Private Client Guide 2022 - Jersey

Published date27 January 2022
Subject MatterCorporate/Commercial Law, Tax, Family and Matrimonial, Corporate and Company Law, Income Tax, Trusts, Wills/ Intestacy/ Estate Planning, Withholding Tax
Law FirmCarey Olsen
AuthorMr Keith Dixon and Elizabeth Le Guillou

This guide to Jersey's private client sector includes commentary on tax, trusts, foundations and private wealth structures used within the jurisdiction, including charitable or philanthropic structures. It also looks at capital gains, withholding and wealth tax rules along with issues relating to real property, immigration, succession, making a will and estate planning considerations, legislative changes and disclosure obligations.

Which factors bring an individual within the scope of tax on income and capital gains?

The charge to income tax in Jersey is assessed by reference to a person's residence status:

  • A person who is resident and ordinarily resident in Jersey is charged to income tax on all of his/her Jersey and worldwide source income, whether remitted to Jersey or not.
  • A person who is habitually resident in Jersey is charged to income tax on all Jersey source income and any worldwide source income which is remitted to Jersey.
  • A non-Jersey resident is charged to income tax on Jersey source income only (although by longstanding concession, Jersey bank interest and social security pensions are deemed to be non-Jersey source income for these purposes).

If an individual whose home has been abroad maintains an abode in Jersey which he/she uses, he/she is regarded as resident for any year in which he visits Jersey, for whatever length of time. Further:

  • If his/her visits span one complete calendar year, he/she is regarded as ordinarily resident.
  • If his/her visits are habitual after four years, unless intention to make them habitual is shown earlier, he/she is also regarded as ordinarily resident.

However, an individual whose centre of life is abroad, in the sense that he/she has a home and a business or professional activities abroad which keep him/her more or less continuously outside Jersey, is not regarded as ordinarily resident, unless the annual average period spent in Jersey amounts to or exceeds three months.

Where the individual's professional or business activities have ceased due to him/her having retired from work, he/she is not refused the concession to the charge to income tax if he/she can show that, in the ordinary course of his/her life, his permanent home is settled at one specific place abroad.

For the residence of companies, a company incorporated in Jersey is generally regarded as being resident in Jersey, unless both:

  • Its business is centrally managed and controlled in a country or territory where the highest rate at which any company can be charged to tax on any part of its income is 20% or higher.
  • The company is resident for tax purposes in the country/territory.

A company or foundation incorporated outside Jersey is regarded as not being resident in Jersey unless its business is managed and controlled in Jersey.

Capital gains are not subject to tax in Jersey. However, any attempts to turn income into capital artificially will probably be challenged by the Comptroller of Taxes under blanket anti-avoidance provisions.

What are the taxes and rates of tax to which an individual is subject in respect of income and capital gains and, in relation to those taxes, when does the tax year start and end, and when must tax returns be submitted and tax paid?

The standard rate of income tax for an individual is 20%, a rate which has applied since 1940.

The official tax year in Jersey starts on 1 January and ends on 31 December each calendar year. An individual may file an annual tax return either online or by means of a paper return. The deadline is 31 July in the year following the relevant tax year.

Income tax in Jersey is collected in different ways depending on whether the tax payer is employed, self-employed, not working or a combination of these. Income tax is collected by a deduction from the taxpayer's salary under the Income Tax Instalment Scheme (ITIS), or by payments made on account.

There are no particular rules affecting temporary residents. Income tax is collected from the salary of any employed resident by a deduction under ITIS, whether or not that person is a temporary or permanent resident.

Strictly, income tax is payable by the taxpayer on the day after receipt of the Comptroller of Taxes assessment, but this is subject to certain exceptions including ITIS. The assessments for a tax year ending on 31 December are usually sent out in September in the year following the year of assessment but this is set to change. With effect from 1 January 2021 all prior year basis taxpayers will be moved to a current year basis. The 2019 tax bill for such taxpayers will be frozen and paid in the future under arrangements which have yet to be announced. Penalties for late payment surcharges apply from close of business on the Friday following the first Monday in December of the following year of assessment.

Capital gains are not subject to tax in Jersey.

Are withholding taxes relevant to individuals and, if so, how, in what circumstances and at what rates do they apply?

Salaries paid to a Jersey resident or non-resident are not subject to withholding tax, although as set out in the answer to Question 2 income tax is collected by a deduction from an employed taxpayer's salary under ITIS, or by payments made on account.

Dividends paid to a Jersey resident or non-resident are not subject to withholding tax.

Interest paid by a company to a Jersey resident or non-resident is not subject to withholding tax. In particular, interest paid by a Jersey bank is not subject to withholding tax. However, interest paid by a Jersey resident individual may be subject to a 20% withholding tax in certain cases.

Royalties paid by a company to a Jersey resident or non-resident are not subject to withholding tax but royalties paid by a Jersey resident individual may be subject to a 20% withholding tax in certain circumstances.

By longstanding concession, an assessment to income tax is not made on a person who is not resident in Jersey in relation to Jersey bank interest or a Jersey social security pension. However, if a non-resident relief claim is made in respect of other Jersey income, any Jersey bank interest and social security pension is included in the calculation as income tax subject to Jersey tax. If the calculation results in a liability greater than tax suffered by deduction or charged at the standard rate on other Jersey income, no action is taken to collect the excess.

The concession in respect of Jersey bank interest also applies to:

  • A non-resident person entitled to interest from designated accounts.
  • Trustees of trusts with no Jersey resident beneficiaries.
  • The attorney executor of the estate of the deceased non-resident.
  • The executor of the estate of the deceased Jersey resident, to the extent that the income is payable to beneficiaries who are not resident in Jersey.

How does the jurisdiction approach the elimination of double taxation for individuals who would otherwise be taxed in the jurisdiction and in another jurisdiction?

Jersey generally seeks to eliminate double taxation by means of express agreements with other states. It currently has full double taxation agreements with fifteen states (including the United Kingdom) and partial double taxations agreements with a further twelve states, a complete list of which together with copies of those agreements can be found on the Comptroller of Taxes' website (www.gov.je).

Jersey has committed itself to support the actions being undertaken under the Base Erosion and Profit Shifting (BEPS) project. It became a signatory to the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Sharing on 7 June 2017.

As a result of its international obligations, the States of Jersey adopted the Taxation (Companies - Economic Substance)(Jersey) Law 2018 on 6 December 2018. This Law applies an economic substance test to companies that are tax resident in Jersey and generating gross income from relevant activities in a financial period commencing on or after 1 January 2019.

Partnerships were recently be brought into scope of this economic substance regime. Partnerships in existence before 1 July 2021 will first be in the scope of the Taxation (Partnerships - Economic Substance)(Jersey) Law, 2021 for accounting periods commencing on or after 1 January 2022. Partnerships formed on or after 1 July 2021 will be in scope from the date of formation.

Is there a wealth tax and, if so, which factors bring an individual within the scope of that tax, at what rate or rates is it charged, and when must tax returns be submitted and tax paid?

There is no wealth tax regime in Jersey.

Is tax charged on death or on gifts by individuals and, if so, which factors cause the tax to apply, when must a tax return be submitted, and at what rate, by whom and when must the tax be paid?

There is...

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