The European Union's Economic and Financial Affairs Council has approved the Isle of Man's corporate tax system as being compliant with the EU Code of Conduct for Business Taxation. This follows the scheduled withdrawal of the Isle of Man's attribution regime for individuals (ARI), which will be abolished from April 2012.

The European Union had earlier agreed, in principle, that the Isle of Man's business tax system would no longer be considered harmful if it went ahead with the proposed repeal of ARI. ARI, which came into force in 2006 when a standard corporate income tax rate of 0% was introduced, was designed to limit the impact of individuals leaving profits in a Manx company to be taxed at 0%, rather than paying them out as distributions which would then be taxable as part of the shareholder's taxable income.

The Isle of Man government has welcomed the confirmation that its zero-10 corporate tax system (a twin-tier corporate rate tax depending on the nature of the business) is EU compliant, stating that this is a further endorsement of the Isle of Man's policy of responsive engagement with international scrutiny, while always seeking to defend the island's own strategic interests. The rates incorporated into the zero-10 regime are said to have attracted business from all over the world to the island, including from the e-gaming and space industries.

For further information on this topic please contact John T Aycock at M&P Legal by telephone (+44 1624 695800), fax (+44 1624 695801) or email ([email protected]).