Legal And Tax Regimes
term 'offshore' is not used in Jersey legislation or in describing
company forms. Non-residence has been the key criterion for
obtaining offshore tax treatment. Normally,
non-resident tax treatment is given to foreign income, while
income arising in Jersey is taxed more highly.
main forms useful for offshore operations in Jersey include
Partnership and Trust, and until recently the
International Business Company and the Exempt Company.
However, the IBC is being phased out in
accordance with Jersey’s commitment to the ‘Rollback’
provisions of the EU Code of Conduct for Business Taxation.
Benefits for existing beneficiaries of the IBC regime will
be progressively extinguished by no later than the December
31, 2011. Meanwhile, no new Exempt Company formations have
been possible since June 3, 2008, under recently introduced
reforms to Jersey's corporate tax system (see below).
became clear in May 2002 that Jersey, along with its fellow
UK dependent territories Guernsey and the Isle of Man, would
agree to be part of the EU's information-sharing regime, whereby
financial institutions are obliged to pass details of income
on investments by nationals of EU member states to their home
tax administrations. The EU finally began information-sharing
in 2005, and after some hesitation, Jersey decided to opt
for a withholding tax on the Swiss model. This withholding
tax became effective from July 1, 2005, initially at a rate
of 15%. This rate increased to 20% from July 1, 2008 and will
rise to 35% on July 1, 2011.
Comptroller of Income Tax reported in mid-2006 that GBP13
million had been collected in withholding tax revenues from
bank deposits in the first six months of the directive. For
the year 2007, Jersey paying agents retained and passed to
the Comptroller a total of GBP34.98 million of withholding
tax. This figure increased slightly in 2008, to GBP35.62m.
In 2009, this figure reduced to GBP11.8m. The sharp drop was
explained by the substantial reduction in interest rates following
the global financial crisis.
the terms of the agreements entered into with each EU Member
State, 75% of the tax retained is sent to the individual Member
States concerned and the remaining 25% is retained by the
Comptroller of Income Tax.
November, 2002, in response to competition from other jurisdictions,
including the Isle of Man, and with an eye to the EU's 'Code
of Conduct' Committee, the authorities announced plans to
reduce the rate of income tax on corporations in Jersey to
zero. Financial institutions continue to be liable to income
tax at a rate of 10%. The
Finance and Economics Committee published its Fiscal Strategy
proposals in February 2005 and these were approved by the
States Assembly in May that year. The States agreed to introduce
a broad-based, 3% Goods and Services Tax (GST) in 2008 to
compensate for the loss of revenue caused by the elimination
of business tax.
'zero/ten' tax system was introduced on January 1, 2009 by
the Income Tax (Amendment No. 28)(Jersey) Law 2007 and the
Income Tax (Amendment No. 29)(Jersey) Law 2007.
the purposes of the 10% tax rate, the new tax law defines
a ‘financial services company’ as one registered,
or holding a permit, by virtue of various Laws administered
by the Financial Services Commission. The 10% rate applies
to the following entities:
entities carrying out banking business through a permanent
establishment in the Island, whether through a Jersey company,
through a branch or through some other structure.
All entities carrying on the business or trade of trust
business through a permanent establishment.
All entities carrying on investment business, independent
financial advice and similar activities through a permanent
All entities carrying on the business or trade of funds
administrator or funds custodian through a permanent establishment.
'non-financial services entities' are liable for the 0% standard
corporate tax rate, excluding utility companies, which pay
income tax at 20%.
companies resident for tax purposes in the Island prior to
June 3, 2008, switched to a tax rate of either 0% or 10% for
the year of assessment 2009 onwards. However, a company that
becomes resident for tax purposes in the Island on or after
June 3, 2008, will be taxed at either a 0% or a 10% rate immediately.
Such companies are unable to elect for exempt company status
after this date.
0/10 corporate tax regime may prove to be short-lived, however,
due to concerns expressed by the EU that it does not adhere
to the 'spirit' of the Code of Conduct on Business Taxation.
In common with Guernsey and the Isle of Man, the Jersey government
has announced a comprehensive review of the island's fiscal
strategy, with a view to introducing further changes to the
findings of the review, to be carried out during 2010, will
be finalised in time for inclusion in the 2011 budget.
recent assessment of Jersey’s business tax regime by
the EU Code of Conduct on Business Taxation Group (“the
Code Group”) focused on the interaction of the deemed
distribution and attribution provisions with the 0% general
rate of tax that applies to Jersey resident companies. In
early 2011, a proposal was lodged by the Treasury Minister,
supported by the Council of Ministers, to remove the deemed
distribution and attribution rules with effect from January
The Treasury Minister,
Senator Philip Ozouf said: “We are confident that the
evidence shows this positive action will result in Jersey’s
0/10 tax regime being considered fully compliant with the
Code. We can then keep our existing corporate tax regime while
also meeting the concerns of the EU.
following information describes the situation in Jersey prior
to the introduction of the 'zero/ten' tax reforms in 2009.
of Offshore Operation
to the introduction of the 'zero/ten' tax regime described
above, offshore operations could take place within the following
Tax Treatment of Offshore Operations
NB: This section describes the situation that obtained prior
to the introduction of the 'zero/ten' regime.
Taxes for the general principles of Jersey corporate
taxation, which also apply to offshore entities.
IBCs are subject to a minimum annual tax liability of GBP1,200.
The diminishing sliding scale applicable to the 'international
income' of IBC's is as follows:
up to GBP3m
common with many offshore jurisdictions, Jersey allows its
International Business Companies (which have to be owned
by non-residents who have declared their beneficial ownership)
to set their own rates of tax, with a minimum of 2%, in
order to climb over the bar of any minimum tax rate specified
in the owner's country of origin.
taxation was already permitted informally in Jersey, but
was regularised by the 1998 Finance Act. Unfortunately for
Jersey, this was the year in which the OECD started its
pogrom against offshore jurisdictions, and in which the
UK Treasury was preparing a battery of measures against
offshore, including a ban on 'designer' taxation, offshore
mixing, and other techniques used by companies with foreign
2001 the UK Government finally allowed Jersey's 1998 Finance
Act to receive royal assent, after holding it up for two
years. Even though a UK company is unable to use a 'designer'
tax through Jersey, the island's rules are still useful
to companies from other countries.
companies pay a fee of GBP600 per annum while they are exempt.
Income arising in the island from an 'established place
of business' will be taxed at 30%. Holding directors' meetings,
issuing invoices and other minor administrative tasks will
not be caught by this provision. Interest received resulting
from Jersey banks is counted as international income. There
are no withholding taxes on dividends, interest, royalties
or other payments made by exempt companies. Collective investment
companies can have exempt status, and Jersey residents may
hold their shares.
partnerships are not liable for tax on foreign income; however
assessments may be made on the firm in the name of resident
Jersey partners for the profits of trading operations in
Jersey. Limited partnerships are not subject to income tax
assessment; but their resident partners are liable to tax
on their share of the whole of the partnership's income;
non-resident partners are liable on Jersey income only (as
usual, excluding Jersey bank interest).
insurance companies can be exempt, but they may need to
demonstrate that there is economic benefit to the island.
with non-resident beneficiaries are usually (by concession)
exempted from Jersey income tax on income arising outside
the island and on Jersey bank interest. If some of the beneficiaries
or life tenants are Jersey residents, the picture becomes
more complicated, and exemption may be partly or wholly
Taxation of Foreign Employees of Offshore Operations
This section refers to the taxation of foreign employees of
non-resident operations and International Business Companies.
The general principles of individual taxation in Jersey also
apply to the resident employees of non-resident entities.
There is in fact no distinction between the employees of resident
or non-resident operations. It is a question of individual
status. Most types of compensation and benefit paid to employees
are taxable; there are no special privileges or exemptions
for expatriate workers.
is no statutory definition of residence. Jersey often follows
the UK in this respect. Normally, an individual is resident
if he spends more than six months on Jersey in any one year,
or more than 3 months on average in each of 4 consecutive
years. If the individual has a place of abode in Jersey, the
rules are tighter.
are liable to pay Jersey income tax only in respect of income
arising in Jersey or from Jersey sources. Commonwealth or
EU citizens may claim proportional allowances in respect of
Jersey income. By concession, Jersey bank interest is not
taxed in the hands of non-residents. Tax due from a non-resident
director of an International Business Company in respect of
duties performed on the island is not pursued.
Jersey has no exchange controls.
Jersey Offshore Activities
NB: This section describes the situation that obtained prior
to the introduction of the 'zero/ten' regime.
International Business Companies, activities on the island
must not involve transactions with Jersey residents, but are
not otherwise specifically limited. For exempt companies,
activities are permitted on the island as long as there is
no established place of business there. In most other cases
of non-residence there are no specific rules about Jersey
activities; income is simply split according to its source
and taxed or not accordingly. However, In accordance with
the Island’s commitment to the European Council of Finance
Ministers (Ecofin), the International Business Company vehicle
was abolished to new entrants with effect from 1 January,
2006. In accordance with the 'zero/ten' corporate tax reforms,
no new exempt companies could be formed in Jersey from June
Employment and Residence
There are no special privileges or disabilities for the employees
of non-resident or offshore operations as such. Nationals
of European Union member states have free right of movement
in Jersey for the purposes of work and establishment. Generally
a work permit will be granted only if no suitably qualified
local exists. A work permit is issued for the duration of
the vacancy up to a maximum period of 3 years. The expectation
is that during this period the employer will continue to seek
to fill the post on a more permanent basis by finding someone
who is free of permit restrictions, training them if necessary.
In exceptional circumstances, with the approval of the Home
Affairs Committee, a permit may be issued for up to 5 years.
Preference is given to UK and other European Union nationals.
A non European Economic Area national seeking entry for more
than 6 months needs to obtain an entry clearance from a British
Embassy or High Commission abroad, before arrival.
Long-term residency in Jersey is carefully controlled; with
certain exceptions consent for residency will be given only
to a person owning a residence, and in turn the purchase of
a residence is subject to consent, which is given in only
a limited number of cases, usually involving a luxury dwelling
or an individual who is clearly going to contribute significantly
to the island through payment of local taxes.