The Isle of Man is one of the best places on the planet to headquarter a technology business. Aside from the obvious tax advantages noted below – we also enjoy an excellent technology infrastructure, a business minded Government and one of the highest quality of lives in the world. See here for our practical guide to relocating to the Isle of Man.
There are many good reasons why a ‘Tech’ businesses can adapt to the offshore environment much more easily than other types of business.
1. Reliant on Intellectual Property (IP) – Tech businesses are often underpinned by their IP assets. Domain names, trademarks & code are valuable intangibles which can easily be transferred and owned outside high tax jurisdictions. The Isle of Man is an excellent location for holding IP.
2. No Permanent Establishment (PE) – Traditional businesses often rely on a fixed place of business – a Permanent Establishment (PE) to generate their profits; this may be a factory, an office or a shop. It is difficult for such businesses to escape corporate tax because tax systems have evolved to tax PE’s. Tech busineses are different because the business often takes place on the Internet and servers can be located outside high tax jurisdictions – it’s comparatively easy to avoid having a PE in a high tax jurisdiction – even if customers are there.
3. Management and Control – As well as PE, the location of the ‘Management and Control’ – sometimes called ‘Mind and Management’ of a business is used as a key factor in determining liability to corporate taxation. Traditional businesses are generally controlled from their premises – offices within a factory, an office or a shop – which is generally located near their customers; and this in itself creates a taxable presence. Tech businesses often have a more widely geographically distributed management and much fewer staff. Key decisions are often taken, not in physical meetings but over Skype, via email or other electronic forums of communication. Key staff often work from home and may be located across several difference countries. As a result, there is no obvious base for mind and management.
Without too much effort and with the right guidance, it is frequently possible to locate mind and management and therefore tax obligations of a Tech business in a fiscally friendly jurisdiction like the Isle of Man and enjoy significant tax advantages.
In practice, there are a number of ‘do’s and don’ts’ for the principals of a Tech business to consider but periodic well run and well documented board meetings held in the Isle of Man might be sufficient to establish the Island as a Tech business’s principal fiscal domicile.
We have successfully assisted several Tech business to relocate their operations to the Isle of Man. Please contact us if you would like to discuss this further.