A snapshot of Jersey’s tax regimes

January 28, 2021

Alex Picot Trust, Jersey

Jersey offers a clear, tax-neutral environment with no capital gains tax or inheritance tax. Here, we provide the highlights of Jersey’s tax regimes and some recent important changes to tax legislation (as of 11 July 2020). The Jersey tax year runs from 1 January to 31 December.

The ‘High Value Resident’ regime

A preferential tax system is available to high net worth individuals:
• Minimum Jersey tax contribution of £145,000 per annum (20% on first £725,000 of income, 1%on excess).
• Inclusion of Jersey rental income within the
£725,000 minimum requirement of income (Jersey Budget 2019).
• Move from ‘high value resident’ regime to 20%Jersey taxpayer status. After 10 years’ residency in Jersey, high value residents have the option to become an ordinary Jersey resident taxpayer, if this suits their current circumstances.

Company tax

The following company tax rates apply:

0% 10% 20%
§  Investment holding

§  Holding companies

§  Trading

§  IP holding

§  Non-income producing asset holding

§  Pension companies

§  Financial services

§  Banking business

§  Trust business

§  Investment business

§  Independent financial advice

§  Funds administration / custodian

§  Jersey property rental

§  Jersey property development

§  Large retailers with profits over £500,000

§  Utility company

§  Income from importation/supply of hydrocarbon oil

From Year of Assessment (YA) 2019, all Jersey companies must file a set of accounts with their company tax return. Previously, a set of accounts was only required for companies that pay tax at 10% or 20%.

Jersey has introduced ‘economic substance’ legislation, effective from YA 2019. The company tax return now includes more detailed questions about a company’s activity and management/control, to assess whether it meets the economic substance test. The type of information provided on the return can be as thorough as staff qualifications, timesheets and location of board meetings.

This has been an important change to the tax system and it is more important than ever to ensure a company is managed and controlled in Jersey to guarantee its Jersey tax residence.

Extracting Funds

No tax is paid on income in a company, the extraction of funds is taxed at either 20% or 26% in hands of the individual plus LTC contribution at 1.5% or 1.95%. 20% tax paid on income in a company, any extraction of funds is received with 20% tax credit.

If standard rate taxpayer, only LTC at 1% to pay. If marginal rate taxpayer, additional 6% to pay plus LTC at 1.3%. N.B. Any extraction of funds from a company is only taxable up to the level of accumulated income in the company.

The introduction of fixed calendar deadlines in 2020 for paying corporate income tax (CIT) has created a much clearer compliance cycle for Jersey companies.
• CIT will become payable in two fixed-date instalments (31 May and 30 November) after the Year of Assessment.
• A separate category of earlier payment date
(31 March and 30 September) was set for
‘large remitters’.
• Estimated assessments will no longer be issued to all taxpaying companies in advance of payment deadlines. All companies will be responsible for calculating and paying the correct amount of income tax on time, at the new instalment and ‘balance due’ dates.
• Importantly, there is no change to the CIT filing deadline. All companies must continue to file CIT returns by 31 December in the year following the YA.

Trust taxation

Jersey taxes are not applied to trusts where all beneficiaries reside outside Jersey, and Jersey tax is not payable on distributions to non-resident beneficiaries. Highlights:
• Jersey trusts are taxed at 20%.
• Taxed on gross income, as trusts do not get
a deduction for expenses (except Jersey rental income).
• Distributions from Jersey companies up to trusts have a tax credit if that company is taxed at 10%or 20%.
• Income distributions to Jersey resident beneficiaries of the trust come with a 20% tax credit.