Jersey, Channel Islands
Individual - Income determinationLast reviewed - 28 December 2022
A resident and ordinarily resident individual is subject to Jersey income tax on the full amount of the emoluments received from one’s employment, including benefits in kind, and regardless of where the duties are performed. Special rules apply in the years of arrival and departure. Where a Jersey non-resident performs duties in Jersey, the emoluments attaching to these duties may be assessable in Jersey. However, non-resident directors are exempt from Jersey income tax on directors' fees.
There are rules relating to intermediary services vehicles (ISVs). These apply where a Jersey resident individual provides services to a client via a company and, were it not for the company, the individual would be considered an employee of the underlying client. In this situation, the company will be an ISV. The measures ‘look through’ the ISV and tax the individual as if they were receiving income directly from the client. The income is referred to as 'attributable earnings'.
The individual is able to deduct one’s remuneration, employer social security contributions, and any tax deductions one would normally be entitled to as an employee from one’s attributable earnings.
The proposals do not apply if the total income from clients in the ISV is less than GBP 45,000.
Capital gains are not subject to tax in Jersey.
Jersey residents are liable to Jersey income tax at a rate of 20% on their worldwide investment income, regardless of where that income arises. Non-residents are liable to Jersey income tax at a rate of 20% on their investment income arising in Jersey, subject to the concession that applies to bank interest.
Jersey distribution provisions
The definition of ‘distribution’ for Jersey tax purposes is very wide, encompassing almost any situation where a shareholder receives value from the company. It includes dividends, liquidations, share buybacks, repayments of loans made by shareholders to companies, transfers of assets from companies to shareholders, transfers of liabilities to companies etc.
However, repayment of loans made on a commercial basis to a trading company or a company within a trading group will not be regarded as a distribution.
Where a Jersey individual shareholder owns over 2% of the ordinary share capital of a Jersey company, the distribution is taxable. To the extent a distribution can be matched to the Jersey shareholder’s share of ‘specified profits’, this amount will be taxed on the individual with no tax credit (other than 10% company tax paid on profits). ‘Specified profits’ are, broadly, accumulated tax-adjusted profits from 2009 onwards not already taxed as dividends, deemed dividends, or attributed profits. This will include future profits as they arise.
Any amount of the distribution that cannot be matched with ‘specified profits’ will be treated as a ‘normal’ dividend and the treatment will follow the nature of the profits/reserves being distributed.
Note that there is an option to elect for a simplified alternative to treat all distributions as taxable.