In December 2017, the Isle of Man was placed on the grey list of non-cooperative tax jurisdictions by the EU Code of Conduct Group.
In response to this, the Isle of Man Government made a commitment to enact changes to meet the EU listing criteria, which meant complying with the 3 governance standards prescribed.
The standards are, in a nutshell:
- Transparency – to comply with international standards on information exchange
- Fair Tax Competition – to have tax practices that are not considered to be harmful
- BEPS Implementation – to implement the OECD’s Base Erosion and Profit Shifting minimum standards, including Country-by-Country Reporting
The Island was recognised as compliant with the transparency and BEPS requirements however was considered to have fallen short at the ‘fair taxation’ hurdle.
In order to remedy this, November 2018 saw the Isle of Man Government introduce new ‘Substance Legislation’, which was hoped would be sufficient to provide the EU with comfort that our tax regime was indeed fair. Once this was drafted there was no way of knowing for sure if it would be sufficient, as the EU would not offer consultation on the matter. This meant there was little more the Government could do but sit back and wait.
We are delighted to read that on 12 March 2019 the EU issued a press release clearing the Isle of Man from their grey list.
Check out the press release here:
What does this mean for for the Island?
This is huge news for the Isle of Man and our residents as we hope it will help promote the Island as a responsible financial centre. We expect to see this heavily publicised by the Department for Enterprise in their campaign to encourage new and credible business to the Isle of Man.
However, as the full effects of the substance legislation are not yet in full swing this is something that will need close monitoring.
Check out the legislation here:
We await guidance from the Income Tax Division in order to provide the necessary detail to assist with the compliance of the new regime.