DOING BUSINESS IN THE

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DOING BUSINESS IN THE ISLE OF MAN Stuart
Foster sfoster_at_burleigh.co.im Basil Bielich
bbielich_at_burleigh.co.im
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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

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About the IOM Easily Accessible
Serviced By Air

• Travel By Air
• 16 Destinations
• Over 100 flights a day
• 1 hour from London City

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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
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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

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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
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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

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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 Poors and Moodys AAA sovereign
  credit rating

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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.

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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 anddemonstrates the
  need for global law enforcement co-operation

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IOM A Competitive Location
Cayman Dublin Channel Islands Isle of Man
Square 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
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Summary

• A World Class Economy
• Self Governing Crown Dependency
• Stable diversified economy
• Standard Poors and Moodys 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

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Business Structures

• Companies
• Standard Company
• New Manx Vehicle
• Limited Liability Company
• Protected Cell Company
• Trusts
• Discretionary
• Life Interest
• Accumulation Maintenance
• Various Others

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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.

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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

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Limited Liability Company

• Based on the Wyominglegislation
• 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

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Protected Cell Company
UCTION
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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 cells 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.

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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.

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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.

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TAXATION
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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

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TAXATION - Indirect Taxes

• Value added tax
• Basic rate 17.5
• Low rate 5
• Zero Rate Outside United Kingdom
• Exemptions
• Customs and Excise duties

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TAXATION - Other

• 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

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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).

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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

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The quality international AIM vehicle

• 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

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The Browne Craine Group
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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
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PEREGRINE CORPORATE SERVICES

• PROVIDING HIGH QUALITY BESPOKE SERVICES TO
  COMPANIES AND TRUSTS SINCE 1986

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PEREGRINE CORPORATE SERVICES

• THE SERVICES
• Companies Incorporations
• Fully managed
• AIM listings
• Trusts Establishment
• Provision of Trustees

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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

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IOM COMPANIES - USES

• TRADING
• HOLDING
• CONSULTANCY
• PROPERTY

• INTELLECTUAL PROPERTY
• SHIPPING / YACHTS
• PRIVATE AIRCRAFT
• FINANCING

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Consultant / Sportsperson / Entertainer
IOM Company
Country X

• Invoice

Funds
Funds
Non-resident Individual
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Case Study - Consultancy

• Performer / 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.

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Trading Company
Country B
Country A

• GOODS

Invoice
Invoice
IOM Company
Funds
Funds
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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 / CFCs

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Property Company
IOM Company
Purchase
UK Property

• Rental Income

Finance
IOM Bank
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Case Study Property Company

• Property Company
• UK 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.

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Shipping and Aircraft Registers
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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

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Growth of shipping register
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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

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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

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Where Next?

• Space industry Public Private
• IOM owns satellite orbiting slots
• Space University in IOM

• Forward-thinking attitude of Government
  Industry

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COMPANIES OUR SERVICES

• Incorporation of companies
• Full management control OR
• Incorporation support
• Not just IOM, other international companies

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

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TRUSTS - INTRODUCTION

• Used since 10th Century
• Wealth protection
• Assets entrusted to associates TRUSTEES
• Trustees act for the benefit of the BENEFICIARIES
• Legally recognised arrangement

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TRUSTS - STRUCTURE
SETTLOR
Assets
Can decide
TRUSTEES
BENEFICIARIES
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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

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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

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TRUSTS Case Study
SETTLOR Grandparent
TRUSTEE Trust Fund
BENEFICIARY Grandchildren
Assets
Assets On Death

• Lifetime Income

BENEFICIARY Children
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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

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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

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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
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MORE INFORMATION

• www.brownecraine.com
• www.peregrine-iom.com
• www.bces.co.im
• www.gov.im/dti/

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CONTACTS

• Basil Bielich bbielich_at_burleigh.co.im
• Stuart Foster sfoster_at_burleigh.co.im
• Craig Mitchell cmitchell_at_burleigh.co.im
• Maurice Singer msinger_at_burleigh.co.im
• David Craine dcraine_at_burleigh.co.im