About purchased life annuities
A purchased life annuity is an annuity purchased from an insurer the terms of which include a life contingency.
They pay a regular amount, part of which is capital.
The decision whether an annuity is a purchased life annuity and the calculation of the capital element is made by the company which pays the annuity, if the company is in Jersey. If the annuity is paid from outside of Jersey the taxes office makes this decision and calculation.
Purchased life annuity taxation
Exemption from income tax on the capital element
The capital amount that certain purchased life annuities pay is exempt to Jersey income tax, but the remaining portion of the annuity is taxable.
Not all purchased life annuities come with this exemption. Those excluded are:
- an annuity certain
- annuities where the premiums have qualified for retirement annuity relief
- an annuity purchased in pursuance of any direction in a will or by virtue of a will or settlement
- an annuity purchased under, or for the purposes of, or in connection with a superannuation scheme
- an annuity purchased by a person in recognition of another's services or past services in any office or employment
- an annuity purchased in satisfaction of a droit de douaire or a droit de viduité
- an annuity purchased with funds withdrawn from a Jersey approved drawdown contract or a Jersey approved trust
If you can claim the exemption, the insurance company will ask you to complete and return part A of the form PLAJ1. They will then complete part B and send it to us.
Deduction of tax at source
Annuities paid by insurance companies through branches in Jersey are obliged to deduct tax at source from the income / interest element. This taxable amount is then declared on the 'Jersey taxed income' section of your Jersey tax return.
Purchased life annuities paid from outside Jersey
A purchased life annuity paid from outside of Jersey can still have an exempt capital amount, but it is the taxes office that determines whether the annuity is a 'life annuity' that is not excluded and also calculates the capital element.
The payment is received without deduction of tax and the taxable element should be declared on the 'investment and savings income' section of your Jersey tax return.
For annuities paid from outside of Jersey form PLAJ2 has to be completed and sent to the Jersey taxes office.