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Repeal of deemed distribution and attribution provisions (zero / ten tax system)

Effect of repeal

The repeal means that Jersey resident shareholders will no longer be liable to Jersey tax on:

  • deemed interim dividends (0% company)
  • deemed final dividends (0% company)
  • deemed dividends (10% company)
  • attributed profits 

that arise out of company profits accruing on or after 1 January 2012.

Deemed interim dividends (0% company)

Where cash dividends equating to 60% or more of the relevant profits have not been paid out of a trading company to its shareholders then, prior to the repeal, a deemed interim dividend arises on the Jersey resident shareholders in proportion to their share ownership. The deemed interim dividend is deemed payable at the end of the following financial period.

Deemed interim dividends continue to apply on profits accruing to 31 December 2011. No deemed interim dividends apply on profits accruing from 1 January 2012.

In cases where the company financial period is 31 December the position is quite straightforward. The deemed interim dividend will be calculated by reference to the year ended 31 December 2011 accounts and must be declared by the shareholder on his 2012 return.

In cases where the financial period is not 31 December the position is as follows:

(For illustration a financial period of 30 June is considered)

  1. The shareholder will be liable to tax on a deemed interim dividend arising out of the (12 month) financial period ending on 30 June 2011. This must be declared on the shareholder’s 2012 return form and will be taxed in the 2012 year of assessment.
  2. The shareholder will also be liable to tax on a deemed interim dividend arising in the period from 1 July 2011 to 31 December 2011. As the financial period is the 12 months to 30 June 2012, the relevant profits on which the deemed interim dividend will be calculated by time apportioning the profits for the 12 month period. The deemed interim dividend from this period must also be declared on the shareholder’s 2012 tax return and will also be taxed in the 2012 year of assessment.

Note: To calculate the deemed interim dividends applicable each of the company’s financial periods must be dealt with separately. It is not acceptable to combine the relevant profits of both periods.

Deemed final dividends (0% company)

A deemed final dividend applies on the occurrence of one or more trigger events. Trigger events occurring on or before 31 December, 2011 will continue to trigger a deemed final dividend on the Jersey resident shareholder. Trigger events occurring after that date will have no implication on the Jersey resident shareholder.

Where the company has a non 31 December year end then the deemed final dividend will be calculated by reference to:

  • all of the financial periods completed prior to the date of the trigger event and
  • by time apportioning the financial period that commenced during 2011 from the date of commencement of that financial period to the date of the trigger event.

Deemed dividends (10% company)

As for deemed final dividends above, a deemed final dividend applies on the occurrence of one or more trigger events. Trigger events occurring on or before 31 December 2011 will continue to trigger a deemed final dividend on the Jersey resident shareholder. Trigger events occurring after that date will have no implication on the Jersey resident shareholder.

The position where the company has a non 31 December year end mirrors that for deemed final dividends.

Attributed profits

Attributed profits are assessable on Jersey resident shareholders of investment companies and personal service companies where cash dividends have not been paid sufficient to cover the relevant profits of the company.

In cases where the company financial period is 31 December the attributed profits will be calculated by reference to the year ended 31 December 2011 accounts and must be declared by the share holder on his 2011 return.
In cases where the financial period is not 31 December the position is as follows:

(For illustration a financial period of 30 June is considered)

  1. The shareholder will be liable to tax on attributed profits relating to the (12 month) financial period ending on 30 June 2011. These must be declared on the 2011 return form and will be taxed in the 2011 year of assessment.
  2. The shareholder will also be liable to tax on attributed profits relating to the period from 1 July 2011 to 31 December 2011. As the financial period is the 12 months to 30 June 2012, the relevant profits on which the attributed profits will be calculated by time apportioning the profits for the 12 month period. The attributed profits from this period must also be declared on the shareholder’s 2011 tax return and will be taxed in the 2011 year of assessment.

Note: (As for deemed distributions above) To calculate the attributed profits each of the company’s financial periods must be dealt with separately. It is not acceptable to combine the relevant profits of both periods.

Cre​dits

Where a cash dividend is subsequently paid from the profits of the same financial period, the credit remains available going forward in the year that the dividend is paid.

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