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The island has its own income tax and customs and excise framework and is independent from the United Kingdom in respect of direct taxation.  Income tax is low, the standard rate being 10% and the higher rate being 20% and there are also generous allowances.  From 6th April 2016 there is a revised personal taxation cap which means that an individual's personal tax liability is limited to £125,000 (£250,000 for jointly assessed married couples or civil partners) irrespective of income generated per tax year agreed over five consecutive years. 

There are also no stamp duties, capital gains taxes, wealth taxes, capital transfer taxes, inheritance taxes or death duties imposed in the Isle of Man.

The standard rate of corporate income tax in the Isle of Man is 0%, 10% received by a company from banking business and 20% from land and property in the Isle of Man (including property development, residential and commercial rental or property letting).

The Isle of Man benefits from a special relationship with the European Union which allows the streamlined movement of goods between the Island and the Union. The Isle of Man is the only offshore financial centre where zero tax rate companies may operate within the European Union VAT system and trade freely within the European Union.

Businesses trading in the Isle of Man may apply to register for VAT in the Isle of Man providing that they can show that day to day management and control of the business is effected from the Island. Once VAT-registered, any Isle of Man business is subject to the normal UK/EU VAT rules.

Registration for VAT is compulsory for companies making taxable supplies which at the end of any month, the total value of taxable supplies made during the preceding 12 months (on a rolling 12-month basis) exceeds £83,000. Also, should a company expect that the value of taxable supplies within a 30 day period will exceed £83,000, then registration will be necessary. The VAT rate currently stands at 20%.

For Isle of Man businesses that are trading outside the UK and Isle of Man, their trading would normally be outside the scope of UK and Isle of Man VAT and as such would not be required to register in either territory unless registering on a voluntary basis.