DOING BUSINESS IN THE ISLE OF MAN Stuart Foster – sfoster@burleigh.co.im

1. DOING BUSINESS IN THE ISLE OF MAN Stuart Foster – sfoster@burleigh.co.im Basil Bielich – bbielich@burleigh.co.im

2. 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

3. About the IOM: Easily Accessible Serviced By Air: • Travel By Air • 16 Destinations • Over 100 flights a day • 1 hour from London City

4. About the IOM: International Relations

5. 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

6. “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 Why Locate In The Isle of Man World Famous for TT Races

7. 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

8. 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

9. 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.

10. 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”

11. IOM: A Competitive Location

12. Summary A 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

13. Business Structures • Companies • Standard Company • New Manx Vehicle • Limited Liability Company • Protected Cell Company • Trusts • Discretionary • Life Interest • Accumulation & Maintenance • Various Others

14. 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.

15. 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

16. 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

17. CELL CELL CELL CORE CELL CELL Protected Cell Company UCTION

18. 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.

19. 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.

20. 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.

21. TAXATION

22. 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%

23. TAXATION - Indirect Taxes • Value added tax • Basic rate 17.5% • Low rate 5% • Zero Rate Outside United Kingdom • Exemptions • Customs and Excise duties

24. 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

25. 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).

26. 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

27. 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

28. The Browne Craine Group

29. 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

30. PEREGRINE CORPORATE SERVICES PROVIDING HIGH QUALITY BESPOKE SERVICES TO COMPANIES AND TRUSTS SINCE 1986

31. PEREGRINE CORPORATE SERVICES THE SERVICES • Companies – Incorporations – Fully managed – AIM listings • Trusts – Establishment – Provision of Trustees

32. 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

33. IOM COMPANIES - USES • INTELLECTUAL PROPERTY • SHIPPING / YACHTS • PRIVATE AIRCRAFT • FINANCING • TRADING • HOLDING • CONSULTANCY • PROPERTY

34. Consultant / Sportsperson / Entertainer Invoice IOM Company Country X Funds Funds Non-resident Individual

35. 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.

36. Trading Company GOODS Country B Country A Invoice Invoice IOM Company Funds Funds

37. 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

38. Property Company IOM Company Rental Income Purchase UK Property Finance IOM Bank

39. 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.

40. Shipping and Aircraft Registers

41. 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

42. Growth of shipping register

43. 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

44. 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

45. Where Next? • Space industry – Public & Private • IOM owns satellite orbiting slots • Space University in IOM • Forward-thinking attitude of Government & Industry

46. 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

47. TRUSTS - INTRODUCTION • Used since 10th Century • Wealth protection • Assets entrusted to associates = TRUSTEES • Trustees act for the benefit of the BENEFICIARIES • Legally recognised arrangement

48. TRUSTS - STRUCTURE SETTLOR Assets Can decide TRUSTEES BENEFICIARIES

49. 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

50. 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