“The ISle of MaN haS CoNSISTeNTly STaTed ThaT IT IS NoT SeekINg To ChaNge ITS regulaTory SySTeM IN order To qualIfy aS a SolveNCy II ‘equIvaleNT’ jurISdICTIoN.”
allowing for projected expenditure and any investment losses. Thanks to the IPA’s transparent guidelines, capital-efficient methods
can be utilised under the Island’s regulations—subject to approval by the IPA—whereby admissible assets can include letters of credit, independent guarantees and related party loans, which together can be up to 100 percent admissible.
Taxation The Isle of Man operates a ‘Zero/10’ corporate income tax regime.
• The management and collection of premiums; and • Bank account and cash control.
It is common practice for captive insurers to utilise Isle of Man-based insurance managers who would undertake many of these activities.
The minimum requirement for paid-up share capital depends on the class of licence: • Class 11: £100,000;
• Class 12: £50,000. This minimum capital requirement is supplemented by an initial capital requirement which is tailored to the applicant’s business plan and, often, driven by expected premium volumes.
The minimum capital requirement plus 10 percent of the supplement must be paid in cash and deposited with an authorised bank on the Isle of Man.
On an ongoing basis, a Class 12 captive would be required to maintain sufficient capital to meet its solvency margin of: • £50,000; • Plus 10 percent of net premium written up to £2 million; • Plus 5 percent of net premium in excess of £2 million.
While these figures are simple numeric guidelines, the overriding principle of the Island’s regulatory regime is that of ensuring that the captive has sufficient financial resources to support its business, both by way of its ability to pay its insurance obligations in full, and by
Only income from banking activities and Isle of Man land and property is taxable—at 10 percent—with all other income streams taxable at 0 percent. As such, captive insurers located on the Island are subject to corporate income tax at 0 percent, with there being no requirement to withhold tax from the payment of dividends and interest, whether to residents or non-residents.
Although the Island’s tax regime, like all offshore jurisdictions, has been
subject to scrutiny by the EU over the last couple of years, following a meeting of the EU Code of Conduct Group on Business Taxation in September 2011, the Island is now confident that its Zero/10 tax regime is robust and acceptable in the eyes of the code group. The Isle of Man is one of the first jurisdictions to have been successfully reviewed, with the group set to review Guernsey’s tax regime in January 2012.
The Isle of Man is effectively part of the UK for VAT purposes, with rates
and exemptions being largely identical to those applied in the UK (the Island has its own VAT legislation and system of collection and administration, administered by the Isle of Man Customs and Excise). Generally, VAT expense in the Island’s captives is minimal as insurance management services, often the most significant operating expense, are VAT-exempt. Additionally, the Island does not impose any insurance premium tax or capital gains tax, making the Isle of Man a tax-efficient place to do insurance business.
Simon Nicholas is an associate director at KPMG LLC. He can be contacted at:
snicholas@kpmg.co.im
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