Jurisdiction
Special Focus: JERSEY
by Jason Gorringe
July
2009

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 around 91,500 (July 2009 est.) expatriates
and residents. 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, are enjoyed by all
its citizens.
As
is the case in all of the Channel Islands, Jersey
is exceptionally politically stable, and dealings
with the United Kingdom, (which is responsible
for its external affairs, such as dealings with
the European Union), 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. However, other goods benefit
from the lack of VAT, and low level excise duties
on the island. Housing is one major area in which
prices are usually significantly higher than in
the United Kingdom.
Jersey
has a reasonably settled relationship with the
multilateral organisations of the moment, namely
the EU, the Financial Action Task Force (FATF),
and the Organisation for Economic Co-operation
and Development (OECD), although there was some
friction with the latter in the early stages of
its 'harmful tax competition' initiative. In the
OECD's latest listing of offshore jurisdictions
in April 2009, Jersey was placed in the 'white'
section of the three-tier classification.
The
island is not a member of the European Union,
and as such is not necessarily obliged to comply
with the Union's various tax initiatives, although
the UK often tries to exert pressure on it to
do so, as can be seen below. Despite its close
relationship with the UK, Jersey is excluded from
most of the effects of Britain's accession to
the EU, other than those concerning trade in goods.
Its constitutional position in relation to Europe
cannot be changed without the unanimous agreement
of all EU member countries, which of course includes
the UK, which never legislates regarding Jersey
without consultation.
Jersey
was described on the occasion of the release of
the first FATF 'uncooperative countries' blacklist
as being in 'close to complete adherence' with
the organisation's forty anti-money laundering
recommendations, and the jurisdiction is one of
the most respectable and long-established of all
the offshore financial centres.
It
came as a surprise, then, when in Summer 2000,
Jersey and Guernsey were included on the first
OECD blacklist, accused of employing 'harmful
tax competition' because they had refused to sign
a letter committing themselves to abiding by the
rules laid down on taxation by the organisation.
Jersey
signed a 'commitment' letter to the OECD in February
2002, but it contained an 'Isle of Man' level
playing field clause making changes dependent
on comparable changes in Switzerland and the USA.
By mid-2003, the OECD seemed to have forgiven
Jersey, and was assisting it to design a nil%
corporate tax system.
Jersey's
unique situation with regard to the EU is both
a strength and a weakness. The island will remain
a favoured base for holding and trading companies
working into the EU, and for e-commerce activity;
but it has the EU and the OECD to contend with.
After
several years of 'hands-off' policy in regard
to Jersey taxation, the UK government in 2002
threatened Jersey with sanctions if it didn't
fall in line with EU information-sharing rules.
In May, 2002, it became clear that Jersey, along
with its fellow UK dependent territories Guernsey
and the Isle of Man, was ready to sign up to the
EU information-sharing regime if that became necessary;
but after the EU finally reached its compromise
agreement on the Savings Tax Directive in early
2003, Jersey decided, along with Guernsey and
the Isle of Man, to apply a withholding tax to
the returns on personal savings for EU residents.
This
is known locally as a 'retention' tax, and was
levied at 15% from 2005, when the Directive came
into force until 2007; from 2008 the rate is increased
to 20%.

Jersey's Advantages
Jersey
is particularly 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.
Despite
the global financial turmoil in 2008, Jersey Finance
reported just a 2% dip in the net asset value
of funds in December 2008 compared to a year earlier,
from GBP246.2bn to GBP241.2bn. However, the total
number of funds increased by 161 from 1,311 to
1,472 over the same period.
“The
last quarter of 2008 has been particularly difficult
for financial services businesses globally. Whilst
there is little doubt that 2009 and much of 2010
is likely to be challenging and we will see further
volatility in business numbers, there are some
inherent features of our offering from which we
can take some comfort," commented Geoff Cook,
chief executive of Jersey Finance Limited. .
Latest
figures released in June, 2009, confirmed an anticipated
fall in the size of Jersey's banking and funds
sectors, although Geoff Cook believes there are
grounds for cautious optimism about the business
outlook generally.
The statistics for the first quarter of 2009 ending
March 31, collated and prepared by the Jersey
Financial Services Commission, show that banking
deposits have decreased by GBP10.1bn and the net
asset value of funds by GBP30.9bn. However, the
industry believes that banking deposits have held
up well considering current trends and, although
the value of the funds business also declined
overall, the total number of funds still showed
an increase.
The headline figures from the statistics are as
follows:
-
Banking deposits decreased by GBP10.1bn during
the first quarter of 2009 from GBP206bn to GBP195.9bn.
- The
Net Asset Value (NAV) of funds under administration
decreased by GBP30.9bn during the last twelve
months from GBP246bn to GBP215.1bn. The total
number of funds increased by 43 from 1,370 to
1,413.
- The
value of funds under investment management decreased
by GBP700m from GBP18.8bn to GBP18.1bn during
the first quarter of 2009.
- Company
formations for Q1 2009 were down 24.4% compared
to Q1 2008. The total number of live companies
on the register decreased by 205 during the
last twelve months from 33,784 to 33,579 companies.
Geoff Cook commented: “The reduction in bank deposits
caused by the slowdown in global financial markets
was predicted in our year end assessment, but
was previously masked by the effect of currency
movements in the last quarter of 2008.”
“Bank
deposits held up well, given the general trend
around the world to pay down debt and unwind positions,
strongly supported by a complete absence of any
banking stability issues. The announcement regarding
the introduction of a Depositor Compensation scheme
has further bolstered Jersey’s appeal as a leading
international banking centre.”
Cook continued: “With
main markets falling between 30% and 40% over
comparable periods, Jersey funds have shown considerable
resilience to the shocks in the global financial
system. Given that increasing numbers of expert
commentators are indicating early signs of stabilisation
in the global economy, there does, finally, appear
to be some ground for cautious optimism about
the outlook for business. In this respect it was
encouraging to see that a further 43 new funds
were opened in Jersey in the twelve months to
March 31, 2009.”
“The
live companies on the register reflect the global
pattern of reduced company formation and listings
activity, although again some positive signs were
seen on the AIM market and The Channel Islands
Stock Exchange with the successful flotation of
Max Property, utilising a closed ended Jersey
Company as the listing vehicle; the first significant
flotation for many months.”
“The
inclusion of Jersey on the G20 ‘white list’ has
resulted in an increased number of new business
enquiries in the second quarter as clients have
increasingly recognised the value of placing business
in a cooperative, transparent and well regulated
centre, approved by the world’s leading nations,”
concluded Cook.
So
is Jersey a suitable location for your assets?
Should you establish a business presence there?
It depends
due to a number of factors, including
time zone, and language, which it shares with
all of the Channel Island jurisdictions, Jersey
is most suitable for UK (non-resident) expatriates,
foreign residents living and working in the UK,
expatriate consultants and business people and
European citizens.
However,
if you belong to any of the above groups, and
have liquid assets which you would like to protect
for the future, would like to establish a personal
service company, or would simply like to take
advantage of the tax advantages afforded to non-residents,
then it could well be ideal. Below are just some
of the factors in Jersey's favour:
-
Favourable Location. As previously stated,
Jersey is conveniently located for both Western
Europe and the United Kingdom, being both within
spitting distance of France and the UK (depending
on how far you can spit, that is!). The climate
is moderate, and political stability is a key
advantage.
-
Double Tax Treaties. In common with many
offshore and low tax jurisdictions, Jersey does
not enter into a great number of double taxation
agreements. However, there are agreements in
place with the United Kingdom and Guernsey (which
do not follow the OECD model). There is also
a limited agreement with France, which exempts
shipping and air transport profits from tax.
- Regulatory
Environment. Thus far, all of the Channel
Island jurisdictions have a good reputation
in the offshore world which they intend to keep,
and as such it is in their interests to maintain
a high regulatory standard. The financial sector
in Jersey (which takes in banking, investment
funds, insurance, and in some cases trust and
company management) is regulated by the Financial
Services Commission. Tellingly, unlike many
other jurisdictions, Jersey banking law contains
capital adequacy provisions tougher than those
contained in the Basle requirements.
- Infrastructure.
As previously stated, the business and financial
infrastructure in Jersey is modern, efficient,
and extensive. They've been doing it for a long
time, and they do it well.
- Online
Facilities And Telecommunications. Although
until relatively recently, Jersey was not particularly
noted in terms of online and e-commerce facilities
on offer - perfectly respectable, and able to
acquit itself compared to many offshore jurisdictions,
but nothing special - the island has gone to
great lengths to enhance its telecommunications
system, and has invested millions per year in
e-commerce development and telecoms, meaning
that whether you want to check up on your business
presence on the island, or just want to contact
your bank manager, you should have no problems
accessing a fast and reliable service. It seems
that it may only be a matter of time before
Jersey establishes itself as a Western European
e-commerce hub, with the inherent affinity between
offshore and the internet facilitating this.
- Established
Stock Exchange. Jersey is a member of the
Channel Islands Stock Exchange, which is based
in St Peter Port, in Guernsey, and commenced
operations in 1998. The
2,000th listing on the exchange occurred on
April 16, 2007, when Isle of Man collective
investment fund Lansdown Atlantic Life Settlement
Fund was admitted to the Official List. The
exchange has developed specialist niches in
floating property funds, open and closed-ended
investment funds, debt, securities and special
purpose vehicles and is attracting increasing
interest from alternative investment funds.
The CISX also lists international trading companies
and not just those based in Guernsey.
In September, 2002, the US Securities and Exchange
Commission awarded the Channel Islands Stock
Exchange (CISX) designated offshore securities
market status.
Wealth Management In Jersey
Although Jersey is widely recognised in the institutional
investment world as one of the leading jurisdictions
for pensions and insurance fund management, other
areas of expertise perhaps more of interest to
expats, international consultants, and HNWI include
its banking sector, and its company and trust
formation sectors.
The
majority of the banks established in Jersey are
branches or subsidiaries of the world's top banking
establishments, and as previously mentioned, are
in the main well regulated and safe, with capital
adequacy levels not seen in many offshore jurisdictions.
Advantageous tax treatment of interest income
from Jersey bank accounts - excepting, of course,
the STD related retention tax - combined with
this peace of mind, means that alone, or in combination
with other offshore structures, bank accounts
in Jersey are a good bet.
The
efficient infrastructure, which includes internationally
qualified IFAs, accountants, lawyers, and stockbrokers,
is also an important factor, and they should be
able to provide you with information and support
both in deciding whether it is appropriate to
locate your assets in Jersey, and in the succeeding
years if you choose to do so.
Jersey
can also be a beneficial location in which to
establish an offshore structure, whether for the
purposes of asset protection, or to serve as a
business presence for global consultants and other
such self-employed professionals. Due to the burgeoning
e-commerce sector, it was becoming possible to
establish a personal services company in Jersey
(usually in the form of an IBC) to act as a repository
for funds earned around the world, and to take
advantage of the island's generous tax regime.
However,
in accordance with Jersey’s commitment to
the ‘Rollback’ provisions of the EU
Code of Conduct for Business Taxation, the International
Business Company vehicle was abolished to new
entrants with effect from 1st January, 2006. Benefits
for existing beneficiaries of the International
Business Company regime will be progressively
extinguished by no later than the 31st December
2011.
In any case, tax evasion or money laundering via
a Jersey offshore structure would be very difficult
to accomplish, as beneficial ownership for all
Jersey based companies and vehicles must be disclosed
to the authorities. However, it will never be
disclosed externally except by order of the Royal
Court. Tax minimisation, in conjunction with the
laws of the island, however, is eminently possible.
Obviously,
though, you will need assistance in setting up
and maintaining these structures, and what is
appropriate for you will vary according to your
personal circumstances and country of residence,
so you should always consult a qualified professional
before making any decision of this kind.
Permission
to reside in Jersey on employment grounds (about
which more later) is often negotiated when applications
are made to establish a business presence on the
island.
Probably
the most appropriate vehicles in Jersey for expats
or non-UK citizens in need of asset protection
for estate planning or other purposes (and in
addition to, or in combination with a Jersey bank
account), is the Jersey trust. The normal form
of trust in Jersey is a discretionary trust, and
where the beneficiaries of the trust are non-resident,
income arising from sources outside Jersey are
not liable for income tax there, and neither are
distributions to the beneficiaries.
Although the costs involved in setting up and
maintaining a Jersey trust can vary considerably,
the creation of such a structure is free from
government duty at least. Trust law in Jersey
explicitly excludes foreign inheritance laws,
and except in cases of proven criminal wrongdoing,
foreign judgements are rarely recognised.
Jersey As A Location For Career Expats And Retirees
Jersey,
in common with some of the other island jurisdictions,
for example Guernsey, the Isle of Man, Bermuda,
and the Cayman Islands, has a good standard of
living but limited space and resources as a result
of a comparatively dense population.
Therefore,
although it is possible to achieve short-term
residence for employment purposes, or long term
residence if you are suitably qualified (in either
the traditional or financial sense!), achieving
permanent residence in Jersey is no mean feat
Obtaining Permission To Live
And Work In Jersey
For
the majority of expatriates, the two issues mentioned
above are inextricably linked, as there are really
only two ways to obtain residence on the island;
on economic grounds, or on employment grounds.
Initial
enquiries regarding the possibility of gaining
residence on economic grounds should be made to
the Chief Advisor to the States of Jersey, as
each case is considered on its individual merits.
The Chief Advisor then consults with the Housing
Committee. Although there are no hard and fast
rules about who will be accepted, and normally
only 5 or 10 approvals are granted each year,
the following criteria may be considered when
the application is being processed:
-
Likely contribution to tax revenues (usually
capital worth in excess of £10 million
is preferred)
-
Professional and social background
-
Number of dependants
-
Non-economic benefits which may be received
by the island if permission is granted.
In
addition to this, new residents accepted on economic
grounds are expected to purchase a substantial
luxury property, preferably with a value in excess
of hundreds of thousands of pounds.
Achieving
permission to reside and work on the island is
a less expensive business, certainly, but is still
not easy! 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 to the States Defence Committee
of the Aliens Office for permission to reside
and work on the island), but employers still need
to apply for a license in order to employ them.
Residence
in Jersey as an essentially employed individual
is known as 'J category' residence, and permission
is usually granted if the Housing Committee feels
that it is in the best interests of the community
to approve the application, if the employer has
a good record in recruiting and training local
people, if no suitably qualified local can be
found to do the job, and finally, if the aforementioned
licence has been granted to the employer.
If
the Housing Committee is satisfied with an applicant,
it will issue either time-restricted (usually
3-5 years), or open-ended consent. The former
is more typical, although the latter is sometimes
offered to senior or highly skilled employees,
and permanent residential status is afforded after
10 years of continuous essential service on the
island.
The
Housing Committee also has the authority to grant
or withhold permission to buy or rent property
in the jurisdiction for J category employees,
and can sometimes require employers to purchase
or lease property in order to house their expatriate
workforce.
Although
in view of the limited space and resources available,
and the desire to maintain the standard of living
of existing residents, Jersey is of necessity
not terribly family friendly, it is possible for
the fiancé(e) or spouse of an expatriate
who is coming to live and work in Jersey, to obtain
entry by applying for a visa or entry certificate.
Children of economic or J category migrants obtain
residential status in their own right after an
aggregate period of 10 years residence, provided
that that residence began when they were under
18.
Residence And Taxation
Residence
in Jersey for taxation purposes is divided into
three categories: Residence, Ordinary Residence,
and Non-Residence. Few jurisdictions employ the
concept of ordinary residence any more, but it
is not complicated, and really just implies a
greater continuity than simple residence. A person
is considered to be Jersey resident for tax purposes
if they are:
-
Physically present there for more than six months
of the year
- Present
in Jersey for an average of at least 3 months
per year over a 4 year period
- Maintaining
an abode in Jersey and visit the island at all
Income
tax is levied at one rate of 20%, 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 (but see above
regarding the EU's Savings Tax Directive).
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,
which may account for its popularity as a destination
for HNWI.
For
more detailed information on liability for tax
in Jersey, please visit the Lowtax
Jurisdictions Guide.
Conclusion
So,
is Jersey a good final destination for you, your
assets or your business? Unfortunately, on the
first question, no definitive answer can be given,
as the answer will depend very much on your personal
circumstances, wealth, qualifications, and family
situation. Each application is considered on its
individual merits, and because of the high standard
of living and relative wealth of the jurisdiction,
it is quite a popular choice. But at the same
time there are relatively few opportunities for
obtaining permanent residence available. However,
it is possible, so if you have a substantial liquid
net worth, and are prepared to contribute to the
community, or if you are a skilled career expat,
used to moving around fairly frequently, it could
be just the place for you.
On
the issue of whether Jersey is a good location
in which to locate your assets and/or personal
service company, however, there really isn't much
dispute. Although obviously there are no guarantees
in the offshore world, especially with the OECD
vacillating on various issues, Jersey, in common
with the other Channel Islands has a reasonably
calm relationship with the major multilaterals,
is politically stable, experienced in the areas
of trust management, company formation and administration,
and banking, and should present no problems in
the areas of telecommunications or support services.
It isn't the cheapest jurisdiction in which to
locate an offshore vehicle, but neither is it
one of the most expensive; all in all, Jersey
strikes a good balance.
For up-to-date news about the offshore and taxation
regime, visit the Jersey
section of Tax-News.com.
Other Useful Links:
This
Is Jersey
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