The Manx government has put forward proposals to the EU to prove our low-tax economy has real substance.

In December, the Isle of Man escaped blacklisting by Brussels.

But we were one of 40 jurisdictions deemed not to be fully compliant with EU and international tax standards that have given a commitment to make changes to their tax regime.

Those on the list were given a deadline of one year to comply with tax good governance.

Chief Minister Howard Quayle, giving evidence to a Tynwald scrutiny committee in March, warned that we faced a ’very real danger’ of being blacklisted by Brussels.

In a report, the European Council named the Isle of Man, alongside Bermuda, Cayman Islands, Guernsey, Jersey and Vanuatu, as having tax regimes that ’facilitate offshore structures which attract profits without real economic activity’.

The Manx government said it has since worked closely with the other Crown Dependences and put forward proposals to the EU Code of Conduct Group.

And it believes this will enable it to meet its commitment by December 31 this year.

These proposals will require companies that are tax resident in the Isle of Man and engaged in key activities identified by the EU to demonstrate they meet minimum substance requirements as part of their annual tax return.

The key activities that would be required to demonstrate these substance requirements are banking, insurance, fund management, finance and leasing, shipping, collective investment vehicles, intellectual property and holding companies that generate income from any of these key activities.

Substance requirements will vary across the different activities to reflect the needs of the companies involved.

They are designed to be fair and proportionate while ensuring there are sufficient activities in the Isle of Man to reflect the amount of profits accounted here, said the government in an update to Tynwald members.

They will include being able to demonstrate that the company is directed and managed in the Isle of Man, that they have adequate level of employees as well as annual expenditure and physical offices.

Commitment

Chief Minister Howard Quayle said: ’The Isle of Man is a well regulated, transparent and cooperative jurisdiction.

’We have worked closely with our colleagues in Jersey and Guernsey to develop proposals to ensure that they meet the needs of our businesses as well as ensure that we fulfil our commitment to the EU.

’We will be holding a series of meetings with representatives from the relevant industry sectors in the coming weeks to discuss these proposals and allow for any feedback as we prepare the legislation.

’This approach means that we can listen and act on the words of our industry.

’We will also be seeking views on the further transparency measures referred to in the EU’s scoping paper.’

A copy of the update provided to Tynwald members is available on the government website.