Jersey Tax Guide 2010

Transcription

1 Jersey Tax Guide 2010

2 FOREWORD For any business looking to set up in a new market, one of the critical deciding factors will be the target country s tax regime. What is the corporate tax rate? What capital allowances can we benefit from? Are there double tax treaties? How will foreign source income be taxed? Foreword Since 1994, the PKF network of independent member firms, which is administered by PKF International Limited, has produced the PKF Worldwide Tax Guide (WWTG) to provide businesses with the answers to these key tax questions. This handy reference manual provides clients and professional practitioners with comprehensive international tax and business information for over 100 countries throughout the world. As you will appreciate, the production of the WWTG is a huge team effort and I would like to thank all the member firms of the PKF network who gave up their time to contribute the vital information on their country s taxes that forms the heart of this publication. I would also like thank Richard Jones, PKF (UK) LLP, Kevin Reilly, PKF Witt Mares, and Rachel Yeo and Scott McKay, PKF Melbourne for co-ordinating and checking the entries from within their regions. This year s WWTG is the largest ever reflecting both how the PKF network is growing and the strength of the tax capability offered by member firms throughout the world. I hope that you find that the combination of reference to the WWTG plus assistance from your local PKF member firm will provide you with the advice you need to make the right decisions for your international business. Mark Pollock PKF Perth Chairman, International Tax Committee of the PKF network I

3 IMPORTANT DISCLAIMER This publication should not be regarded as offering a complete explanation of the taxation matters that are contained within this publication. Disclaimer This publication has been sold or distributed on the express terms and understanding that the publishers and the authors are not responsible for the results of any actions which are undertaken on the basis of the information which is contained within this publication, nor for any error in, or omission from, this publication. The publishers and the authors expressly disclaim all and any liability and responsibility to any person, entity or corporation who acts or fails to act as a consequence of any reliance upon the whole or any part of the contents of this publication. Accordingly no person, entity or corporation should act or rely upon any matter or information as contained or implied within this publication without first obtaining advice from an appropriately qualified professional person or firm of advisors, and ensuring that such advice specifically relates to their particular circumstances. PKF International is a network of legally independent member firms administered by PKF International Limited (PKFI). Neither PKFI nor the member firms of the network generally accept any responsibility or liability for the actions or inactions on the part of any individual member firm or firms. II

4 PREFACE The (WWTG) has been prepared to provide an overview of the taxation and business regulation regimes of over 100 of the world s most significant trading countries. In compiling this publication, member firms of the PKF network have sought to base their summaries on information current as of 30 September 2009, while also noting imminent changes where necessary. Preface On a country-by-country basis, each summary addresses the major taxes applicable to business; how taxable income is determined; sundry other related taxation and business issues; and the country s personal tax regime. The final section of each country summary sets out the Double Tax Treaty and Non-Treaty rates of tax withholding relating to the payment of dividends, interest, royalties and other related payments. While the WWTG should not to be regarded as offering a complete explanation of the taxation issues in each country, we hope readers will use the publication as their first point of reference and then use the services of their local PKF member firm to provide specific information and advice. In addition to the printed version of the WWTG, individual country taxation guides are available in PDF format which can be downloaded from the PKF website at Finally, PKF International Limited gladly welcomes any comments or thoughts readers may wish to make in order to improve this publication for their needs. Please contact Kevin F Reilly, PKF Witt Mares, Eaton Place, Suite 440, Fairfax, Virginia 22030, USA by to kreilly@pkfwittmares.com PKF INTERNATIONAL LIMITED APRIL 2010 PKF INTERNATIONAL LIMITED ALL RIGHTS RESERVED USE APPROVED WITH ATTRIBUTION VI

5 ABOUT PKF INTERNATIONAL LIMITED PKF International Limited (PKFI) administers a network of legally independent firms. The PKF network is the 11th largest global accountancy network with over 240 legally independent member and correspondent firms which have a combined annual turnover of $1.9 billion. Located in 125 countries, the member firms of the PKF network share a commitment to providing clients with high quality, partner-led services tailored to meet each client s own specific requirements. The membership base of the PKF network has grown steadily since it was formed in Added to the sustained growth in the number of PKF member firms, this solidity has provided the foundations for the global sharing of expertise, experience and skills and the development of services that meet the evolving needs of all types of client, from the individual to the multi-national corporation. Services provided by member firms include: Assurance & Advisory Insolvency Corporate & Personal Financial Planning Taxation Corporate Finance Forensic Accounting Management Consultancy Hotel Consultancy IT Consultancy Introduction PKF member firms are organised into five geographical regions covering Africa; Latin America and the Caribbean; Asia Pacific; Europe, the Middle East & India (EMEI); and North America. Each region elects representatives to the board of PKF International Limited, which administers the network. While the member firms remain separate and independent, international tax, corporate finance, professional standards, audit, hotel consultancy and business development committees also work together to improve quality standards, develop initiatives and share knowledge across the network. Please visit for more information. VII

6 STRUCTURE OF COUNTRY DESCRIPTIONS A. TAXES PAYABLE FEDERAL TAXES AND LEVIES COMPANY TAX CAPITAL GAINS TAX BRANCH PROFITS TAX SALES TAX/VALUE ADDED TAX FRINGE BENEFITS TAX LOCAL TAXES OTHER TAXES B. DETERMINATION OF TAXABLE INCOME Structure CAPITAL ALLOWANCES DEPRECIATION STOCK/INVENTORY CAPITAL GAINS AND LOSSES DIVIDENDS INTEREST DEDUCTIONS LOSSES FOREIGN SOURCED INCOME INCENTIVES C. FOREIGN TAX RELIEF D. CORPORATE GROUPS E. RELATED PARTY TRANSACTIONS F. WITHHOLDING TAX G. EXCHANGE CONTROL H. PERSONAL TAX I. TREATY AND NON-TREATY WITHHOLDING TAX RATES VIII

7 INTERNATIONAL TIME ZONES AT 12 NOON, GREENWICH MEAN TIME, THE STANDARD TIME ELSEWHERE IS: A Angola...1 pm Argentina...9 am Australia - Melbourne...10 pm Sydney...10 pm Adelaide pm Perth...8 pm Austria...1 pm B Bahamas...7 am Bahrain...3 pm Barbados...8 am Belgium...1 pm Belize...6 am Bermuda...8 am Bolivia...8 am Botswana...2 pm Brazil am Brunei...8 pm Bulgaria pm C Cameroon...1 pm Canada - Toronto...7 am Winnipeg...6 am Calgary...5 am Vancouver...4 am Cayman Islands am Chile...8 am China - Beijing pm Colombia...7 am Costa Rica...6 am Croatia...1 pm Cyprus...2 pm Czech Republic pm D Denmark...1 pm Dominican Republic am E Ecuador...7 am Egypt...2 pm El Salvador...6 am Estonia...2 pm F Fiji...12 midnight Finland...2 pm France pm G Gambia (The) noon Germany...1 pm Ghana noon Greece...2 pm Grenada...8 am Guatemala...6 am Guernsey noon Guyana...8 am H Hong Kong...8 pm Hungary...1 pm I India pm Indonesia pm Ireland noon Israel...2 pm Italy...1 pm J Jamaica...7 am Japan...9 pm Jersey noon Jordan...2 pm K Kazakhstan...5 pm Kenya...3 pm Korea...9 pm Kuwait...3 pm L Latvia...2 pm Lebanon...2 pm Leeward Islands (Nevis, Antigua, St Kitts)....8 am Libya...2 pm Liberia noon Lithuania...2 pm Luxembourg...1 pm M Malaysia...8 pm Malta...1 pm Mauritius...4 pm Mexico...6 am Morocco noon N Namibia pm Netherlands (The) pm Netherlands Antilles am New Zealand midnight Nigeria...1 pm Norway...1 pm O Oman...4 pm P Panama am Papua New Guinea pm Peru...7 am Philippines...8 pm Poland pm Portugal...1 pm Puerto Rico...8 am Q Qatar am Romania...2 pm Russia - Moscow/St Petersburg pm S Sierra Leone noon Singapore...7 pm Slovak Republic pm South Africa...2 pm IX Time Zones

8 Spain...1 pm Swaziland...2 pm Sweden...1 pm Switzerland...1 pm T Taiwan...8 pm Tanzania...3 pm Thailand...7 pm Trinidad and Tobago am Turkey...2 pm Turks and Caicos Islands am Time Zones U Uganda...2 pm Ukraine...2 pm United Arab Emirates pm United Kingdom (GMT) 12 noon United States of America - New York City am Washington, D.C am Chicago...6 am Houston...6 am Denver...5 am Los Angeles...4 am San Francisco am Uruguay...9 am V Vanuatu...11 pm Venezuela...8 am Vietnam Z Zambia...2 pm X

9 Jersey JERSEY Currency: British Pound Dial Code To: 44 Dial Code Out: 00 (GBP) Member Firm: City: Name: Contact Information: St Peter Port, Guernsey André Trebert A. TAXES PAYABLE FEDERAL TAXES AND LEVIES COMPANY TAX All companies incorporated in Jersey or managed and controlled in Jersey are treated as resident and, therefore potentially chargeable to income tax. Some companies can elect for exempt status. These are collective investment funds and also, for calendar years up to and including 2008, certain Jersey registered companies owned by non-residents. The annual exemption fee is currently 600. Under exempt status, income tax is not payable on income arising outside Jersey and, by concession, income arising from bank deposits in Jersey is not taxable. Other income arising in Jersey is subject to Jersey tax. On 1 January 2009, the exempt and international company regimes were abolished and all Jersey registered companies became resident for taxation purposes, except collective investment schemes that may make an exempt status election. A new zero rate of corporation tax has been introduced for all companies, except for companies with certain classes of income. This new corporate tax regime is known as Zero 10. Financial services entities are subject to a 10% rate and are defined as: in Jersey, whether through a Jersey company, a branch or some other structure establishment similar activities through a permanent establishment services through a permanent establishment. It should be noted that clerical functions such as invoicing operations, management and administration services and entering into contracts in respect of a company s international business do not amount to the carrying on of a business through a permanent establishment in the Island. J Public utility companies such as those providing electricity, water, gas, telecommunications and postal services continue to be taxed at 20%. Jersey rental income and profits from property development in Jersey also continue to be taxed at the rate of 20%. All other companies are liable at the rate of 0%. The new regime applies to accounting periods ending in 2009 and thereafter. The income tax rate for all Jersey resident companies for calendar years up to and including 2008 was 20%. The tax year runs from 1 January to 31 December, although companies may adopt a year end of their choice. Income is assessable on a preceding year basis. There are special opening and closing year rules which may also apply to successions. Assessments are notified to the company in the year following the year of assessment and tax is payable on the following day. Jersey incorporated companies may be treated as non-jersey resident for tax purposes from 2007, where they are both centrally managed and tax resident in another country or territory subject to tax on its income at a tax rate of 20% or higher. The basis of assessment has now changed from a prior year basis to a current year basis with the year of assessment 2009 being the first such year. The year of assessment 2008 was a transitional year in which an average of the income for 2007 and 2008 is assessed. 1

10 Jersey CAPITAL GAINS TAX There is no capital gains tax in Jersey. Capital gains are not included in ordinary taxable income. BRANCH PROFITS TAX There is currently no branch profits tax in Jersey. However, please note the changes above introduced under the Zero 10 regime. There are special rules for overseas life assurance companies. SALES TAXES/VALUE ADDED TAX (VAT) With effect from 1 May 2008, a Goods and Services Tax (GST) has been introduced to offset the loss in revenue on the introduction of the Zero 10 corporation tax regime. GST is a form of sales tax on the domestic consumption of imported and locally produced goods and services. There is a standard rate of 3% which will be collected from customers by registered businesses when they make supplies of those goods and services which are specified by Law as taxable at the standard rate. There are three categories of supplies: under a hire purchase agreement, renting and hiring out of goods, business stock used for private purposes, the provision of services (e.g. hairdressing or hotel accommodation), charging admission for access onto premises, and imported goods. and pharmaceutical supplies made by registered professionals or institutions, and supplies to charities. medical prescription and international services. FRINGE BENEFITS TAX On 1 January 2004, the taxation of benefits in kind was introduced. Taxable benefits include, amongst other things, the private use of a company motor vehicle, rent-free of tax on benefits. LAND TRANSACTIONS TAX A new Land Transactions Tax was introduced on 1 January 2010 in order to collect a form of stamp duty on share transfer transactions involving immovable property in Jersey. The primary purpose of the law is to achieve equity between the financial cost to purchasers of property by share transfer or freehold. J As there is no requirement to register the transfer of shares, the charge takes the form of a Tax rather than Stamp Duty. A legal obligation is placed on the purchaser of a property by share transfer to pay a tax exactly equal to the amount of Stamp Duty which would have been paid on the purchase if it had been freehold property. There are lower rates for first time buyers, charities, the transfer of matrimonial property from joint to sole ownership (or vice versa), and transfers from a deceased person s estate. Non-resident purchasers of shares are not exempt from the tax. The rates of tax applied range from 0.5% (where the value of the transaction does not exceed 50,000) to 13,000 in respect of the first 700,000 plus 3% of the excess (where the transfer value exceeds 700,000). LOCAL TAXES Taxes are levied on a state level only. B. DETERMINATION OF TAXABLE INCOME The taxable income of a company is determined by ascertaining assessable income and then subtracting all allowable deductions. Generally, to be deductible, expenditure must be wholly and exclusively expended for the purposes of the business. Special rules apply in respect of the categories listed below: DEPRECIATION No deduction is permitted in respect of depreciation on capital items. However, annual allowances, calculated using the reducing-balance method, are allowed as follows: If, in any year, there are insufficient profits to cover balancing allowances, which are treated as a deduction from profits, any unrelieved amount is carried forward and 2

11 Jersey treated as an allowance for the following year. This allowance can be carried forward indefinitely, if necessary. STOCK/INVENTORY UK principles are followed such that the value of the stock is normally the lower of cost and market value. Acceptable methods of valuing inventory include FIFO and average cost but not LIFO. DIVIDENDS Dividends paid are not deductible in calculating the profits of a company but are paid out of after tax profits. With effect from January 2009, dividends paid out of Jersey company profits carry a tax credit in relation to the tax paid by the company at either the 0%, 10% or 20% rates. Dividends received from a UK resident company do not qualify for double tax relief and individuals are taxed on the net amount received. No unilateral relief is available to resident companies on receipt of foreign dividends and, thus, the net dividend is taxable (in other words, relief is given for foreign tax suffered by way of deduction). However, relief may be granted by concession on foreign dividend income if the absence of it would prevent bona fide commercial transactions (e.g. because dividends paid to a holding company by an overseas subsidiary would be doubly taxed). With effect from 1 January 2009, this income is liable to Jersey tax at the standard corporate tax rate of 0% when received by a Jersey company. An individual resident in Jersey owning more than 2% of the ordinary share capital of a Jersey trading company is liable to pay tax on deemed interim dividends. A Jersey trading company subject to the rules relating to deemed interim dividends is one which is taxed at 0% and is not an investment holding company. Where such a company distributes less than 60% of its relevant profits, it will be treated as having distributed 60% of the profits. The Jersey resident shareholder owning more than 2% of the ordinary share capital will be liable to pay tax on the deemed dividend. services companies liable at 10% A further deemed dividend will arise on the occurrence of one of the following trigger events: company following year J FULL ATTRIBUTION FOR INVESTMENT HOLDING COMPANIES Income arising to investment holding companies is attributed to Jersey resident shareholders. An individual resident in Jersey who owns more than 2% of the ordinary share capital in a company that is subject to full attribution is liable to pay tax on his/her proportion of the company s relevant profits as if that portion was the individual s own profits. Relevant profits mean the balance of income, profits and gains chargeable to tax on the company at 0%. SHAREHOLDER LOANS A loan made to a Jersey resident shareholder or a member of the shareholder s family is liable to income tax if it is made by a company subject to 0% or 10% (other than a company which is subject to the full attribution rules) unless it is made at a commercial rate of interest. The shareholder is entitled to a credit when the loan is repaid, equal to the amount of tax paid on the loan. INTEREST DEDUCTIONS From 1 January 2004, interest tax relief has been abolished with certain exceptions. Interest will continue to be deductible to the extent that it relates to monies borrowed for the purpose of the business. Mortgage interest relief will also continue to be deductible but only on loans up to 300,000 on an individual s principal private residence. LOSSES Losses can be carried forward indefinitely provided there is a continuity of ownership and trade. Losses can only be carried back against profits of the immediately preceding year. Losses can also be group relieved in the same year. 3

12 Jersey C. FOREIGN TAX RELIEF Jersey has double taxation arrangements with the United Kingdom and Guernsey. Double taxation relief is available on all income taxed at source excluding UK dividends received and UK debenture interest. Jersey has entered into limited double taxation arrangements relating to income and mutual agreement procedures with: Australia Finland Iceland Norway Denmark Germany Netherlands Republic of Ireland Faroe Islands Greenland New Zealand Sweden Unilateral relief is available on all foreign sourced income from countries other than those noted above, including dividends which have had withholding taxes deducted (see Dividends above). Australia France Netherlands Sweden Denmark Germany New Zealand United Kingdom Faroe Islands Greenland Norway United States of America Finland Iceland Republic of Ireland D. CORPORATE GROUPS Tax provisions relating to groups of qualifying companies were introduced with effect from January These provisions allow losses of a group company to be offset against the profits or gains of another company in the same group. A claim for relief must be made within one year following the year of assessment in which the loss period ended. Companies will be treated as being in the same group where one holds directly or indirectly more than 50% of the ordinary share capital of the other company, or where one company (company A) owns directly or indirectly more than 50% of the ordinary share capital of the two other companies (company B and company C). J E. RELATED PARTY TRANSACTIONS There is no transfer pricing or related party legislation in Jersey. F. WITHHOLDING TAX Withholding tax is to be deducted from dividends and deemed dividends paid to Jersey residents by Jersey companies out of profits taxed at less than 20%. No withholding tax is deducted from dividends paid out of profits taxed at 20% or more (such as trading profits that arose prior to 1 January 2009). Jersey resident shareholders are entitled to a 20% tax credit on all dividends and deemed dividends they receive from Jersey resident companies. However, the company has to include a statement on the dividend vouchers showing its effective rate of tax. Shareholders who are in a repayment situation, charities and those not liable to Jersey tax (i.e. non-residents, until 2009) will only be able to claim a tax credit at the effective rate. With effect from 1 January 2009, non-resident shareholders are not liable to Jersey tax on dividends paid to them. Until they were abolished at the end of 2008, income tax did not need to be deducted from dividends paid by exempt companies. A collective investment fund must deduct income tax from any dividend paid to a Jersey resident shareholder. Withholding tax at the standard rate of 20% is deducted from certain interest payments, although there is no withholding tax on interest on short-term loans (less than one year) or paid to, or by, a resident bank. With effect from January 2009, interest payments to non residents are not subject to Jersey withholding tax. Withholding tax is deducted from patent royalties at the standard rate of 20%. There is no withholding tax on other royalties. With effect from January 2009, royalty payments to non residents are not subject to Jersey withholding tax. 4

13 Jersey investors have the option of receiving bank interest gross by opting for an exchange of information on their savings income with their domestic tax authority, or, alternatively, accepting a deduction of withholding tax at the current rate of 20%. The withholding rate increased from 15% to 20% on 1 July 2008 and will increase again on 1 July 2011 to 35%. G. EXCHANGE CONTROL There are no exchange control rules in Jersey. H. PERSONAL TAX Income tax is charged on Jersey-resident individuals in respect of worldwide income and profits regardless of whether such profits or income are remitted to Jersey. There is, however, a statutory relief in the case of individuals who are resident, but not ordinarily resident in Jersey, so that foreign income not remitted escapes taxation. There is no statutory definition of residence or ordinary residence in Jersey. However, regard is paid to UK law and practice and, generally, individuals are treated as resident in a year if they are present in Jersey for more than six months or if they are present for three months or more, on average, over a period of four consecutive years. If an individual maintains a place of abode in Jersey, he is regarded as resident in any year that he stays in that abode. Any time that his visits span a complete calendar year, he will be classed as ordinarily resident. He is also regarded as ordinarily resident if his visits are habitual (after four years) unless his centre of life is abroad, e.g. has a home, business or professional activities abroad and is spending less than three months a year in Jersey. Income from offices and employment is assessable on an arising basis. Income tax is levied on the assessable income of the individual less personal allowances and deductions at a rate of 20%. amount arising after the deduction of any foreign tax charged and any necessary expenses but there is a special half-rate tax chargeable on pensions in respect of which tax of a Commonwealth territory has been paid. Income is exempt if it does not exceed 12,650 for a single person ( 14,110 for those aged 63 and over) or 20,280 for a married person ( 23,220 for those aged 63 and over). Marginal relief is available where income exceeds the exemption limit on small incomes, whereby the tax charged is not to exceed 27% of the excess. J Where income is chargeable to tax, personal allowances are available as follows: 2009 Single person 1,040 Married person 2,080 Child allowance 3,000 (each child) education in 2008 is 6,000. There is an Additional Personal Allowance for single parents of 4,500 for From 1 January 2006, an income tax instalment scheme has been introduced. The effect is that tax is deducted from salary on an ongoing basis. 20% MEANS 20% With effect from 2007 the granting of personal allowances for high earners is being withdrawn in phases up to 2011 and 2012 will be the first year without any personal allowances. The gradual withdrawal of these allowances will mean that, over a five year period, higher earners will see a year-on-year increase in their tax liability. The withdrawal of allowances is applied by limiting the tax allowances to 4/5ths of the total allowance in year one and thereafter a further 1/5th of the allowance is withdrawn in each of years two to four with a complete withdrawal in year five. Where a taxpayer s income exceeds certain exemption thresholds, 5

14 Jersey a form of marginal relief will be available whereby a tax charge of 27% is applied to the amount in excess of the threshold. Provided the charge under this calculation is less than the charge calculated using the annual personal allowances, the marginal relief is available. The personal tax allowances that will remain are: HIGH NET WORTH INDIVIDUALS With effect from 1 January 2005, individuals who are new to the island applying for a 1(1)K licence to live in Jersey are taxed on their Jersey source income at 20%. The first 1,000,000 of non-jersey source income is also taxed at 20% but the next 500,000 is taxed at 10% and non-jersey source income above the 1.5 million level is taxed at just 1%. J 6

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