible– redemptions and purchases of shares – distribution of income and capital possible (subject to solvency)– no financial assistance prohibitions

• in general– no annual return requirements– requirement for a registered agent– corporate directors permitted within certain limits– no prescriptive accounting requirements

Browne Craine & Co

Limited Liability Company

• Based on the “Wyoming”legislation • Main purpose was for tax reasons

– Has limited liability and corporate personality– but is taxed as if it were a partnership.

• Popular as a simple form of business vehicle– the members can also manage the company– no separation of ownership and management as with other forms of company.

• The main characteristics of the LLC– Liability is limited to the amount of capital contribution made by the members– there is no share capital as such. – Members have the right to manage the LLC in relation to their capital contribution or they

can appoint a manager– There are no Directors– Taxation

• members pay income tax on their share of the profits, however • if the LLC is owned by non-resident members and has no Manx-sourced income then it may be

exempt from all Manx taxation.– LLCs may exist for an unlimited period– Automatically be wound up on the death, resignation or disqualification of a member– If there are two or more members remaining then they can resolve to continue

Browne Craine & Co

CORE

CELL

UCTION

CELL CELL

CELL

CELL

Protected Cell Company

Browne Craine & Co

Protected Cell Companies (PCCs)

• Basically a standard company limited by shares– Separated into legally distinct ‘cells– Each cell has its own proportion of the overall share capitalof the PCC, – Each cell’s assets, liabilities and tax liabilities are kept separate from each other cell.– Shareholders can own an entire cell but at the same time only own a small proportion of the PCC as a

whole.

• The PCC is a separate legal entity.• The separate cells created by the PCC do not become legal entities separate from the PCC itself.• Cells are created by the PCC for the purpose of protecting ‘cellular’ assets using the provisions contained in

the PCC Act. • Cellular assets are the assets represented by the proceeds of cell share capital, and all other assets

attributable to the cell.• Initial use

– Captive insurance– Funds– Collective investment schemes– PCC structures can be particularly useful in allowing ring

• Useful– Ring fencing of individual client or intermediary assets– Provides a layer of risk management not afforded to these schemes previously, and this could prove to

be attractive to high net worth clients.

Browne Craine & Co

Accountancy and Auditing

• Recognised bodies– The Institute of Chartered Accountants in England

and Wales;– The Institute of Chartered Accountants in Scotland;– The Institute of Chartered Accountants in Ireland.– The Chartered Association of Certified Accountants;

and– The Chartered Institute of Public Finance and

Accountancy.• Financial Supervision Commission may authorise a

person to act as an auditor of a private company.

Browne Craine & Co

Audit Exemption

• Criteria is similar to those used in the United Kingdom.

• A company can be an audit exempt company if it meets two of the following criteria:– its annual turnover is £5.6million or less;– its balance sheet total is £2.8million or less;– its average number of employees is 50 or

fewer.

Browne Craine & Co

TAXATION

Browne Craine & Co

TAXATION - Principle Taxes

• DIRECT TAX =INCOME TAX• Resident individuals and companies are subject to Manx income

tax on their worldwide income.

• INDIVIDUALS» BASIC RATE AT 10%» HIGHER PERSONAL RATE 18%» CAPPED per individual £100,000-00

• Corporate » STANDARD RATE 0%» BANKS 10%» PROPERTY COMPANIES 10%

Browne Craine & Co

• Value added tax– Basic rate 17.5%– Low rate 5%– Zero Rate Outside United Kingdom – Exemptions

• Customs and Excise duties

TAXATION - Indirect Taxes

Browne Craine & Co

• Isle of Man does not levy:– Corporation tax or advance corporation tax– Capital gains tax– Capital transfer or gift taxes– Wealth taxes– Stamp duties– Death, estate or inheritance tax

TAXATION - Other

Browne Craine & Co

Alternative Investment Market (AIM)

• Isle of Man- over 50 companies listed on AIM

• 15 companies in the AIM 100• The Isle of Man has more high performing

companies listed than any jurisdiction other than the UK (the next jurisdiction only has 6).

Browne Craine & Co

Alternative Investment Market (AIM)

• General rate of corporate income tax 0%• No capital gains or stamp transfer taxes • Not a regulated entity• Shares can be traded through CREST without the need to use

depositary receipts• NMV is a new simple and flexible corporate structure

– Removal of capital maintenance requirements– Less prescriptive prospectus requirements

• The Isle of Man is a common law jurisdiction in which company and trust law is closely aligned to that of England and Wales

• Security concepts are the same as in England and Wales• The provision of company administration services is a regulated

activity on the Isle of Man

Browne Craine & Co

• Lawyers increasingly using IOM• Capacity for new business• Speed and flexibility• Highly cost effective• Strong skill base/fund expertise• Reputation for quality – key to

Institutional Investors• ….a growing success story…

The quality international AIM vehicle

Browne Craine & Co

The Browne Craine Group

Browne Craine & Co

Browne Craine & Co

• Newest member of TIAG – April 2008

• Over 25 years of success

• Wide variety of services & clients

• Based in the Isle of Man

Our Offices – Burleigh Manor, Douglas, Isle of Man

Browne Craine & Co

PEREGRINE CORPORATE SERVICES

PROVIDING HIGH QUALITY BESPOKE SERVICES TO COMPANIES AND TRUSTS SINCE 1986

Browne Craine & Co

PEREGRINE CORPORATE SERVICES

THE SERVICES

• Companies – Incorporations– Fully managed– AIM listings

• Trusts – Establishment– Provision of Trustees

Browne Craine & Co

COMPANIES

Why Isle of Man?• Zero % Tax for majority• VAT registration as though UK• A strong reputation• Access to EU markets• IOM resident directors not

required• Robust regulation

Browne Craine & Co

IOM COMPANIES - USES

• TRADING

• HOLDING

• CONSULTANCY

• PROPERTY

• INTELLECTUAL PROPERTY

• SHIPPING / YACHTS

• PRIVATE AIRCRAFT

• FINANCING

Browne Craine & Co

Consultant / Sportsperson / Entertainer

InvoiceIOM

CompanyCountry

X

Non-residentIndividual

Funds

Funds

Browne Craine & Co

Case Study - ConsultancyPerformer / Sportsman / Consultant

• Individual works on several short term contracts all over the world.

• IOM company bills their clients – incl VAT if required.

• IOM company pays no tax on income.• IOM company distributes profits as and when

required to shareholders.• Depending on tax rules in home country,

profits can accumulate tax free in IOM company.

Browne Craine & Co

Trading Company

GOODSCountry

B

IOMCompany

InvoiceInvoice

CountryA

Funds Funds

Browne Craine & Co

Case Study – Trading Company

International Trading Company

• Goods sold from Country A to Country B.• IOM company issues invoice Country B.• Country A invoices IOM company at

lower price.

• Profit is isolated in IOM Company at 0% tax on profits

• Care required – Transfer Pricing / CFC’s

Browne Craine & Co

Property Company

Rental Income

IOMCompany

UKProperty

IOMBank

Purchase

Finance

Browne Craine & Co

Case Study – Property Company

Property CompanyUK Shareholder invests in an IOM company to purchase

UK property as he plans to leave UK in future.

• IOM company borrows from a bank in IOM – several major banks & many contacts.

• IOM company pays no tax on rental income in IOM, but will pay tax in UK – Peregrine area of expertise.

• Property sold in future when shareholder has left UK.

• No capital taxes on disposal for IOM company.• Depending on tax rules in new country of

shareholder, capital taxes may be avoided.

Browne Craine & Co

Shipping and Aircraft Registers

Browne Craine & Co

Shipping register

• Historical shipping register, since 1786• 1984 – established as an International

Register• Developed and respected shipping

sector• Steady growth of register and sector• 2003 – introduction of commercial

yachts • Developing yacht sector • Centre of excellence – ships and yachts

Browne Craine & Co

Growth of shipping register

0

50

100

150

200

250

300

350

400

450

No

of

Ves

sels

1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Year

Superyachts

Ships

Browne Craine & Co

Why Isle of Man?• Political and Economic stability

• Secure financial Jurisdiction

• Quality of Register and shipping centre

• Low cost – no annual dues

• Corporate vehicles and tax structures

• Supportive and pro-active government

• Customer focused registry/survey teams

• Pragmatic approach to regulation

• British Flag which is not the UK

Browne Craine & Co

Aircraft Register• Planned in 2005 - to mirror and complement

Isle

of Man register for commercial yachts• Opened for business 1 May 2007• Private & corporate only, not commercial air

transport• Offers unique M-registration (e.g. M-MANX)• No insurance premium • European time zone• Helpful, flexible and pragmatic approach• Cost effective and high quality register

Browne Craine & Co

Where Next?

• Space industry – Public & Private

• IOM owns satellite orbiting slots

• Space University in IOM

• Forward-thinking attitude of Government & Industry

Browne Craine & Co

COMPANIES – OUR SERVICES

• 5 qualified accountants as directors of your company• Well regulated location with strong reputation• Provision of directors/services to AIM listed

companies

• Incorporation of companies

• Full management & control OR

• Incorporation & support• Not just IOM, other

international companies

Browne Craine & Co

TRUSTS - INTRODUCTION

• Used since 10th Century• Wealth protection• Assets entrusted to

associates = TRUSTEES• Trustees act for the benefit

of the BENEFICIARIES• Legally recognised

arrangement

Browne Craine & Co

TRUSTS - STRUCTURE

SETTLOR

TRUSTEES BENEFICIARIES

Assets Can decide

Browne Craine & Co

TRUSTS – USES

• Estate and inheritance planning – avoid probate

• Provision for family members/employees

• Protection of assets

• Tax advantages if long term financial gains expected

• Charitable reasons

Browne Craine & Co

TRUSTS - DIFFERENT TYPES

• Discretionary - letter of wishes

• Interest In Possession – life tenant

• Accumulation & Maintenance – children & grandchildren

• Purpose Trusts – Law since 1996, Independent enforcer required

• Will Trusts – additional inheritance planning

Browne Craine & Co

TRUSTS – Case Study

Lifetime Income

SETTLORGrandparent

AssetsOn Death

Assets

BENEFICIARYChildren

TRUSTEETrust Fund

BENEFICIARYGrandchildren

Browne Craine & Co

TRUSTS – CASE STUDY

• SETTLOR - Grandparents settle investments into Trust

• TRUSTEES - Become legal owners and take responsibility for investments.

• Settlor provides guidance to Trustees via a Letter of Wishes

• Income from investments used to provide regular income to children during their life - BENEFICIARY

• Upon death of children, assets pass to Grandchildren - BENEFICIARY

Browne Craine & Co

TRUSTS – WHY ISLE OF MAN?

• Trust service providers regulated• High standards and expertise• History of Trust law – Statute & Common law• Foreign laws re transfer of assets excluded• No statutory requirement to notify beneficiaries• No Tax providing no Manx income or beneficiaries

Browne Craine & Co

TRUSTS – OUR SERVICES

• Establishment of Trusts• Provision of Trustees• Expertise & Experience• Access to legal advice

Isle of Man: - Supportive legislation

- History of Trusts

- Centre of expertise

Browne Craine & Co

MORE INFORMATION

www.brownecraine.com

www.peregrine-iom.com

www.bces.co.im

www.gov.im/dti/

Browne Craine & Co

CONTACTS

Basil Bielich – [email protected]

Stuart Foster – [email protected]

Craig Mitchell – [email protected]

Maurice Singer – [email protected]

David Craine – [email protected]