Complex sentence: Between 1878 and 1918 the areas surrounding the island were controlled by Austria-Hungary, but the island's inhabitants (officially citizens of the Ottoman Empire) enjoyed exemption from taxes and customs and were not subject to conscription.
Split into simpler sentences: Between 1878 and 1918 the areas surrounding the island were controlled by Austria-Hungary, but the island was under Ottoman sovereignty. The island's inhabitants (officially citizens of the Ottoman Empire) enjoyed exemption from taxes and customs and were not subject to conscription.