M1: Jersey trustees of a trust for the benefit of non-Jersey residents
1. By virtue of being resident in Jersey, trustees are, in strictness, chargeable to tax in respect of all the income arising to them in that capacity.
2. However, by concession the taxation of the trustees should reflect the tax position of the beneficiaries of the trust and, where the beneficiaries include legal bodies and arrangements (which for the purposes of this concession includes trusts and partnerships), the ultimate individual beneficial owners of those legal bodies and arrangements. Therefore, the tax treatment of the income arising to the trustees will reflect the tax treatment which would have applied to the beneficiaries (or the ultimate individual beneficial owners of any legal bodies and arrangements which are beneficiaries) if the income had arisen to them directly.
3. Where either all of the life tenants of a trust or all of the beneficiaries of a trust without life tenants:
- are non-Jersey resident individuals
- are legal bodies and arrangements ultimately wholly owned by non-Jersey resident individuals
- are Jersey charities exempt from income tax under Article 115 of the Income Tax (Jersey) Law 1961
by concession the trustees will not be taxed on any non-Jersey source income and the statutory exemptions outlined in Article 118B will be treated as being available to the trustees.
In this context "life tenants" means beneficiaries of a trust having a right to trust income as it arises.
4. If trustees are in receipt of income from another trust with Jersey resident trustees or from the activities of a partnership established or incorporated in Jersey, such income will retain the character in which it arose to the underlying trust or partnership. This also applies where there is more than one tier of other trusts and/or partnerships.
5. The statutory exemptions in Article 118B include an exemption from Jersey income tax for:
- Jersey bank interest
- any distribution received from a Jersey resident company which is made out of profit/gains taxed at the rate of 0% in the company; and
- interest paid by a Jersey resident company
6. Where a Jersey resident individual is entitled to income from any part of the trust as it arises, is a beneficiary of a trust without life tenants, or the ultimate beneficial owner of an interest in a legal body or arrangement which is a beneficiary, the concessional exemption granted above will be restricted.
7. The restriction will operate so as to charge tax on the total income of the trust less any non-Jersey source income or any income falling within the statutory exemptions in Article 118B paid to, or expressly designated or accumulated for the exclusive benefit of, a non-resident individual beneficiary or a beneficiary which is a legal body or arrangement wholly owned by non-resident individuals.
8. In cases in which a Jersey resident individual is a life-tenant, a beneficiary of a trust without life tenants or the ultimate beneficial owner of an interest in a legal body or arrangement which is a beneficiary, the trustees should approach the Comptroller to agree the basis of taxation under this concession.
9. For the avoidance of doubt, the Comptroller does not need to be approached or notified where none of the beneficiaries/ultimate individual beneficial owners of legal bodies and arrangements which are beneficiaries are Jersey resident.
10. In the situation where the trustees of a trust are unable to fully identify the residence of all of the beneficiaries/ultimate individual beneficial owners of legal bodies and arrangements which are beneficiaries of the trust but are satisfied, beyond reasonable doubt, that:
- there are more than ten individuals that are beneficiaries/ultimate beneficial owners of the trust; and
- more than 90% of the trust income will be ultimately distributable to the beneficiaries who they have verified as non-resident
then the trustees will be taxed under this concession as if all of the beneficiaries/ultimate individual beneficial owners of legal bodies and arrangements which are beneficiaries are non-resident.
11. Where the trustees are not certain beyond reasonable doubt in respect of the criteria set out in paragraph 10 but still believe that full or partial exemption should apply to the income of the trust in accordance with this concession, the trustees should approach the Comptroller on a case-by-case basis setting out the full facts for determination.
12. Where the settlor of a trust is an individual resident in Jersey at the time the trust is created, or when further property is added to the trust, or when any settlor becomes resident in Jersey, the concession will be available, provided that:
- written application is made accompanied by a copy of the Trust Deed and by an explanation of the purpose of the trust;
- the trust is irrevocable;
- the settlor and their spouse/civil partner are irrevocably excluded from benefitting from the trust; and
- the reduction or avoidance of a Jersey tax liability was not the main purpose, or one of the main purposes, of the creation of the trust
In this context "settlor" means the person who has, or will have, provided any part of the trust property.
13. Where the settlor is a legal body or arrangement and any Jersey resident has any interest in that legal body or arrangement, the trustees should approach the Comptroller on a case-by-case basis setting out the full facts for determination.
14. Income tax returns are not normally issued where there are no Jersey resident beneficiaries / ultimate beneficial owners, however the trustees remain under a legal obligation (under Article 16) to report any income which remains taxable (e.g. Jersey trading income, Jersey rental income) by the normal due dates.
15. This concession also applies to the trustees of unit trusts. It is acknowledged that in the context of unit trusts where units are held by legal bodies and arrangements, the trustees may not be required under AML or other rules to identify the residence of all of the ultimate beneficial owners. Correspondingly trustees may not be able to confirm whether they meet the test set out in paragraph 10 above.
16. In the situation where trustees of unit trusts are not obliged to identify and have not identified the residence of all ultimate beneficial owners of a legal body or arrangement under AML or other rules, the units held by that legal body or arrangement will be treated as being held by non-Jersey resident ultimate beneficial owners provided that the legal body or arrangement is either: (a) a company, the shares of which are regularly traded on a stock exchange; or (b) an occupational pension scheme established principally for the benefit of non-residents.
17. This treatment will apply provided:
- the trustees deduct and account for Jersey income tax in respect of any distributions made directly to any Jersey resident individuals;
- potential Jersey resident investors are made aware, by means of a warning in the Prospectus, that Article 134A (the general anti-avoidance provision) may be invoked in the case of an investment in an accumulation fund; and
- the trustees provide details to the Comptroller of any legal body or arrangement that owns units in the unit trust when the trustees become aware that a Jersey resident individual is the ultimate beneficial owner of an interest in that legal body or arrangement.
M2: unilateral relief
Moved to Historic tax concessions and practices.
Historic tax concessions and practices
M3: charitable organisations
The profits of charitable and voluntary organisations from fund-raising events such as car boot sales, jumble sales, bazaars, carnivals, gymkhanas and similar activities, together with lotteries or raffles held at such events will not be assessed to tax, even if undertaken on a regular and frequent basis, provided that the following conditions are satisfied:
- the activities are supported substantially because the public are aware that any profit will be devoted to charity; and
- the profits are transferred to charities or otherwise applied for charitable purposes
M5: clubs, societies and associations
Clubs, societies and associations are liable to tax on investment income, such as bank interest, rents and dividends.
Assessments will not be raised, however, in any year of assessment in which the tax does not exceed £200.
Profits generated by clubs, societies or associations trading with their own members do not constitute taxable income and any small profits derived from trading with non-members will be ignored for tax purposes.
M6: group life insurance schemes
A group life insurance scheme is not a scheme to which Article 131 of the Income Tax Law applies because it is not a superannuation fund or pension scheme. Therefore no approval can be given to the group life insurance scheme under that article.
However if the death benefits payable under such a scheme do not exceed the limits laid down for approval under Art 131 of the Income Tax Law then the comptroller may deem the scheme to be ‘satisfactory for income tax purposes’.
The premiums paid by the employer (company) may be eligible for income tax relief as an expense of the business if it can be shown that they were incurred wholly and exclusively for that purpose.
Under the benefit in kind exemption provisions the directors and employees are exempt from income tax on the premiums paid by the employer (company) into the scheme.
M7: money settlements
Money settlements are only applicable to declarations made up to 31 December 2019.
Penalties charged on unpaid tax brought to light either through an investigation into a taxpayer's affairs or through a disclosure by the taxpayer of previously undeclared income are calculated by reference to the following criteria:
- the readiness with which irregularities are disclosed; this can range from a spontaneous voluntary disclosure to repeated denials of any wrong doing
- the co-operation afforded by the taxpayer throughout the investigation to help bring it to a conclusion
- the size and gravity of the offence, ie the amount of omitted income and the degree of culpability associated with the offence, which may range from negligence to fraud
Any 'interest' included in the settlement is broadly calculated by reference to the length of time that the tax has remained unpaid.
M8: taxation of dividends from non-resident companies paid out of capital profits
The provisions of Article 61(4) of the Income Tax (Jersey) Law 1961 ("the Law") which gave statutory exemption in respect of dividends paid out of the capital profits of a company was withdrawn with effect from 1 January 2013.
At the same time a savings provision was introduced in Paragraph 13 of Schedule 5 of the Law.
There has been some uncertainty as to whether dividends paid out of the capital profits of non-Jersey resident companies are either exempt from tax or taxable in the hands of the recipient.
The interpretation of Paragraph 13, Schedule 5 is therefore clarified as follows:
Despite the repeal of Article 61(4) the effect of the provision, that dividends paid out of the capital profits of a non-Jersey resident company are exempt from tax, is preserved from 1 January 2013, when Paragraph 13 of Schedule 5 was introduced.
A person claiming that a dividend from a non-Jersey resident company is exempt from tax by virtue of this statement, must keep sufficient evidence to show the dividend is paid out of the capital profits of the company.
Income Tax (Jersey) Law 1961 and amendments