If you hold shares in an Isle of Man company, those shares entitle you to a share in the profits of that company which will normally be paid out in the form of a dividend or distribution. To assist you with identifying how much you should declare as income, the Division recommends that the company provides you with a voucher/certificate detailing each separate element of the payment.
A company may pay one or more of several different types of dividend or distribution, depending on the tax rates and charges applicable to the company. Some dividends carry tax or DPC credits that can be claimed and used to settle part of your income tax liability. Dividends which should be declared in this section include gross dividends, dividends with 10% or 20% credits, dividends with DPC credits and dividends paid from reserves which carry non-refundable tax credits.
You may only have received a single payment from a company, but that payment could be made up of a number of different types of dividend or distribution - each of which has its own specific tax treatment. You may not have actually received a cash payment for the full amount on the voucher/certificate given to you by the company; some, or all of your dividend may have been credited to a loan account within the company instead. This does not change the fact that the dividend is income, and you should declare the full dividend amount.
If the company has given you a certificate or other document detailing the dividend you have received plus any credits you are entitled to claim, please attach this to your return. If the company has not given you a certificate or details of the dividend you have received, but you know how much you received please complete the return with the details that you have. If you believe that you are entitled to claim tax or DPC credits, you should contact the company and ask for the certificate as credits cannot be given without a certificate.
On 20 February 2018 new legislation was introduced aimed at reducing the tax loss that can occur in the following circumstances:
If goodwill or unquoted shares were sold by a participator to their own company before 20 February 2018 then any subsequent loan repayments from the company to the participator after this date may be chargeable as a dividend first for income tax purposes.
Likewise, if goodwill or unquoted shares were sold from a participator to their company on or after 20 February 2018 then this transaction itself may be chargeable as a dividend first for income tax purposes.
If you have been party to such transactions then the relevant amounts should be declared as taxable dividends in this section. Further details may be found in Practice Note 202/18: Payments to Participators Relating to Sales of Goodwill or unquoted Shares.
If a company has bought back its shares from you, for more than the amount originally paid to the company for these shares, then this excess may be taxable on yourself as an income distribution. If you have received such an amount then please declare this on your tax return in the dividends section and provide any relevant details to help explain matters.
Practice Note, PN174/12: Removal of Concessions – Distributions revised the Assessor’s previous practices with regards to the taxation of distributions. It is not practical to provide full details here of the operation of the Practice Note, but the Practice Note itself and Guidance Note, GN49: Taxation of Distributions from Corporate Taxpayers, which are available on our website, provide further information. We recommend that you read them before completing this section of your return.
With effect from 21 February 2012, the Assessor will not seek to tax certain distributions from Isle of Man companies in the hand of the recipients; however, these distributions should still be declared on your return.
If you receive a distribution from previously attributed income (see GN41 and GN42), no further income tax will be due, however the income should be declared on your return.
