Business Opportunities for the Space and Satellite Industry
1st November 2004
The Isle of Man is fast becoming recognised as a centre of excellence for the provision of specialised financial and regulatory services to the global space and satellite industry. A positive and proactive regulatory environment is a key factor in the profitability and success of any business and the Isle of Man Government and the private sector are working hard to establish the Island as an ideal location for the establishment and incorporation of space and satellite related businesses.
As an integral part of the Government’s strategy, the Treasury Minister Allan Bell announced an extension of the Island’s zero rate of corporate income tax to businesses involved in the space and satellite industry in his 2004 Budget. This was a bold and progressive move by Mr Bell which, it is hoped, in time, will bring significant inward investment to the Island.
When announcing this move, Mr Bell commented: “I intend to extend the existing zero-rate to new opportunities as and when they arise. A small but exceedingly promising area is space and satellite technology. This will encompass the manufacture, operation, sale or other activities provided in respect of launch vehicles, satellites or similar assets, including those educational and other training activities that are directly associated with the industry. Companies involved in this high value added category, will from 6 April 2004 be included in the growing number of activities that already benefit from the zero rate band of tax. I am extremely hopeful that high technology businesses will look to the Isle of Man as their preferred location, and know that the Treasury and the Department of Trade and Industry are working to further develop relations with several multi-national companies.”
The Isle of Man already has a zero tax regime for a number of industries including shipping, insurance and fund management. In 2006, the Island will introduce a standard zero rate of corporate income tax (a move which meets the requirements of the EU’s Code of Conduct on Business Taxation).
Space interests on the Isle of Man are uniquely served in that the Isle of Man has chosen to outsource the commercial handling of much of its space activities to ManSat Limited (an Isle of Man company with offices in Houston, Texas and London). ManSat has been tasked with establishing the Isle of Man as a centre of excellence through the creation of a blue chip space industry on the Island, attracting to the Island only the best in the industry. Many of the space and satellite industry’s leading companies have already established operations on the Island with many more actively investigating the opportunities offered by the Isle of Man.
Working closely with ManSat, Isle of Man satellite companies are able to access orbital positions and radio frequencies via the International Telecommunications Union (ITU) in Geneva. This in itself has already attracted considerable attention from leading satellite operators. ManSat can make such filings with a speed and efficiency that many jurisdictions cannot match.
The usual attractions of doing international business in the Isle of Man apply equally to the space industry. Add to that a zero tax regime, a pro-space government, access to decision makers and an established, if still small, base of space, aerospace and high tech companies on the Island and the attraction of the Island increases. Despite being worth more than $123bn a year, the space industry is relatively small in terms of decision makers and knowledge of the advantages of establishing or structuring in the Isle of Man is pervading through this industry relatively quickly.
Historically, the global space industry has been largely bureaucratic and government led (due mainly to the fact that many leading operators were originally inter-governmental organisations). However, in more recent times, a number of leading operators (and, increasingly, the industry in general) have begun the metamorphosis into more commercially driven organisations. This has never been more so than in the past 18 months, a period that has seen a huge influx of private equity investment into this high value industry. It is widely anticipated that the new private equity owners of many of the major satellite operators will instil yet more commercial focus in the management and operation of these companies in order to maximise the return on their investment and that these companies will begin to look to reputable offshore jurisdictions for strategic business opportunities and solutions.
By structuring operations or establishing R&D or manufacturing centres in the Isle of Man, these companies can achieve significant savings using the Island’s zero tax regime.
Furthermore, at a time when the space industry is experiencing insurance premiums in the region of 20-30% of sum insured in a market where there is limited capacity, a significant number of companies are beginning to explore the possibility of self-insuring. The Isle of Man is ideally placed to fulfil this industry need with a long established and successful captive insurance industry.
Many of the leading global names in insurance provide captive management services on the Isle of Man such as Willis, Aon and Marsh. With access to such insurance heavyweights, space and satellite companies can take advantage of the Island’s captive insurance regime (which is not subject to EU captive insurance rules) and avail of the many benefits associated with captives such as reduced cost of coverage, direct access to reinsurers and improved cash flow. The Island is also home to subsidiaries of many of the world’s leading investment managers who have an established track record of managing significant sums of money for captive insurance clients.
The Island’s ultimate goal is to position itself as a centre of excellence for space and satellite companies. The signs so far are promising and it is encouraging to note that the Island is featuring more and more on the space industry’s radar. In fact, in the last few months, the Island was invited to become a major sponsor of the famous X-Prize Foundation; an invitation it duly accepted.
The Island’s reputation generally as a sophisticated, stable and mature offshore centre provides an important “launch pad” for the Island’s attempts to attract space business. The Isle of Man is recognised by the IMF as a jurisdiction “of the highest standing” and it has received a “AAA” credit rating from both Standard & Poors and Moodys.
Space businesses establishing in the Isle of Man can do so with the confidence that they are choosing a world class jurisdiction with an established track record.
For more information contact: Andrew Corlett.
This article was published in Offshore Investment (Issue 152 www.offshoreinvestment.com). |
