Jersey Focus

Expat Briefing Editorial Team, 27 November, 2017

Jersey Focus

The largest and most southerly of the Channel Islands between England and France, Jersey is a self-governing British Crown Dependency, with a population of just under 100,000 people (July 2017 est.), which includes a small community of mainly British expats. Despite being only 45 square miles, it is as bustling and active as offshore jurisdictions many times its size, and the moderate climate means that outdoor activities such as golf, swimming, water-sports and cycling can be enjoyed.

As is the case in all of the Channel Islands, Jersey is exceptionally politically stable, and relationships with the United Kingdom, (which is responsible for its external affairs), and with its peers are always cordial and respectful. The currency is the Jersey pound, which is on a par with the British pound, and there are no exchange controls.

In terms of living costs, prices are broadly the same as in the UK, although there is some divergence. Certain items, for example foodstuffs, are more expensive as a result of the various costs incurred in transportation. Other goods benefit from the lack of VAT (although a Goods and Services Tax was introduced at a rate of 3 percent in 2008, later increased to 5 percent in 2011), and the low level of excise duties on the island. However, housing is one major area in which prices are usually significantly higher than in the United Kingdom.

The Finance Center

Jersey is widely recognized in the institutional investment world as one of the leading jurisdictions for pensions and insurance fund management. Indeed, according to research released in 2017 by Jersey Finance, Jersey "supports the futures of almost 60 million people around the world."

Jersey is also well known for its banking and trust sectors, and the long-established nature and popularity of these areas of expertise has meant that a good financial and business infrastructure has been established. Jersey's finance center is supported by a large workforce of advisers, accountants, lawyers, bankers corporate service providers and other specialist professionals with expertise in modern finance and wealth management techniques. Attesting to Jersey's presence on the world financial stage, this is the largest workforce of any offshore finance center, according to Jersey Finance.

Jersey's banking system is extremely stable, and the majority of the banks established in Jersey are branches or subsidiaries of the world's top banking establishments, with sound capital adequacy levels. A deposit protection scheme is in place, which provides individual depositors with protection for up to GBP50,000 (USD66,150) in the event that a Jersey bank should fail.

Jersey also regularly expands its wealth management offering. For example, Jersey recently became the first Crown Dependency to offer Foundations. With a long history in continental Europe, Foundations are commonly used for charitable and wealth management purposes in civil law jurisdictions, where the concept of the common law trust is somewhat alien. Regulations permit foundations to migrate in and out of Jersey. They also provide for existing Jersey companies to convert to foundations.

Residence and Taxation

Residence in Jersey for taxation purposes is divided into three categories: Residence, Ordinary Residence, and Non-Residence. Ordinary Residence, although an unusual concept, simply implies a greater continuity than simple residence. A person is considered to be Jersey resident for tax purposes if they are:

Income tax is levied at one rate of 20 percent, and resident and ordinarily resident individuals are subject to tax on their world-wide income. Resident but not ordinarily resident individuals are subject to tax on Jersey-source income and foreign income remitted back to the island, and non-resident individuals are taxed only on Jersey income, with interest payments from Jersey-based bank accounts exempted from this by concession.

Although social security contributions are payable, and property owners may be liable for some parish taxes, there is no property tax, capital gains tax, wealth tax, or estate tax payable in Jersey. These factors, combined with a special tax regime for "high-value residents" (explained in more detail below) may account for Jersey's popularity as a destination for HNWIs.

A "zero/ten" tax system for companies has applied from 2009. This was achieved by introducing a standard rate of corporate income tax of 0 percent, and a special rate of 10 percent for specified financial services companies, into the Island's existing schedular tax system. Utility companies, rental income and property development profits continue to be charged at the standard income tax rate of 20 percent.

High-Value Residents

To potential high-value residents, the Jersey Government offers a very personal, individual and confidential support mechanism. This is designed to make the application process as clear and speedy as possible while ensuring that all aspects are fully covered. All applications are dealt with through a single point of contact, the Director of High Value Residency. An initial response to an application is normally provided immediately, with a final response issued within 10 working days. Once approved, the service continues to provide full assistance to the newly resident, providing information on housing and schooling, among other aspects of life on the island.

Although there are no hard and fast rules about who will be accepted, the following criteria may be considered when the application is being processed:

In addition to this, new residents accepted on economic grounds are expected to purchase a property. Generally, this property must be valued in excess of GBP1.75m (USD2.3m).

To meet the current requirements, applicants would normally be expected to generate sufficient income so that – at the present rates of tax – their annual tax contribution is in the region of GBP125,000 (GBP145,000 from January 1, 2018). To qualify for high-value residence status, an individual's minimum worldwide income needs to be "comfortably" in excess of GBP625,000 per annum (GBP725,000 from January 1, 2018)

At the time of writing, all personal income over GBP625,000 is taxed at one percent, a rate intended to attract high net worth individuals to invest their wealth in the Island.

Non-HVRs do not have to agree a minimum income tax contribution with the authorities. These individuals are subject to Jersey's general income tax rules and will pay tax at a standard rate of just 20 percent on their worldwide income (including Jersey source income).

Work And Residence Permits

Nationals of EU member states have free right of movement in Jersey, and do not need to apply for work permits (non-EU member country citizens must apply for permission from a British Embassy or High Commission to reside and work on the island), but employers still need to apply for a license in order to employ them.

Residency rules have been tightened up in Jersey with the enactment of the Control of Housing and Work Law 2012, which came into effect on July 1, 2013. The law introduces registration cards so that employers, landlords and property agents can confirm a person's residential status before they move into a property or start work in Jersey.

Under the new law, the system for residential qualifications has also changed. Four new categories have been introduced which determine where a person can live and work. These are explained in the following table:

Residential Status

Definition

Housing

Work

Entitled

Someone who has lived in Jersey for 10 years

Can buy, sell or lease any property

Can work anywhere and doesn't need a license to be employed

Licensed

Someone who is an "Essential Employee"

Can buy, sell or lease any property in their own name provided that they retain Licensed status

Employer needs a license which specifies the maximum number of Licensed employees permitted

Entitled to Work

Someone who has lived in Jersey for a continuous period of five years immediately preceding the date of issue of the card, or is married to someone who is Entitled, Licensed or Entitled to Work

Can buy property with Entitled spouse/civil partner. Can lease "registered" property (the new name for unqualified property) as a main place of residence

Can work anywhere and doesn't need a license to be employed

Registered

Someone who does not qualify under the other categories

Can lease "registered" property as a main place of residence

Employer needs a license which specifies the maximum number of Registered employees permitted

However, for high-value residents, the cost of a registration card isn't cheap! Under plans announced by the Government in May 2017, HVRs will pay GBP7,500 for registration cards when they arrive, a rise of 50 percent.

The Government is also hiking a range of other charges in this area. Fees for the cost of a registration card for registered and licensed individuals will rise to GBP80. The cost of employing a licensed employee will rise to GBP225 per year, and the maximum amount payable by visiting businesses in any one year will more than double to GBP3,500.

In addition, a new fee is planned for employment agencies of GBP500 per employee for every registered member of staff they are permitted. An annual fee of GBP50 will be payable each year by business for each permission they hold to employ a registered member of staff, excluding seasonal permissions. A new charge of GBP500 is proposed for companies (not individuals) seeking permission to purchase land or property.

International Reputation

These days, the word "offshore" has come to be used pejoratively. And while Jersey abolished offshore company formats some years ago, the fact that it has very low tax rates keeps the jurisdiction on the radar of the world's tax authorities and tax transparency campaigners.

However, at the time of writing, Jersey meets all international standards with regards to tax transparency and the prevention of financial crime. Indeed, in November 2017, Jersey, along with fellow Crown Dependency the Isle of Man, received the highest possible OECD rating in recognition of compliance with global standards of information exchange in tax matters.

Commenting on Jersey's top rating, Geoff Cook, CEO of Jersey Finance, the island's financial services promotion agency, said: "This is a real differentiator for Jersey and sends out a strong message that Jersey is serious about tax transparency, whilst also serving to reinforce just how unjustifiable the claims sometimes made against Jersey's position on tax transparency really are."

Infrastructure and Transport Connections

In terms of telecommunications infrastructure, Jersey is well-served. Jersey has a modern telephone system, and broadband internet coverage is widespread. Indeed, Jersey has a growing reputation as one of the leading offshore centers for e-commerce.

As mentioned, Jersey is short flight away from the United Kingdom, and the island's international airport services many cities across the UK, as well as a limited number of European destinations.

Jersey is also well connected to the south coast of England and the north coast of France by sea.

Jersey, The EU, And Brexit

Jersey is not a member of the European Union, and Protocol No 3 of the UK's Treaty of Accession to the UK excludes the island from most of the effects of the Treaty, other than those concerning trade in goods. The island does though apply the external common customs tariff of the EU, but, EU (and hence UK) VAT does not apply to Jersey.

Jersey's constitutional position in relation to the EU cannot be changed without unanimous agreement of the member states, including of course the UK. This issue is especially pertinent as things stand, given the uncertainty surrounding the UK's future relationship with the EU following the 2016 membership referendum, and the 2017 UK general election. However, Jersey remains confident that it will remain a leading offshore financial center come what may.

Commenting on the matter in April 2017, Geoff Cook, observed: "There is clearly uncertainty about the outcome of the Brexit negotiations, and what the relationship between the UK and EU will look like in two years' time, but for Jersey's financial services industry, trade with the EU and UK is governed by bilateral agreements which are unaffected by Brexit. Our access to European markets continues under the same terms, and we continue to be a conduit for investment into the UK and EU."

Tags: business | Tax | Europe | Work | Finance | individuals | employees | investment | France | Isle of Man | Jersey | United Kingdom | law | standards | offshore | services | banking | financial services | internet | tax | trade |

 

 




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