Tax Residency Of Jersey Companies

• Law Firm: Ogier
• Subject Matter: Corporate/Commercial Law, Tax, Corporate and Company Law, Directors and Officers, Income Tax, Corporate Tax, Securities, Shareholders
• Author: Mr Raulin Amy, Bruce MacNeil, Matthew Shaxson, James Fox and Alex Fisher
• Published date: 16 March 2023

This briefing covers both (i) the general position under Jersey legislation and a consideration of the previous case law relating to management and control of Jersey companies and (ii) an evaluation of a UK tax case involving three Jersey companies which is relevant to local service providers.

Current regime

The principal Jersey tax statute is the Income Tax (Jersey) Law 1961 (the Income Tax Law) which determines the rate of Jersey income tax payable by Jersey companies.

A company will be Jersey tax resident for the purposes of the Income Tax Law if it is incorporated in Jersey or, if incorporated elsewhere, its business is managed and controlled in Jersey. The general rate of tax is 0% (subject to some local exceptions).

Notwithstanding the general rule that Jersey incorporated companies are treated as Jersey tax resident, the Income Tax Law states that a Jersey incorporated company will be entitled to be regarded as exclusively tax resident elsewhere if its business is managed and controlled in a jurisdiction other than Jersey, it is tax resident in that jurisdiction and the highest rate of corporate income tax in that jurisdiction is 10% or higher.

For Jersey and English purposes tax residency is broadly determined by reference to where an entity's central management and control abides, being the location where the high-level strategic decisions of the company are made. The principles of management and control in Jersey are the same as those in the UK so English case law is very relevant. However, as set out below, there are other considerations to bear in mind and factors which influence where management and control is deemed to be located.

General tax residency guidelines

Wood v Holden [2006] EWCA Civ 26

The English law case of Wood v Holden confirmed that all board meetings should be held and all decisions and resolutions should be made in Jersey to ensure that a Jersey entity's tax residency remains in Jersey as a matter of English tax law.

Laerstate BV v HMRC [2009] UKFTT 209

In the English case of Laerstate, the First Tier Tribunal (FTT) held that a company's residency cannot be established merely on the basis of the location of board meetings. The FTT found that a company should be resident in the place that it had been doing all its real business, including contract negotiations and obtaining its advice. In Laerstate the FTT found that this was within the UK, which made the company tax resident in the UK. The following guidelines were raised:

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