Check our Cyprus and IOM incorporations. You can incorporate the company and register for VAT.

With effect from 1st January 1993 Customs barriers between European Union member states have been disbanded and there will no longer be a requirement for customs declarations or clearance for most imports or exports moving between E.U. member states.

VALUE ADDED TAX (VAT) & EU TRADING

Following implementation of the Single European Market, an offshore trading company or any foreign company resident outside the EU could have a potential VAT problem. Where an EU supplier delivers goods to an EU customer and invoices through an offshore/foreign company, the supplier will have to charge VAT unless the invoicing company is VAT registered.

Although the Isle of Man is not a member of the EU by virtue of the Customs and Excise Agreement between the United Kingdom and the Isle of Man, the island has a value added tax (VAT) regime which is essentially identical to, and interlinked with that of the UK. The effect of this is that the two jurisdictions are treated as if one for VAT purposes.

Again due to the Agreement the Isle of Man is regarded as part of the European Single Market, and transactions involving the Island are treated by Member States as if they involved the UK.

Registration for VAT within the Isle of Man may, for the purposes of European Union VAT triangulation, alleviate some of the more onerous consequences of registration for VAT in the country of supply. Registration is primarily applied for by Isle of Man Resident or Exempt Companies but may, in certain circumstances, be appropriate in the case of non-Isle of Man companies, the latter needing also to register on the “F” (Foreign) register.

Companies incorporated in the UK or in the Isle of Man, may apply to register for VAT on the Island provided that they can show that day to day management and control is effected from the Island.
Day to day management and control may be demonstrated by a number of factors, or combinations of them; by showing that record keeping, bank accounts, premises, directors, invoicing and administration take place in the Island.
Once VAT-registered, normal VAT rules apply.

Companies trading outside the UK and the Isle of Man, would normally be outside the scope of VAT, and so they would not be required to register unless they wish to do so on a voluntary basis (this usually being in order to recover VAT charged by UK or Isle of Man suppliers e.g. VAT charged to them as an Isle of Man business by UK accountants, lawyers, company administrators etc.).

The Isle of Man is the only jurisdiction in Europe, which provides a full European Union Value Added Tax, whilst also providing for complete exemption of trading profits from income or corporate taxation.

SUMMARY
In order for offshore/foreign companies to be eligible for VAT registration on the Island, they have to comply with the criteria outlined below:

• The company, if not Isle of Man incorporated, must register as a foreign company.

• In order to avoid any liability to Isle of Man taxes the company should obtain exemption under the Income Tax (Exempt Companies) Act 1984.

• The company must have a resident director, a resident qualified secretary and a resident approved person responsible for the day-to-day business of VAT affairs including completion and submission of returns.

• All books and records must be held in the Isle of Man, and all invoices etc. must originate on the Island.

• The company must establish its business bank account on the Island under the control of the local approved person.
   

Isle of Man companies and the need for a VAT registration:

• Obligatory: An IOM company trading in the UK/IOM and having a turnover in excess of £55 000 per annum is obliged to register for VAT

• Optional: An IOM company trading in Europe

• Not applicable: An IOM company trading worldwide (outside Europe)

The fees for arranging VAT registration:
VAT Administration, Bookkeeping and Isle of Man Business Office Services £800
Provision for the Preparation of Statutory Accounts £250

Please note that in order to register the company for VAT, you need to order the IOM company with nominee services included, and to pay the VAT administration for the first 2 quarters.

Check our U.K. and IOM incorporations. You can incorporate the company and register for VAT.