With a modern-day population of some 80,000, the island retains a unique character, and is well known for among other things a breed of tailless cat, the international TT motorcycle racing event, and some of the best golfing to be had in northern Europe.
Of course, it's not just golf courses that will be of attraction to China's high net worth individuals, although Hong Kong-based Appleby partner John Melia still urges golfing enthusiasts not to forget their clubs when they visit.
When asked about the Isle of Man's core competencies as an offshore jurisdiction, Melia - an Isle of Man qualified lawyer - told Asia Outbound that the island's low tax rates (zero percent for most companies) and robust legal system based on English common law, which means both trust law and company law are well developed, and can evolve in parallel with the English law, but with some statutory refinements to ensure that Manx trusts and companies remain user-friendly and competitive.
"The Isle of Man is exceptional in a number of ways, including its size and its constitutional position," said Melia. "While the Isle of Man is tiny compared to China, it offers physical space in a way that many of the competing offshore jurisdictions do not. It would therefore be easier to find space to establish, say, a high-end manufacturing facility on the Isle of Man than in the other Crown Dependencies, or the Caribbean islands. This space also means that HNWIs can buy, or build, more spacious accommodation than might be available in other jurisdictions. The Isle of Man government actively encourages HNWIs, particularly entrepreneurs, with sensible planning for such houses and an income tax cap of £120,000 per annum. Also, relocation grants are available for qualifying businesses, and these can be for up to 40 percent of establishment costs of a business."
While the UK government is responsible for defense and external affairs, the Isle of Man is self-governing, and its government is consulted on any international convention, treaty or agreement that would affect the island. It is not a member state or associate member of the EU, but enjoys what is termed a special relationship. As such, it is included in the EU's customs area, allowing the free movement of industrial and agricultural goods between the island and the EU. While the island does issue its own currency, UK currency is also accepted, with one Isle of Man pound equaling one UK pound sterling. There are no exchange controls on the movement of funds into or out of the island. As part of the common travel area with the UK, there are no extra restrictions on entry to the island, other than usual UK immigration requirements.
Melia added that another difference between the Isle of Man and other jurisdictions is its inclusion within the UK's VAT area. As a result, the Isle of Man can be used as a gateway into the EU for import businesses, gaining both efficiency and cashflow advantages by clearing customs through the Isle of Man's Customs and Excise office. "It also makes Isle of Man companies ideal for holding UK commercial property, as the VAT registration in the Isle of Man can be affected quickly and efficiently, with personal service from a customs officer allocated specifically to that registration," said Melia. "This makes the Isle of Man an attractive proposition if the property owner wishes to 'opt to tax'."
In May this year, a double taxation agreement with Singapore came in to force, bringing the number of countries and jurisdictions it has taxation agreements with to almost 40. This includes China, with which a tax information exchange agreement (TIEA) became effective last year. More recently, the island agreed to cooperate with the US's Foreign Accounts Tax Compliance Act (FATCA) and to enter into a similar arrangement with the UK to help cut down on tax avoidance.
The Isle of Man also enjoys good transport links, with London around an hour away by flights to Gatwick, Luton and London City. It also has air connections with other major UK airports, as well as Dublin. It also has sea links to Liverpool, Belfast and Dublin. The island is also a popular location for registering private aircraft. It was also voted the number one jurisdiction in the world by Corporate Jet Investor magazine. Meanwhile, its shipping register is the fastest growing in Europe and the fourth fastest growing in the world. The island's government is also actively encouraging the registration of yachts, with 410 vessels already on its register according to a Financial Times report. The island also has a world class telecoms infrastructure, and was the second country in the world to enable a 3G mobile phone service, and one of the first in the world to make broadband ADSL services available to the public.
Meanwhile, it has a deep skillbase in the financial services sector, and a high level of education, exemplified by an announcement in May that two of its college students had one places on NASA's summer space school program. The island is also active in encouraging entrepreneurship.
In keeping with the island's unique appeal, it was also voted the fifth most likely nation to put a man on the moon, thanks to the strength of its aerospace sector. Continuing the space link, the island was visited by the six Nasa astronauts who crewed the final mission of the space shuttle Discovery, who gave talks to students. Meanwhile, its bracing sea climate, rugged hiking and biodiversity add to the quality of life.
The Isle of Man has been making great effort to promote itself to Chinese HNWIs, and according to Melia has much to recommend it to the group.
"As the recent Isle of Man government delegation to China made clear, we would welcome Chinese entrepreneurs to the Isle of Man, particularly if they intended to start new businesses or headquarter their European operations here," Melia said. "We have low taxation rates, and space both to live and to build facilities. Residents of the Isle of Man enjoy a very high standard of living, superb air and water quality, proximity to all the major cities in the UK and some excellent golf courses.
"If they do not wish to physically relocate, or to relocate their businesses, they can take advantage of the zero tax rates for companies, or the Isle of Man's VAT arrangements with the UK for imports or the holding of UK commercial property. The Isle of Man also has a very well-developed trust law, and recently introduced a foundations law, so is an excellent place for estate planning and asset protection measures."
When it comes to particular investment vehicles, Melia said:"The Isle of Man Companies Act 2006 introduced a vehicle modeled on, and very much the equal of, the BVI business company, which has proven very popular in China: our 2006 Act companies can do everything a BVI company can do. An Isle of Man company is also very popular as a holding vehicle for intellectual property rights, as it is a party to the TRIPS Agreement on Intellectual Property, the Berne Convention and the Madrid Protocol."
In addition, an Isle of Man company was recently used to acquire Goldman Sachs' headquarters in London, and the gateway proposition has been attracting a lot of attention from Chinese exporters recently, Meila said. "We are also seeing increased interest in the holding of intellectual property rights," he added.
As such, China provides a massive opportunity for the island. As Meila puts it:"On the corporate front, the Isle of Man's 'gateway' proposition is a perfect fit for the 'Go Out' policy of the Chinese government, encouraging Chinese businesses to move further up the value chain and to take charge of the import of their products into the EU. The increased wealth of Chinese individuals will also lead to asset protection and estate planning opportunities, and we look forward to ultra-high net worth individuals registering their private aircraft on the Isle of Man's aircraft register. The Isle of Man is also very keen to accommodate the European headquarters of Chinese businesses looking to expand from their domestic base, providing both a low tax platform and high quality of life."
