Personal income tax rate in Jersey is 20%, although a special regime applies for high net worth individuals. Most allowances will be phased out by 2011 for high income individuals.
Income tax is charged on Jersey-resident individuals in respect of worldwide income and profits regardless of whether such profits or income are remitted to Jersey. There is, however, a statutory relief in the case of individuals who are resident, but not ordinarily resident in Jersey, so that foreign income not remitted escapes taxation.
There is no statutory definition of residence or ordinary residence in Jersey. However, regard is paid to UK law and practice and, generally, individuals are treated as resident in a year if they are present in Jersey for more than six months or if they are present for three months or more, on average, over a period of four consecutive years.
If an individual maintains a place of abode in Jersey, he is regarded as resident in any year that he stays in that abode. Any time that his visits span a complete calendar year, he will be classed as ordinarily resident. He is also regarded as ordinarily resident if his visits are habitual (after four years) unless his centre of life is abroad, e.g. has a home, business or professional activities abroad and is spending less than three months a year in Jersey.
Income from offices and employment is assessable on an arising basis. Income tax is levied on the assessable income of the individual less personal allowances and deductions at a rate of 20%.
Earned income arising outside of Jersey Island is assessable on the basis of the net amount arising after the deduction of any foreign tax charged and any necessary expenses but there is a special half-rate tax chargeable on pensions in respect of which tax of a Commonwealth territory has been paid.
Income is exempt if it does not exceed £12,650 for a single person (£14,110 for those aged 63 and over) or £20,280 for a married person (£23,220 for those aged 63 and over). Marginal relief is available where income exceeds the exemption limit on small incomes, whereby the tax charged is not to exceed 27% of the excess.
Where income is chargeable to tax, personal allowances are available as follows:
Single person £1,040
Married person £2,080
Child allowance £3,000 (each child)
The enhanced Child Allowance for a parent whose child is in full time higher education in 2008 is £6,000.
There is an Additional Personal Allowance for single parents of £4,500 for 2008.
From 1 January 2006, an income tax instalment scheme has been introduced. The effect is that tax is deducted from salary on an ongoing basis.
"20% MEANS 20%"
With effect from 2007 the granting of personal allowances for high earners is being withdrawn in phases up to 2011 and 2012 will be the first year without any personal allowances. The gradual withdrawal of these allowances will mean that, over a five year period, higher earners will see a year-on-year increase in their tax liability. The withdrawal of allowances is applied by limiting the tax allowances to 4/5ths of the total allowance in year one and thereafter a further 1/5th of the allowance is withdrawn in each of years two to four with a complete withdrawal in year five. Where a taxpayer's income exceeds certain exemption thresholds, a form of marginal relief will be available whereby a tax charge of 27% is applied to the amount in excess of the threshold. Provided the charge under this calculation is less than the charge calculated using the annual personal allowances, the marginal relief is available.
The personal tax allowances that will remain are:
- Child Allowance
- Single Parent Allowance (known as Additional Personal Allowance)
- Employment Expenses
- Pension Contributions
- Life Assurance on policies made before 1 January 2022
HIGH NET WORTH INDIVIDUALS
With effect from 1 January 2005, individuals who are new to the island applying for a "1(1)K licence" to live in Jersey are taxed on their Jersey source income at 20%.
The first £1,000,000 of non-Jersey source income is also taxed at 20% but the next £500,000 is taxed at 10% and non-Jersey source income above the £1.5 million level is taxed at just 1%.
All companies incorporated in Jersey or managed and controlled in Jersey are treated as resident and, therefore potentially chargeable to income tax. Some companies can elect for exempt status. These are collective investment funds and also, for calendar years up to and including 2008, certain Jersey registered companies owned by non-residents. The annual exemption fee is currently £600. Under exempt status, income tax is not payable on income arising outside Jersey and, by concession, income arising from bank deposits in Jersey is not taxable. Other income arising in Jersey is subject to Jersey tax.
On 1 January 2009, the exempt and international company regimes were abolished and all Jersey registered companies became resident for taxation purposes, except collective investment schemes that may make an exempt status election. A new zero rate of corporation tax has been introduced for all companies, except for companies with certain classes of income. This new corporate tax regime is known as Zero 10.
Financial services entities are subject to a 10% rate and are defined as:
- All entities carrying out banking businesses through a permanent establishment in Jersey, whether through a Jersey company, a branch or some other structure
- All entities carrying on the business of trust business through a permanent establishment
- All entities carrying on investment business, independent financial advice and similar activities through a permanent establishment
- All entities carrying on the business of funds administration or funds custody services through a permanent establishment.
It should be noted that clerical functions such as invoicing operations, management and administration services and entering into contracts in respect of a company's international business do not amount to the carrying on of a business through a permanent establishment in the Island.
Public utility companies such as those providing electricity, water, gas, telecommunications and postal services continue to be taxed at 20%. Jersey rental income and profits from property development in Jersey also continue to be taxed at the rate of 20%.
All other companies are liable at the rate of 0%.
The new regime applies to accounting periods ending in 2009 and thereafter. The income tax rate for all Jersey resident companies for calendar years up to and including 2008 was 20%.
The tax year runs from 1 January to 31 December, although companies may adopt a year end of their choice. Income is assessable on a preceding year basis. There are special opening and closing year rules which may also apply to successions. Assessments are notified to the company in the year following the year of assessment and tax is payable on the following day.
Jersey incorporated companies may be treated as non-Jersey resident for tax purposes from 2007, where they are both centrally managed and tax resident in another country or territory subject to tax on its income at a tax rate of 20% or higher.
The basis of assessment has now changed from a prior year basis to a current year basis with the year of assessment 2009 being the first such year. The year of assessment 2008 was a transitional year in which an average of the income for 2007 and 2008 is assessed.
CAPITAL GAINS TAX
There is no capital gains tax in Jersey. Capital gains are not included in ordinary taxable income.
BRANCH PROFITS TAX
There is currently no branch profits tax in Jersey. However, please note the changes above introduced under the Zero 10 regime. There are special rules for overseas life assurance companies.
FRINGE BENEFITS TAX
On 1 January 2004, the taxation of benefits in kind was introduced. Taxable benefits include, amongst other things, the private use of a company motor vehicle, rent-free accommodation and free board and lodging. Employees are responsible for payment of tax on benefits.
LAND TRANSACTIONS TAX
A new Land Transactions Tax was introduced on 1 January 2022 in order to collect a form of stamp duty on share transfer transactions involving immovable property in Jersey. The primary purpose of the law is to achieve equity between the financial cost to purchasers of property by share transfer or freehold.
As there is no requirement to register the transfer of shares, the charge takes the form of a Tax rather than Stamp Duty. A legal obligation is placed on the purchaser of a property by share transfer to pay a tax exactly equal to the amount of Stamp Duty which would have been paid on the purchase if it had been freehold property.
There are lower rates for first time buyers, charities, the transfer of matrimonial property from joint to sole ownership (or vice versa), and transfers from a deceased person's estate. Non-resident purchasers of shares are not exempt from the tax.
The rates of tax applied range from 0.5% (where the value of the transaction does not exceed £50,000) to £13,000 in respect of the first £700,000 plus 3% of the excess (where the transfer value exceeds £700,000).
Taxes are levied on a state level only.
DETERMINATION OF TAXABLE INCOME
The taxable income of a company is determined by ascertaining assessable income and then subtracting all allowable deductions. Generally, to be deductible, expenditure must be wholly and exclusively expended for the purposes of the business. Special rules apply in respect of the categories listed below:
No deduction is permitted in respect of depreciation on capital items. However, annual allowances, calculated using the reducing-balance method, are allowed as follows:
- Plant and machinery - 25%; glasshouses - 10%
- Motor vehicles - 25% (cost reduced to £21,000 for expensive cars)
If, in any year, there are insufficient profits to cover balancing allowances, which are treated as a deduction from profits, any unrelieved amount is carried forward and treated as an allowance for the following year. This allowance can be carried forward indefinitely, if necessary.
UK principles are followed such that the value of the stock is normally the lower of cost and market value. Acceptable methods of valuing inventory include FIFO and average cost but not LIFO.
Dividends paid are not deductible in calculating the profits of a company but are paid out of after tax profits. With effect from January 2009, dividends paid out of Jersey company profits carry a tax credit in relation to the tax paid by the company at either the 0%, 10% or 20% rates. Dividends received from a UK resident company do not qualify for double tax relief and individuals are taxed on the net amount received.
No unilateral relief is available to resident companies on receipt of foreign dividends and, thus, the net dividend is taxable (in other words, relief is given for foreign tax suffered by way of deduction). However, relief may be granted by concession on foreign dividend income if the absence of it would prevent bona fide commercial transactions (e.g. because dividends paid to a holding company by an overseas subsidiary would be doubly taxed). With effect from 1 January 2009, this income is liable to Jersey tax at the standard corporate tax rate of 0% when received by a Jersey company.
Deemed interim dividends - Jersey trading companies liable at 0%.
An individual resident in Jersey owning more than 2% of the ordinary share capital of a Jersey trading company is liable to pay tax on deemed interim dividends. A Jersey trading company subject to the rules relating to deemed interim dividends is one which is taxed at 0% and is not an investment holding company. Where such a company distributes less than 60% of its relevant profits, it will be treated as having distributed 60% of the profits. The Jersey resident shareholder owning more than 2% of the ordinary share capital will be liable to pay tax on the deemed dividend.
Deemed Final Dividend - Jersey trading companies liable at 0% and Jersey financial services companies liable at 10%
A further deemed dividend will arise on the occurrence of one of the following trigger events:
- The individual ceases to own more than 2% of the ordinary share capital of the company
- The winding up of the company or death of the shareholder
- Where the company is treated as a company subject to full attribution for the following year
- The owner of the shares ceases to be resident in Jersey.
FULL ATTRIBUTION FOR INVESTMENT HOLDING COMPANIES
Income arising to investment holding companies is attributed to Jersey resident shareholders. An individual resident in Jersey who owns more than 2% of the ordinary share capital in a company that is subject to full attribution is liable to pay tax on his/her proportion of the company's relevant profits as if that portion was the individual's own profits. Relevant profits mean the balance of income, profits and gains chargeable to tax on the company at 0%.
A loan made to a Jersey resident shareholder or a member of the shareholder's family is liable to income tax if it is made by a company subject to 0% or 10% (other than a company which is subject to the full attribution rules) unless it is made at a commercial rate of interest. The shareholder is entitled to a credit when the loan is repaid, equal to the amount of tax paid on the loan.
From 1 January 2004, interest tax relief has been abolished with certain exceptions. Interest will continue to be deductible to the extent that it relates to monies borrowed for the purpose of the business. Mortgage interest relief will also continue to be deductible but only on loans up to £300,000 on an individual's principal private residence.
Losses can be carried forward indefinitely provided there is a continuity of ownership and trade. Losses can only be carried back against profits of the immediately preceding year. Losses can also be group relieved in the same year.
FOREIGN TAX RELIEF
Jersey has double taxation arrangements with the United Kingdom and Guernsey. Double taxation relief is available on all income taxed at source excluding UK dividends received and UK debenture interest.
Tax provisions relating to groups of qualifying companies were introduced with effect from January 2009. These provisions allow losses of a group company to be offset against the profits or gains of another company in the same group. A claim for relief must be made within one year following the year of assessment in which the loss period ended. Companies will be treated as being in the same group where one holds directly or indirectly more than 50% of the ordinary share capital of the other company, or where one company (company A) owns directly or indirectly more than 50% of the ordinary share capital of the two other companies (company B and company C).
RELATED PARTY TRANSACTIONS
There is no transfer pricing or related party legislation in Jersey.
Withholding tax is to be deducted from dividends and deemed dividends paid to Jersey residents by Jersey companies out of profits taxed at less than 20%. No withholding tax is deducted from dividends paid out of profits taxed at 20% or more (such as trading profits that arose prior to 1 January 2022). Jersey resident shareholders are entitled to a 20% tax credit on all dividends and deemed dividends they receive from Jersey resident companies. However, the company has to include a statement on the dividend vouchers showing its effective rate of tax. Shareholders who are in a repayment situation, charities and those not liable to Jersey tax (i.e. non-residents, until 2009) will only be able to claim a tax credit at the effective rate.
With effect from 1 January 2009, non-resident shareholders are not liable to Jersey tax on dividends paid to them.
Until they were abolished at the end of 2008, income tax did not need to be deducted from dividends paid by exempt companies.
A collective investment fund must deduct income tax from any dividend paid to a Jersey resident shareholder.
Withholding tax at the standard rate of 20% is deducted from certain interest payments, although there is no withholding tax on interest on short-term loans (less than one year) or paid to, or by, a resident bank. With effect from January 2009, interest payments to non residents are not subject to Jersey withholding tax.
Withholding tax is deducted from patent royalties at the standard rate of 20%. There is no withholding tax on other royalties. With effect from January 2009, royalty payments to non residents are not subject to Jersey withholding tax.
Jersey has entered into various agreements with several EU countries under the EU Savings Directive. In accordance with the agreements, EU resident individual investors have the option of receiving bank interest gross by opting for an exchange of information on their savings income with their domestic tax authority, or, alternatively, accepting a deduction of withholding tax at the current rate of 20%.
The withholding rate increased from 15% to 20% on 1 July 2021 and will increase again on 1 July 2021 to 35%.
With effect from 1 May 2008, a Goods and Services Tax (GST) has been introduced to offset the loss in revenue on the introduction of the Zero 10 corporation tax regime. GST is a form of sales tax on the domestic consumption of imported and locally produced goods and services. There is a standard rate of 3% which will be collected from customers by registered businesses when they make supplies of those goods and services which are specified by Law as taxable at the standard rate.
There are three categories of supplies:
- Standard-rated supplies - e.g. the sale of new and used goods including those under a hire purchase agreement, renting and hiring out of goods, business stock used for private purposes, the provision of services (e.g. hairdressing or hotel accommodation), charging admission for access onto premises, and imported goods.
- Exempt supplies - e.g. financial services, insurance, postal services, medical and pharmaceutical supplies made by registered professionals or institutions, and supplies to charities.
- Zero-rated supplies - e.g. exports, the supply of dwelling, supplies made on medical prescription and international services.
Registration - GST registration is generally required for all entities that made taxable supplies of GBP 300,000 or more in the last 12 months, or that expect to exceed such an amount in the next year.
A special regime (International Services Exemption (ISE)) applies to certain entities whose activities are predominantly undertaken outside of Jersey. On payment of an annual application fee, an ISE is not a taxable person under the GST law and, hence, does not need to charge GST on supplies it makes, nor should it suffer GST on supplies it receives.
Filing and GST payment - GST filing and payments are due quarterly. The GST return and payment is due one month after the closing of the applicable quarter.
Income Tax Rate
Corporate Tax Rate
Sales Tax / GST Rate
Last Update: Nov 2010
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