The Jersey zero/ten tax regime

With effect from 1 January 2009 a new regime of company taxation will apply to the income, profits and gains of all companies in Jersey (the "Zero/10 regime"). In accordance with certain transitional rules, Jersey companies incorporated from 3 June 2008 and regarded as resident in Jersey will be subject to the Zero/10 regime. A 10% rate of income tax will apply for a restricted sector of local financial services companies; and local utility companies will continue to pay tax at 20%.    It should be stressed that the overwhelming majority of Jersey companies incorporated for overseas corporate groups or private clients will be taxed at 0%. The introduction of the Zero/10 regime is in line with the commitments given to the OECD and the European Union whilst also allowing the Island to remain as a leading offshore jurisdiction.

The outgoing ‘exempt’ company

The exempt company structure enabled companies incorporated or managed and controlled in the island to be exempted from income tax in Jersey allowing tax neutrality to be established in finance transactions.  Broadly speaking exempt company status was available on the payment of a fee but was not permitted where a resident of the island was one of the beneficial owners. Under the Zero/10 regime tax neutrality for finance transactions will continue to be available through the zero tax rate vehicle.  There will be no requirement for a fee to be paid and there will be no restriction on the status of the beneficial owners for a zero tax rate company. With effect from 3 June 2008 it will no longer be possible to apply for exempt company status.  Exempt company status will be abolished from 1 January 2009 and all exempt companies will become zero tax rate companies from that date.

The standard rate of tax charged for a company regarded as resident in Jersey or which has a permanent establishment in Jersey will be 0% unless that company is treated as a financial services company or a utility company. A "permanent establishment", in relation to a company, includes inter alia a branch of the company and a place of management of the company, but the fact that the directors of a company regularly meet in Jersey shall not, of itself, make their meeting place a permanent establishment.  

Financial services companies

A financial services company which has a permanent establishment in the Island will be charged to tax at a rate of 10%.

A "financial services company" is defined as any company that:

(a)    is registered under the Financial Services (Jersey) Law 1998 to carry out investment business or trust company business;

(b)    is registered under the Banking Business (Jersey) Law 1991, other than a company registered for business continuity under that Law, pursuant to Article 9A of the Banking Business (General Provisions) (Jersey) Order 2002; or

(c)    holds a permit under the Collective Investment Funds (Jersey) Law 1988 by virtue of being a functionary who is an administrator or custodian mentioned in Part 2 of the Schedule to that Law.

Jersey residents

Jersey residents who hold an interest in a Jersey company subject to the Zero/10 regime will be taxed personally on a variety of sources of income arising at the level of the company.  Broadly speaking this will be achieved either by deeming distributions to have been made or by fully attributing profits to the individual in accordance with his or her proportion of the ordinary share capital.