In this months Gallery Magazine Talking Business Feature Andrew Gerrard, Director of Harding Lewis, weighs in on the tax benefits for local property investors on the Isle of Man. A link to the online publication can be found here.
Are there any tax benefits for local property investors on the Isle of Man?
It is often forgotten locally that the Isle of Man offers a very tax advantageous regime for business and encourages investment. Although income from Manx property is normally taxed at 20% (or a taxpayer’s marginal rate if less), there are some good news stories to mention.
Certain land developments carried out in the interests of the Manx economy which meet certain criteria can benefit from a tax holiday. Conditions include that an application must be made to the Assessor who will consider whether the proposed commercial property is in the interests of the economy of the Island. The effect of the holiday, if approved, will be an exemption from income tax for any relevant income or profits of a company for up to five years.
If a property development or rental business cannot take advantage of these benefits, it can be beneficial for investors (where related party finance and management occurs in particular) to consider the structure of the arrangement so as to be effective legally, commercially and bearing in mind tax considerations. Different structures can end up with different tax obligations.
The other good news is that there should be no capital gains tax on gains made on Manx property investments, this assuming Manx ownership and no trading. This is not the situation with regard to UK residential property for which the burden of UK taxation has steadily increased in recent times for Manx owners. This is of course another story worthy of another article!