Controlled Foreign Company Reforms

[Newty]

Check this out guys: http://www.ft.com/cms/s/0/f4068508-a298-11e0-83fc-00144feabdc0.html#axzz1Qoy59AxZ

 

Am I right in thinking that this reform effectively ensures the Island's prosperity for the immediate future?

 

It would seem that a certain well known critic od the island is not too happy about it which can only be good news.

[Evil Goblin]

Yes, in some cases there could be a benefit to larger companies setting up a subsidiary in the IoM or other low tax jurisdiction but the ESTD may negate any benefits (and more) with its' approach to determining the tax residence of entities. The following sums that approach up:

 

"Where a board of directors formally finalizes and/or routinely approves key management, commercial and strategic decisions necessary for the conduct of the entity’s business in one State but these decisions are in substance made in another State, the place of effective management will be in the latter State. In determining the place where a decision is in substance made, one should consider the place where advice on recommendations or options relating to the decision were considered and where the decision was ultimately taken.

Indeed, the place where the board of directors meet is overruled as the place of effective management when it appears that the key management decisions are in substance made in another State.

For an offshore company managing a portfolio for a private individual, the most likely place of effective management is the permanent address of the majority shareholder."

 

As EU Law overrules the laws of individual member jurisdictions this could be very bad news indeed for the Island.

[Blade Runner]

Yes, in some cases there could be a benefit to larger companies setting up a subsidiary in the IoM or other low tax jurisdiction but the ESTD may negate any benefits (and more) with its' approach to determining the tax residence of entities. The following sums that approach up:

 

"Where a board of directors formally finalizes and/or routinely approves key management, commercial and strategic decisions necessary for the conduct of the entity’s business in one State but these decisions are in substance made in another State, the place of effective management will be in the latter State. In determining the place where a decision is in substance made, one should consider the place where advice on recommendations or options relating to the decision were considered and where the decision was ultimately taken.

Indeed, the place where the board of directors meet is overruled as the place of effective management when it appears that the key management decisions are in substance made in another State.

For an offshore company managing a portfolio for a private individual, the most likely place of effective management is the permanent address of the majority shareholder."

 

As EU Law overrules the laws of individual member jurisdictions this could be very bad news indeed for the Island.

 

Has IOM Govt/Alan Bell/ DED had wind of this? Maybe the reason for the push for massive "fast tracked" building of mansions in the countryside, that on the surface there is no demand for at present, but now with this? lots of demand?

[manshimajin]

Has IOM Govt/Alan Bell/ DED had wind of this? Maybe the reason for the push for massive "fast tracked" building of mansions in the countryside, that on the surface there is no demand for at present, but now with this? lots of demand?

Hopefully the existing multi-million stock will get sold first. I wouldn't be too happy if I'd been trying to sell my £4.5 milion home for 18 months and Mr Bell suddenly allows a lot more development to occur just when my prospects of selling look likely to improve.

 

Will companies move here or to Luxembourg, the Netherlands or Dublin? I would guess that if there is an opportunity it would be for medium size companies not the big ones.

 

Has Richard Murphy commented yet? I coudn't find anything.

[Newty]

Murph has commented here: http://www.taxresearch.org.uk/Blog/2011/06/30/controlled-foreign-company-reform-a-new-way-for-the-tories-to-pass-wealth-to-the-rich/

 

He believes the policy translates as the UK government encouraging the use of 'tax havens'. It does make sense. You want to atrract business here from abroad and you want to prevent it from leaving for HK/Singapore etc. So you incentivise business to locate offshore in the UK and so pay lower rates of tax. That's how I understand it but I'm sure the devil's in the detail but I can't see how it can be a bad thing for the island.