Taxation of non-resident landlords (FOI)
Taxation of non-resident landlords (FOI)Produced by the Freedom of Information office
Authored by States of Jersey and published on 10 February 2016.
Could you please provide:
- Details of the steps, processes or procedures in place to ensure that income from Jersey property paid to non-resident landlords is taxed.
- Details of any circumstances that the Income Tax Department is aware of that would enable non-resident landlords to legally avoid tax on Jersey property income.
- A summary of any reports, studies, investigations etc. into the potential loss of tax revenue from non-resident landlords.
- Any estimates or attempts to quantify uncollected tax revenue from non-resident landlords.
Taking each part of the request separately:
Details of the steps, processes or procedures in place to ensure that income from Jersey property paid to non-resident landlords is taxed.
A non-resident landlord must complete an annual income tax return detailing the rents received from property or land situated in the Island and any associated expenses relating to the rental income.
They will receive an annual tax assessment showing the tax due on this income which is payable immediately.
There are specific provisions within the Income Tax Law (Article 128A and Schedule 3A) that provide for the collection of tax on the rental income of non–resident landlords.
- require Jersey resident property management agents to register with the Comptroller of Taxes and to provide, as part of the registration process, details of the Jersey properties they manage and details of the non-resident landlords of those properties
- place a duty on those agents to deduct tax from net rents received and retain and remit that tax to the Comptroller until such time as the non-resident landlord is in possession of a good compliance certificate from the Taxes Office
- place a duty on those agents to deduct higher rates of tax where the non-resident landlord is in arrears with the Taxes Office (up to 35% if three or more years of assessment are in arrears)
- require those agents to make a return to the Comptroller within 30 days of the end of each quarter to include details of the properties and non-resident landlords included in the return, details of the net rents for each property and to remit all of the relevant monies applicable
- require tenants of Jersey property that pay rents greater than £25,000 per annum directly to non-resident landlords also to retain tax from the rent payable and remit this to the Comptroller broadly in the same manner as agents are required to do so in respect of rents received as set out above
In summary, there are not only legal obligations on non-resident landlords in respect of their rental income from Jersey property, but there are also legal obligations on agents and in specific circumstances tenants, to ensure that tax is collected from rental income.
With regard to other steps, processes or procedures taken:
- it is standard practice within the Taxes Office, when reviewing the estate of a Jersey taxpayer, where there is evidence that the deceased owned Jersey property, to enquire about the future ownership / use of the property where the beneficiaries to the estate are non-resident
- work is ongoing with the managing agents to ensure their compliance with the current legislation
Details of any circumstances that the Income Tax Department is aware of that would enable non-resident landlords to legally avoid tax on Jersey property income.
The Jersey income tax law provides that tax shall be charged on rents or receipts arising to the owner of land in Jersey, irrespective of the residence of the owner of the land.
It also provides for the taxation of premiums and other payments to the owners of land in Jersey.
The only legal exemptions that apply to non-resident landlords of Jersey property are contained within Article 115 of the Income Tax Law and are:
- income derived from the property of a corporation, association or trust established in the United Kingdom for a charitable object, where exemption from United Kingdom income tax is allowed in respect of such income under section 447 of the Income Tax Act 1952 of the United Kingdom
- income derived from the property of a corporation, association or trust established in the Island of Guernsey for a charitable object, where exemption from Guernsey income tax is allowed in respect of such income under the laws relating to income tax of that Island
- income derived by Her Majesty or by any department of Her Majesty’s government from property in Jersey
A summary of any reports, studies, investigations etc. into the potential loss of tax revenue from non-resident landlords.
A review of information held in respect of the transfer of ownership of share transfer property is currently being undertaken in respect of all flats that transferred ownership to non-residents during 2014.
This is to ensure full compliance with the income tax law in all of these cases.
Depending on the outcome of the review, more work may be undertaken in this area in the future.
Currently, there are no completed reports or studies on the potential loss of tax revenue from non-resident landlords.
Any estimates or attempts to quantify uncollected tax revenue from non-resident landlords.
See the answer to question 3 regarding work currently in progress to ensure compliance with the tax law in respect of share transfer flats.
The Taxes Office is not able to specifically quantify current tax due but not paid by non-resident landlords.
Any uncollected tax debt, however, is pursued through applying the specific provisions of the income tax law (see answer to question 1 above) or through the normal tax collection process if considered appropriate.
Presently, there is no estimate of the theoretical total tax liability of non-resident landlords.