Corporate tax in Jersey

Summary

Corporate Income Tax Rate (%) 0 / 10 / 20 (a)
Capital Gains Tax Rate (%) 0
Branch Tax Rate (%) 0 / 10 / 20 (a)
Withholding Tax (%)
Dividends 0 (b)
Interest (c)
On Bank Deposits and Short-term Debt 0 (d)
Other Interest 0 (e)
Royalties from Patents 0 / 20 (f)
Branch Remittance Tax 0
Net Operating Losses (Years)
Carryback — (g)
Carryforward Unlimited

a) The general rate is 0%. The 10% rate applies to certain regulated financial services companies. The 20% rate applies to utility companies, companies in the business of importation and supply of oil to Jersey, and rental income, development profits and certain income derived from Jersey land.

b) See Section B.

c) Jersey legislation, which took effect on 1 July 2005 and is amended, effective from 1 January 2015, implements withholding tax and exchange-of-information measures similar to the measures included in the European Council Direc­tive 2003/48/EC on the Taxation of Savings Income. For details, see Section B.

d) Debt is considered short-term if it cannot exceed 364 days.

e) A 20% rate applies to certain interest on long-term debt if the loan agreement was entered into before 1 January 2004 by a Jersey individual and if no elec­tion is made to pay the interest gross. This rate is unlikely to be applied except in rare cases.

f) The 20% rate applies to patent royalties paid to individuals resident in Jersey.

g) See Section C.

Taxes on corporate income and gains

Corporate income tax. Resident companies are subject to tax on their worldwide profits excluding capital gains.

In general, all companies incorporated in Jersey are considered resident. However, a company incorporated in Jersey is consid­ered nonresident if the company’s business is centrally managed and controlled outside Jersey in a country or territory where the highest rate at which any company may be subject to tax on any part of its income is 20% or higher and if the company is tax resident in that country or territory. Effective from 1 January 2016, this rate is reduced to 10%. A company incorporated out­side Jersey is regarded as Jersey resident if its business is man­aged and controlled in Jersey.

Rates of corporate income tax. Jersey has a general corporate in­come tax rate of 0% and a rate for certain regulated entities of 10%. Utility companies, companies in the business of importation and supply of oil to Jersey, and rental income, development prof­its and certain profits derived from Jersey land are subject to in­come tax at a rate of 20%.

Regulated entities subject to the 10% tax rate are certain finan­cial services companies that are registered or hold a permit in accordance with various laws administered by the Jersey Finan­cial Services Commission and operate through a permanent es­tablishment in Jersey. These companies include the following:

  • Entities carrying out banking business, trust business or invest­ment business
  • Fund administrators or custodians

The 10% rate applies to such financial services business conduct­ed through a Jersey company or a branch.

Unless certain conditions are met, an agent or tenant must deduct tax at a rate of 20% before paying rent to a nonresident landlord.

International Business Companies. The International Business Com pany status was abolished, effective from 1 January 2012.

Exempt companies. Jersey’s former exempt company status was abolished, effective from the 2009 year of assessment. An alterna­tive exemption regime for eligible investment schemes was intro­duced from 2010. However, because of the existence of the 0% tax rate, this regime is rarely used.

Capital gains. Jersey does not impose a tax on capital gains.

Administration. Corporate income tax returns must be filed by 6:00 p.m. on the last Friday in July in the year following the year of assessment. A GBP250 penalty is imposed for a failure to file or late filing of tax returns. However, by concession provided by the Jersey Taxes Office, effective from the 2014 year of assess­ment, if a company tax return is submitted before 31 December in the year following the year of assessment to which the return relates, no penalty is applied. Assessments are normally issued to taxpayers in the year following the income year (the Jersey fiscal year coincides with the calendar year), and tax is payable on the day following the date of the issuance of the assessment. A 10% surcharge is imposed if tax remains unpaid as of the deadline, which is 6:00 p.m. on the Friday following the first Monday in December in the year following the year of assessment.

The basis of assessment for trading is profits arising in the cur­rent accounting period.

Although no statutory clearance mechanism exists, on specific request, the tax authorities promptly provide advance rulings on the Jersey tax treatment of transactions.

Dividends. Dividends paid by Jersey resident companies may be deemed to be paid net of tax. The rate depends on the tax rate ap­plicable to the profits from which the dividend was paid.

Effective from 1 January 2013, Jersey resident individuals who own more than 2% of a Jersey resident company whose profits are taxed at less than 20% are subject to tax on any value taken by them out of the company that is less than or equal to their share of specified profits. This applies to any distributions made on or after 1 January 2013. The definition of a distribution is quite broad. Before 2012, a deemed distribution regime applied.

European Union Savings Directive. Effective from 1 January 2015, Jersey moved to mandatory automatic exchange of information under the EU Savings Directive.

Before 1 January 2015, Jersey had enacted legislation, which took effect on 1 July 2005, implementing measures similar to the with­holding tax and exchange-of-information measures contained in the European Council Directive 2003/48/EC on the Taxation of Savings Income. The directive applied to interest on certain debt-related distributions paid to individuals resident in the EU. The withholding tax rate was 35%. The withholding tax applied unless the person beneficially entitled to the interest payment specifi­cally authorized disclosure of the interest payment to the Jersey tax authorities that were required to exchange this information with the tax authorities in the country of residence of the person beneficially entitled to the interest payment. The legislation af­fected companies that fell within the definition of “paying agent.”

Automatic exchange of information. Jersey has entered into in­tergovernmental agreements with the United Kingdom and the United States, and has also adopted the Common Reporting Standard.

Foreign tax relief. Jersey has entered into full double tax treaties with Estonia, Guernsey, the Hong Kong Special Administrative Region (SAR), Isle of Man, Luxembourg, Malta, Qatar, Rwanda, Seychelles, Singapore and the United Kingdom. It has entered into limited treaties with Australia, Denmark, the Faroe Islands, Fin land, France, Germany, Greenland, Iceland, New Zealand, Norway, Poland and Sweden. The arrangements with Guernsey and the United Kingdom give credit for tax on all sources of in­come, except that the treaty with the United Kingdom specifi­cally excludes dividends and debenture interest.

Unilateral relief is granted for income not covered by a treaty, to the extent that foreign tax paid is allowed as a deduction in the computation of the amount assessable. Unilateral relief in the form of a tax credit may also be granted by concession if the fol­lowing conditions are satisfied:

  • The income in question is substantial.
  • The income would not otherwise come to Jersey.
  • The income will be used to generate taxable profits, or it will help to overcome an obstacle to the restructuring or expansion of a commercial enterprise and accordingly result in the more efficient use of resources to the benefit of Jersey’s economy.

Jersey has entered into various tax information exchange agree­ments (TIEAs) and some limited double tax agreements (see above). The TIEAs provide for the exchange of information be­tween tax authorities, on request, with respect to the tax position of resident persons. The limited double agreements provide for the allocation of taxing rights with respect to certain income de­rived by individuals and enterprises operating ships and aircraft in international traffic.

Determination of trading income

General. The amount assessable is based on the accounting profit, adjusted for tax purposes.

Revenue expenses incurred wholly and exclusively for the pur­poses of a trade or the managing of investments are deductible.

Inventories. No statutory rules prescribe which methods of stock valuation are acceptable. Inventory is normally valued at the lower of cost or net realizable value.

Provisions. Only provisions relating to specific expenses are allow­ed as deductions.

Tax depreciation (capital allowances). Capital allowances, normal­ly at 25% of the declining balance, are given on capital expendi­ture incurred to acquire machinery or plant to be used wholly and exclusively for the purposes of the trade.

Capital allowances are calculated on a pool of assets. A balancing charge is imposed if the proceeds from the sale of an asset (lim­ited to the cost of the asset) exceed the written-down tax value of the pool or if the business is terminated.

Groups of companies. A qualifying company that suffers a loss may surrender the loss to another qualifying company in the same group. The company receiving the loss can then offset the loss against its profits or gains. The loss can be offset only against profits or gains determined for an accounting period that is the same as, or overlaps with, the financial period in which the loss arises. For these purposes, a qualifying company is a regulated entity that is taxed at a rate of 10% (see Section B).

Companies taxed at 0% that are part of a group may also sur­render losses to offset the profits of another company taxed at 0% in the group.

Relief for losses. Companies subject to tax at the 0% or 10% rates can relieve losses by carrying the losses forward and offsetting them against future profits or by surrendering losses under the group relief measures (see Groups of companies).

Losses incurred by companies subject to tax at a rate of 20% may be used to offset either income for the year in which the losses were incurred or profits derived from the same trade in the imme­diately preceding year of assessment. Unused losses may be car­ried forward, without time limit, to offset income from the same trade for any subsequent year of assessment.

Other significant taxes

The following table summarizes other significant taxes.

Nature of tax Rate (%)
Social security contributions; on salaries of
employees resident in Jersey; payable by
Employer (maximum monthly contribution
for each employee of GBP261.30)
6.5
(Employers are required to pay an additional
contribution of 2% on the earnings of employees
above GBP48,240 and up to GBP159,624
per year.)
Employee (maximum monthly contribution
of GBP241.20)
6
Goods and services tax; on domestic supplies
of goods and services; an exception applies
to certain entities that are able to elect for a
fee to have International Services Entity status
5
Land transaction tax; applies to the sale of shares
in a company that give the owner of the shares
the right to occupy a dwelling; the tax is the
equivalent to the stamp duty levied on the sale
of freehold property; a GBP80 charge also
applies; the rate is reduced for reduced rate
properties (below GBP400,000) and first-time
buyers; other charges may also apply
0 to 7

Miscellaneous matters

Anti-avoidance legislation. The Income Tax (Jersey) Law contains a general anti-avoidance provision. The Comptroller may make assessments or additional assessments to counteract transactions if the primary purpose is the avoidance or reduction of income tax.

Foreign-exchange controls. Jersey does not apply any form of ex­change controls, and capital can be freely repatriated.

Related-party transactions. No special legislation applies to related-party transactions.

Debt-to-equity rules. Jersey does not impose debt-to-equity requirements.

Transfer pricing. Jersey’s law does not include transfer-pricing rules. However, see Anti-avoidance legislation.

Treaty withholding tax rates

Dividends (%) Interest (%) Royalties (%)
Estonia 0* 0 0
Guernsey 0* 0 0
Hong Kong SAR 0* 0 0
Isle of Man 0* 0 0
Luxembourg 0* 0 0
Malta 0* 0 0
Qatar 0* 0 0
Singapore 0* 0 0
United Kingdom 0* 0 0
Non-treaty countries 0* 0 0

* See Section B.