Employee benefit trusts established in the Isle of Man are used increasingly to enhance loyalty and motivation amongst staff. For example bonuses, instead of being paid direct to employees, could be paid by the employing company into an employee benefit trust and held on trust for eventual payment to employees. Contributions made by the Employers may be tax allowable. This effectively amounts to deferred compensation and in certain countries can provide tax deferral advantages to employees, not just because tax on the initial bonus is deferred but because the gross amount of the bonus can be invested tax free within the trust.
It is possible to obtain agreement from the Isle of Man tax authorities that the trust will have no liability to local income tax and as there is no Capital Gains Tax in the Isle of Man, the fund can roll-up free of local taxes.
