How taxation works in Jersey
The standard rate of income tax in Jersey is 20%. This rate is applicable both to individuals and corporate entities, as well as partnerships and branches of overseas companies. For high net worth individuals, there is a preferential tax rate available.
The island has no separate corporation tax code, although Jersey has now introduced a new ‘zero/ten’ corporation tax regime. Under ‘zero/ten’, companies will generally be taxed at 0% and there will be a special 10% rate applying to certain regulated financial businesses. These changes are now in place and, in general terms, apply from 2009 year of assessment for companies.
There are no 'wealth' taxes such as capital gains tax or inheritance tax.
Other attractions of the Jersey tax system include generous rules for the taxation of employee share ownership; Social Security payments capped at a low level; no stamp duty on equity transactions; and an excellent working relationship between the Finance Industry and the Tax Office which promotes openness and economic growth.
As part of its international commitments, Jersey has indicated that it will move to a 'zero/ten' corporation tax regime in due course. Under 'zero/ten', companies will generally be taxed at 0% and there will be a special 10% rate applying to certain regulated financial businesses. These changes are intended to be in place by 2008 for the first full year of tax assessment thereafter, ie from 1 January 2009.
Personal tax
High Value Residents - “1(1)Ks”
The 1(1)K licence given to high net worth individuals derives its name from Jersey's current Housing Law.
A key consideration in the granting of 1(1)K licences is the expected level of annual tax contribution to be made by the applicant. To meet the current requirements, applicants would normally be expected to generate sufficient income so that - at the present rates of tax - their annual tax contribution is in the region of £125,000. As part of the application process consideration will be given to the total net worth of the applicant, in order to be satisfied that the applicant has sufficient wealth to generate the expected future tax revenues.
With effect from 1st July 2011, 1(1)K individuals new to the Island will be taxed on the following scale:
The first £625,000 of world wide income (including Jersey based) will be taxed at 20% thereby accruing the £125,000 per annum minimum tax contribution. All personal income over £625,000 will be taxed at 1%. The object of the reduced tax is to attract high net worth individuals to invest their wealth in the Island.
For confidential and free advice about any aspect of High Value Residency in Jersey, please visit the Locate Jersey website or Our Director of High Value Residency.
Non 1(1)Ks
Non-1(1)K individuals do not have to agree a minimum income tax contribution with the authorities. These individuals are subject to Jersey's general income tax rules and will pay tax at a standard rate of just 20% on their worldwide income (including Jersey source income).
In many instances, managers will also benefit from the favourable ‘benefits in kind’ rules that apply for example, to share incentive schemes and proprietary investments in funds managed by them. Generally, any initial benefit obtained when purchasing such shares will be taxable but the subsequent growth in value will be free of Jersey tax. Taken together with the Social Security benefits, this means the tax treatment of such benefits in Jersey is far more attractive than, for example, the UK.
Social Security payments in Jersey are low compared to many jurisdictions. Currently, the combined employer and employee Social Security payments in Jersey are capped at £5,529 per annum per employee. Considerable Social Security savings can therefore be made by moving to Jersey.
Individuals and income tax (tax and your money section)
People in employed work - class 1 contributions (payment of contributions section)
Self employed class 2 contributions (employer contributions section)
General business taxation
For owner managed businesses moving to Jersey, profits will simply be taxed at the standard rate of 20%. Whilst this rate will reduce to 10% or 0% from 2009 onwards (depending upon whether the company is carrying on a regulated financial services business), a form of imputation system will be introduced for locally owned businesses to ensure that corporate structures are not used by local residents to avoid income tax.
Taxation of funds and fund management businesses
An important feature of most investment funds is their tax neutrality, and Jersey offers a range of vehicles specifically designed to meet this objective. Accordingly, it is most common for the fund vehicle itself to be outside the scope of Jersey taxation (with any tax liability instead falling upon the individual fund investors).
Clearly, a Jersey resident fund promoter/manager will be subject to Jersey taxation on taxable profits arising from its business in the normal way. A key criterion for any new business seeking to establish a presence in Jersey is the expected level of tax contribution.
Income tax (taxes and your money section)