Jersey Personal Income Tax

Individual income taxation in Jersey is based on residence. Taxpayers are categorized as resident and ordinarily resident, resident and not ordinarily resident, or nonresident.

Individuals are considered resident in Jersey in any income year if they meet any of the following qualifications:

  • They are present in Jersey for more than six months.
  • They are physically present in Jersey for an average of three months a year over any consecutive four-year period.
  • They have accommodation available in Jersey and stay there during the year.

Individuals are considered ordinarily resident in Jersey in any income year if they meet any of the following qualifications:

  • They normally spend all of their time in Jersey other than peri­ods spent away on holiday or business.
  • They have accommodation available in Jersey and visit on aver­age for more than three months.
  • They are expecting to permanently reside in Jersey for a period of greater than three years.

Resident and ordinarily resident individuals are subject to Jersey income tax on their worldwide income.

Resident but not ordinarily resident individuals are subject to Jersey income tax on their Jersey-source income and their non­Jersey-source income remitted to Jersey.

Nonresident individuals are subject to tax on Jersey-source income only, excluding the following:

  • Interest on bank deposits
  • Cash and stock dividends issued by a company resident in Jersey that is taxable at a rate of 0%
  • Income from a purchased life annuity
  • Interest received from a company resident in Jersey
  • Earnings from serving as director of a company
  • Royalties or other amounts paid with respect to the use of patents
  • Jersey state pensions

Jersey residents receiving pension income from a country that has entered into a double tax agreement with Jersey may be exempt from tax in that country, depending on the terms of the double tax agreement. Nonresidents receiving Jersey pensions may be exempt from income tax in Jersey on such pension income. Professional advice should be obtained if necessary.

Income subject to tax

Employment income. Taxable income includes salaries, wages, directors’ fees, bonuses, gratuities, pensions and benefits in kind. Effective from 1 January 2016, the first GBP250 (a reduction from GBP1,000 for years of assessment before 2016) of taxable benefits in kind from all sources is exempt from tax, and several specific exemptions exist, including but not limited to, health insurance.

Education allowances provided by employers to their employees’ children 18 years of age and under are taxable for income tax purposes. Housing benefits are also subject to tax. Shareholder benefits (for example, loans) may also be subject to tax.

Termination payments paid by, or on behalf of, an employer to an employee are chargeable to Jersey income tax. The first GBP50,000 of a termination payment is exempt from income tax. However, if a termination payment is made as a result of injury, death or disability, it is completely exempt from tax.

Self-employment and business income. All self-employed indi­viduals carrying on a trade, business or profession are subject to tax on business profits.

Tax on self-employment and business income is imposed on the accounting profits, adjusted for tax purposes, of non-corporations at a flat rate of 20%. Adjusted profits are assessed on a current-year basis.

The general corporate income tax rate is 0%. A 10% rate applies to certain regulated financial services companies. Jersey utility companies and companies engaged in the importation and supply of oil to Jersey are subject to tax at a rate of 20%. Jersey utility companies and companies engaged in the importation and supply of oil to Jersey are subject to a tax rate of 20%. In addition, the 20% rate applies to income derived from the rental of Jersey land and property development profits derived from Jersey land or from extraction trades relating to Jersey land.

Investment income. Dividends, interest, royalties and income from property are taxed on an actual-year basis at a rate of 20%. Property rental expenses are fully deductible.

Additional shareholder taxation rules exist for Jersey-resident individuals who are shareholders of Jersey tax-resident compa­nies. The rules are complex, and professional advice should be obtained regarding them.

An individual must disclose in his or her tax return any interests in the following that have not been previously disclosed to the Taxes office:

  • Companies
  • Trusts
  • Any property in Jersey or elsewhere, regardless of whether it is income producing

Taxation of employer-provided stock options. A Jersey tax liability generally arises at the time an option is granted to an employee. The liability equals 20% of the difference between the fair mar­ket value of the stock at the date of grant and the strike price. If the individual cannot exercise the option for a period of three years or more, discounts of 30% to 50% may be applied. The following are the discounts:

  • Three years: 30%
  • Four years: 40%
  • Five years or more: 50%

No additional tax is levied at the time the option is exercised. The sale of the stock is not taxed because Jersey does not tax capital gains. Stock options fall under the benefit-in-kind rules (see Employment income) and, accordingly, the GBP250 exemption can be claimed. For cases that are more complex than a simple option, it is suggested that the agreement of the Comptroller of Taxes with the tax position be obtained in advance.

Scrip dividends are subject to income tax in Jersey.

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

Deductions:

Deductible expenses. Deductible expenses must be incurred wholly and exclusively for the purpose of employment. These include amounts incurred on subscriptions to approved profes­sional bodies.

Personal deductions and allowances. All taxpayers may deduct payments made to an approved superannuation fund or pension scheme and premiums paid under a retirement annuity contract, with certain restrictions. The total amount of pension scheme contributions that are deductible is limited to the lower of GBP50,000 and the related earnings of individuals during the year of assessment. The relief available to individuals whose income is GBP150,000 or more is restricted by a phasing-out process. Under this process, GBP1 of relief is withdrawn for each GBP1 of income over GBP150,000.

Life insurance premium payments are not deductible for income tax purposes.

In addition to the personal deductions discussed above, all tax­payers may claim the child allowance, which is a deduction of GBP2,000 for standard-rate taxpayers and GBP3,000 for margin­al-rate taxpayers from taxable income for each child of the tax­payer. A GBP6,000 allowance may be claimed for children attending higher-education institutions full time. This allowance may be increased to GBP9,000 if the taxpayer is paying tax at the marginal rate of tax (see Exemptions limits and marginal relief). Child allowances are reduced if the child’s own income exceeds

GBP3,000. A child’s earnings after completion of a course in full-time higher education in that year are disregarded.

Interest paid on personal loans and debts is not a deductible expense, unless the loan was obtained for an allowable purpose, such as for buying into a business. Qualifying interest payments are deductible for all taxpayers.

Medical insurance premium payments are not deductible for income tax purposes.

If an individual is not taxed on the basis of being fully resident in Jersey throughout the year of assessment, allowances, deductions and exemption limits to which he or she is entitled may be reduced to reflect the proportion of the year the individual is present in Jersey.

Exemption limits and marginal relief. The following are the income tax exemption thresholds for 2016:

  • Single person: GBP14,350
  • Single person (age 65 and over): GBP15,900
  • Married or civil partnership: GBP23,000
  • Married or civil partnership (age 65 and over): GBP26,100

For taxpayers earning less than the applicable exemption thresh­old, no tax liability arises.

For taxpayers whose total income exceeds their exemption threshold (including the additional allowances described below plus some of the allowances described above), two tax calcula­tions are required. The amount of income that exceeds the exemp­tion threshold is subject to tax at a rate of 26%. If this results in a lower liability than the standard 20% rate calculation, the lower liability is used. This allows low and middle income earners to benefit from an additional deduction, namely “marginal relief,” which is the difference between the two calculations when the calculation using the exemption limits is lower than the standard calculation. Some allowances can be deducted from both tax computations. However, some, as described below, are available only in the marginal computation. The allowances are added to the relevant exemption thresholds.

In addition to the exemption thresholds, a marginal-rate taxpayer can add certain additional allowances to the allowances and reliefs discussed above. The following are the allowances that may be added to the exemption thresholds:

  • Child care tax allowance (maximum of GBP6,150, which can be increased to GBP12,000 for children below school age)
  • Wife or civil partner’s working allowance (100% of wife or civil partner’s earnings, up to a capped amount of GBP4,500)
  • Single parent allowance of GBP4,500
  • Qualifying maintenance payments
  • Qualifying interest payments (including interest payments on a loan taken out to purchase a taxpayer’s main residence, subject to limits (restricted to capital of GBP300,000 and maximum relief of GBP15,000)

Business deductions. Disbursements or expenses incurred wholly and exclusively for the purpose of trade are allowable. Capital allowances are granted for machinery and equipment at an annual reducing-balance rate of 25% and for greenhouses at an annual rate of 10%.

Rates. Income tax is imposed at a flat rate of 20% on taxable income.

Tenants paying rent to nonresident landlords are required to with­hold Jersey income tax at a rate of 20%. Landlords can apply to the Taxes Office for permission for the rent to be paid gross.

Relief for losses. Non-corporate business losses may be carried forward indefinitely if the business continues to operate, or they can offset income for the year in which the losses arose or profits derived from the same trade in the preceding year.

Different rules for the use of business losses apply to companies.

Other taxes

Wealth tax and estate tax. No wealth tax or estate tax is levied in Jersey. For probate to be granted on death, stamp duty may be payable. The amount payable depends on the domicile of the deceased, the situs of property and whether the property is immovable or movable.

Land transaction tax. 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 rates range from 0% to 5%. Land transac­tion tax is equal to the stamp duty levied on the sale of freehold property.

Social security

Contributions. Jersey has a compulsory social security scheme. Everyone between school-leaving age and pension age is insur­able in either Class 1 (employed persons) or Class 2 (self-employed or unemployed individuals).

Class 1. Employers and employees must make contributions based on salaries at rates of 6.5% (secondary contributions) and 6% (primary contributions), respectively, with a standard earn­ings limit (SEL) of GBP49,128 per year (GBP4,094 per month). These limits are updated on 1 January of each year.

In addition, an upper earnings limit (UEL) of GBP162,504 per year (GBP13,542 per month) exists.

A 2% rate also applies only to employer (secondary) contribu­tions on earnings above the SEL (GBP4,094 per month) and up to the UEL (GBP13,542 per month). The maximum annual contri­bution is GBP5,460.84 for employers and GBP2,947.68 for employees.

Class 2. Self-employed individuals are required to pay Class 2 contributions at a rate of 12.5% on earnings up to the SEL (GBP4,094 per month). This rate equals the combined total of the employer’s and employee’s Class 1 maximum contribution amounts. A 2% rate also applies earnings above the SEL and up to the UEL (GBP13,542 per month). The maximum annual amount of Class 2 contributions is GBP8,408.52 (GBP700.71 per month).

A Class 2 individual can make an application to pay reduced rate contributions during 2016, based on the 2014 income tax assess­ments and business accounts, if income for 2014 was between the LEL (GBP9,888 per year) and UEL (GBP162,504 per year). Individuals who recently established businesses may be eligible to pay a deferred rate of contribution on an application to the Social Security Department.

The Taxes Office collects contributions to the long-term care fund on behalf of the Social Security Department. The fund pro­vides financial support to Jersey residents who are likely to need long-term care for the rest of their lives, either in their own home or in a care home. Contributions are payable at a maximum rate of 0.5% on taxable income. This is payable by individuals earn­ing enough to pay income tax.

Totalization agreements. To provide relief from double social security taxes and to assure benefit coverage, Jersey has entered into totalization agreements, which usually apply for a maximum of 12 months. However, it may be possible to obtain an extension if agreed to by the Social Security Department. Totalization agreements are currently in effect with the following jurisdic­tions.

Austria Ireland Norway
Barbados Isle of Man Portugal
Bermuda Italy Spain
Canada Jamaica Sweden
Cyprus Japan Switzerland
France Korea (South) United Kingdom
Guernsey Netherlands United States
Iceland New Zealand  

 

Tax filing and payment procedures

The taxable income year in Jersey is the calendar year and is referred to as the year of assessment. Persons subject to income tax must file income tax returns with the Comptroller of Taxes if required to do so by general or particular notice. Jersey does not operate a Pay-As-You-Earn (PAYE) system. However, it operates a similar system called the Income Tax Instalment System (ITIS). Under the ITIS, income tax payments are deducted from an employee’s salary and applied towards settlement of the preced­ing year’s tax liability. New residents pay ITIS on a current-year basis. Married persons and persons in a civil partnership are assessed jointly, not separately, on all types of income, unless they elect otherwise. Separate assessment does not provide a financial advantage.

Taxpayers are normally notified of tax assessments in the year following the year of assessment. Tax must be paid to the Comptroller of Taxes on the day after the day on which the assessment is issued. However, in practice, a reasonable amount of time to pay is allowed. A 10% surcharge is levied on any remaining tax unpaid by the specified date, which is the Friday following the first Monday in December in the year following the year of assessment. For taxpayers who suffer tax under the ITIS,

it is not usually necessary to make a balancing payment if more than 80% of the tax due was paid under the ITIS.

Returns are required to be filed by 6:00 p.m. on the last Friday in May following the year of assessment (last Friday in July if an agent has been appointed). A maximum penalty of GBP250 is imposed for returns not submitted by the deadline.

Double tax relief and tax treaties

Foreign tax paid is allowed as a deduction from taxable income.

Jersey has entered into double tax treaties with Australia, Denmark, Estonia, the Faroe Islands, Finland, France, Germany, Greenland, Guernsey, the Hong Kong SAR, Iceland, Isle of Man, Luxembourg, Malta, New Zealand, Norway, Poland, Qatar, Singapore, Sweden and the United Kingdom. Treaties with Poland, Rwanda and Seychelles have been signed, but they have not yet been ratified.

The majority of these treaties are extremely limited in scope. The treaty with France addresses only the exemption of air transport and shipping profits. The treaties with Australia, Germany and New Zealand address only the avoidance of double taxation on individuals. The treaties with Denmark, the Faroe Islands, Finland, Greenland, Iceland, Norway, Poland and Sweden address the avoidance of double taxation on individuals and the exemp­tion of air transport and shipping profits. The treaties with Estonia, Guernsey, the Hong Kong SAR, Malta, Qatar and the United Kingdom provide a credit for tax levied on all sources of income, excluding dividends and debenture interest in the UK treaty.

Jersey has entered into tax information exchange agreements (TIEAs) with the following jurisdictions.

Argentina                        Greenland                    Norway

Australia                          Hungary                       Poland

Austria                            Iceland                         Portugal

Belgium*                         India                             Romania

Brazil*                             Indonesia*                   Slovenia

Canada                            Ireland                          South Africa

China                               Italy                              Spain*

Czech Republic               Japan                            Sweden

Denmark                         Korea (South)              Switzerland

Faroe Islands                   Latvia                           Turkey

Finland                            Mexico                         United Kingdom

France                             Netherlands                  United States

Germany                         New Zealand

* These agreements are not yet in force, but are expected to enter into force by the end of 2016.

Several double tax treaties and TIEAs are currently under negotiation.

Work permits and self-employment

Non-European Economic Area (EEA) nationals wishing to work in Jersey must obtain work permits through their intended employers. The Immigration and Nationality Depart ment issues permits to employers who demonstrate that they are unable to fill a vacancy locally, or to foreign persons who are free of permit restrictions. A visa or entry certificate is also required and is available from the British high commission, embassy or consul­ate in the country where the person lives.

Work permits may also be issued to people with specialist skills if their appointment is of particular benefit to the island or to foreign nationals who are free of work permit restrictions in the United Kingdom.

In addition, under the Control of Housing and Work (Jersey) Law 2012, an employer must apply for a license to engage any person who has not worked in Jersey for at least five years to fill a vacancy within an existing undertaking.

British subjects and nationals of the member states of the EEA, which includes the EU, do not require work permits (although employers on the island are required to obtain licenses to employ them) and, in the majority of cases, may enter and exit Jersey freely.

Self-employed individuals are subject to the same visa, work permit and residential permit guidelines outlined in this chapter. Additional restraints may also apply.

Residence permits

Economic grounds. The Housing Minister may grant individual permission to a high-value resident to reside in Jersey if the per­mission can be justified on social or economic grounds. Consent is not granted unless the Housing Minister is satisfied that the appli­cant would make a major contribution to the island’s tax revenues while residing in Jersey. Each application is considered on its individual merits.

High-value residents are subject to a different tax regime than other residents in Jersey. A 20% tax is charged on the first GBP625,000 of Schedule D income, generating GBP125,000 of tax and a further 1% tax is charged on the income in excess of the GBP625,000 limit. Schedule D income is made up of eight differ­ent cases of income, including income with respect to a trade car­ried out in Jersey, profits, employment, pensions and interest, and is outlined in detail in Article 62 of the Income Tax (Jersey) Law 1961. All income received from Jersey real estate is taxed at a rate of 20%.

As a guideline, residents admitted on economic grounds are expected to purchase freehold property with a value in excess of GBP1 million. It is also possible that an individual may be allowed to rent property. The expectation is that an individual will rent property with a market value of approximately GBP1,750,000.

After an immigrant admitted on economic grounds emigrates from Jersey, he or she loses his or her residence status.

Employment grounds. The Regulation of Undertakings and hous­ing laws were combined into a new Control of Housing and Work (Jersey) Law 2012. This law, which took effect on 1 July 2013, introduced registration cards. An individual moving to Jersey must obtain a registration card before he or she can begin to work or lease a property. This allows employers and landlords to con­firm an individual’s work and housing status before the individu­al relocates or begins employment.

It is possible to take up residence in Jersey as an essentially employed individual. This status was commonly known as a “J cat,” but is now referred to as a “licensed” employee.

Employers are granted licenses for a certain number of employ­ees if the Housing Minister deems that this is in the best interests of the community. Employers can then issue these licenses to suitable employees or recruits.

Licensed employees are granted permanent residential status after completing a continuous period of 10 years of essential employment in Jersey.

Other possibilities to take up residence in Jersey exist for indi­viduals who are in neither of the above categories, including living in a guest house or hotel, lodging in a private dwelling, or occupying certain unqualified residences. After 10 years of con­tinuous residence in Jersey, such persons gain permanent residential status.

Family and personal considerations

Family members. If a non-EEA national wishes to enter Jersey as the fiancé(e) or spouse of either a person settled in Jersey or a person free from immigration controls who is coming to settle on the same occasion, he or she must first obtain an entry clearance, which is in the form of either a visa or an entry certificate. Application for an entry clearance should be made to the British high commission, embassy or consulate in the country where the person lives. If the fiancé(e) or spouse is in Jersey, he or she should contact the Immigration and Nationality Department for further advice and to arrange an interview.

The child of a person granted residential status under either eco­nomic grounds or Licensed status is granted residential status in his or her own right after he or she has completed a continuous period of 10 years’ residence, provided the residence commenced when the child was a minor.

Driver’s permits. A non-Jersey driver’s license must be exchanged for a Jersey license within seven days if the holder’s intention is to stay in Jersey longer than 12 months.

Jersey has driver’s license reciprocity with the following jurisdic­tions.

Alderney                         Falkland Islands           Liechtenstein

Australia                          Finland                         Malta

Austria                            France                          Monaco

Barbados                         Germany                      Netherlands

Belgium                           Gibraltar                       New Zealand

British Columbia             Guernsey                     Norway

British Virgin                  Hong Kong SAR         Poland

Islands                           Iceland                         Portugal

Croatia                           Ireland                          Romania

Cyprus                           Isle of Man                  Singapore

Czech Republic              Italy                              Switzerland

Denmark                        Latvia                           United Kingdom

To obtain a driver’s license in Jersey, an individual should take driving lessons from a qualified instructor on the island. The driving test includes a vision test, a short drive and a touchscreen PC theory test.