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.

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This Is Jersey