distribution is where a shareholder removes value from a company and the
withdrawal is not classed as a loan.
A company distribution can include:
- cash distribution (including a dividend paid from capital)
- transfer of assets or liabilities
- repayment of share capital
- loan repayment
For further explanation see Income Tax (Jersey Law) - Article 3AE.
Distributions taxable under Schedule D3
Companies which are subject to 20% tax will make D3 distributions.
When making distributions look at the previous accounting year to check where the money originated.
The only exception when a 0% or 10% company will make a D3 distribution is when they are distributing capital. This is classed as a D3 distribution (exempt).
In all cases, if there are untaxed profits in the company, we would insist that these are distributed first as a D9 distribution.
D3 distribution with a credit
A credit of 20% will be applied to the tax file of the individual based on the value of the distribution (net amount is distributed). The credit of 20% is applied because the money has already suffered tax at a rate of 20% in Jersey.
D3 distribution with a credit from UK property income
When a company owns UK rental property and a distribution is made to a Jersey resident, the distribution is given a 20% non repayable credit. This is because the income has already suffered tax in the UK.
D3 distribution with no credit
When a distribution is made by a company with no previous accounting year, a distribution is classed as a D3 distribution. No credit is given to the individual receiving the distribution.
D3 distribution (exempt)
A distribution made up of capital is classed as a D3 distribution (exempt). This could be capital profit or actual capital. This means the distribution is not going to be taxed, and doesn't need to be declared on the individuals personal tax return.
Distributions taxable under Schedule D9
Companies subject to 0% or 10% tax will make D9 distributions.
There is always going to be an element of tax payable on a D9 distribution as it hasn't suffered tax at 20% if the company:
pays tax at a rate of 0%, no credit is given to the individual receiving the distribution. Tax is due on the distribution
pays tax at a rate of 10%, then a 10% credit is given to the individual receiving the distribution. They are responsible for paying the additional 10% of tax
is distributing capital, see D3 distribution (exempt) above
Information required when a distribution has been made
When a distribution is made by a company to a Jersey resident, the company must provide information to that individual. This should be provided within 1 month after the end of the year of assessment in which the distribution was made.
For further explanation see Article 89 (1A) of the Income Tax (Jersey) Law.
Provide the amount:
- or value of the distribution that is subject to tax under Schedule D3
- of so much of any distribution in (a) that is exempt from tax under Article 78
- or value of the distribution that is subject to tax under Schedule D9
We understand that companies may have difficulty providing this information within the deadline. By concession, provided that the information is provided by the company to the Jersey resident before the end of 31 December in the year following the year of assessment in which the distribution was made, no penalty will apply.
Comptroller's guide to the taxation of company distributions