Offshore Company formation: Jersey

Jersey Offshore Company Formation

• Tax planning via a network of international tax advisers and attorneys
• Why form a company in a foreign country with a tax accountant specialized in international tax law?
• Basic Considerations regarding the Formation of Companies in „Zero-Tax Havens“ i.e. in countries that have not entered into Double Taxation Agreements with other countries
• Offshore Company Formation: Tax haven rankings
• Examples for the legal reduction of corporate taxes
• DTA permanent establishment concept – Our services and fees
• Parent companies and their subsidiaries in the European Union
• Beware of cheap founders!

The Island of Jersey is situated in the British Channel Islands in the Bay of St Malo approximately 19 miles from the French coast. It is a British Crown Dependency

The legal system is based on English common law and local statute. Companies incorporated in Jersey are regulated by the Companies Law 1991 which emulates the English Companies Act 1948. However, there are no forms of Jersey companies comparable to those of English companies limited by guarantee or unlimited companies. A Jersey private company is classified as any company that is not a public company.

There are several offshore business vehicles the most popular being the Exempt Private Limited Liability Company, the advantage of such a formation is total exemption from taxation on foreign income; the International Business Company has a similar advantage but tax is levied on foreign income at a low rate. The Limited Partnerships and Trusts are other entities utilized for tax avoidance.

Advantages of the Jersey Offshore Company Formation

Investors are attracted to the jurisdiction because of its political stability, low taxes and international credibility and good transport communications. However, the administration has adopted a protectionist approach. Foreign business and investors are only encouraged if they contribute positively to the jurisdiction’s services and business.

Offshore Company Formation Formalities

There are some restrictions to the offshore entities trading activities in Jersey. International Business Companies must not conduct businesses with Jersey residents, but are not otherwise specifically limited. Exempt Private Companies, are permitted to conduct their activiites on the island as long as there is no established place of business.

There is no specific minimum capital requirement. In most cases, a registration agent will only issue two shares.

Jersey companies require a local registered office for service of process. Registered and bearer shares can be issued. There must be at least two directors in a Jersey company and directors must be real people. Public anonymity can be obtained by the employment of nominee directors/shareholders. A full register of members and charges must be kept at the registered office in Jersey. The company name must end with either Limited or Public Limited Company. No accounts or annual summaries need to be filed with the Jersey Government in the case of Exempt companies. Jersey residents must not have any direct interest in the shares of an exempt company, but may own shares in a company which does. The exempt company’s beneficial owners must be disclosed to the Financial Services Commission

Trusts

There is no registration requirement for Trusts and no fees are payable. All Trust documents are normally in English. The trustees of a non-resident trust whose beneficiaries are non-resident are not required to submit returns or provide accounts of the trust to the Comptroller of income tax. Trust accounts must be maintained but audit is not required.

Trusts are exempt from tax on foreign income and Jersey bank interest provided that the settlor, life tenants and beneficiaries are not resident in Jersey. However, matters become somewhat complicated if some of the beneficiaries or life tenants are Jersey residents, the picture then exemption may be partly or wholly lost.

The Jersey Trust is impenetrable from foreign judgments and Inheritance laws.

Taxation

There are no capital gains taxes, capital transfer tax, purchase or sales tax or VAT. Stamp duties are levied on the transfer of immovable property (up to 1%) and individual parishes levy property taxes.

Income tax is levied at 20%, and employees social security contributions are payable. Property owners and occupiers are also liable for parish taxes.

The rate of Jersey corporate income tax is 20%; but for International Business Companies’ The Jersey income tax rate is 30%. Resident ‘income tax’ companies pay full income tax on their world-wide income, International Business Companies are liable for full income tax on their income arising in Jersey. Exempt companies pay full income tax on their income arising from an established place of business in Jersey. Jersey branches of foreign corporations pay full income tax on income arising in Jersey if they are managed and controlled outside the island; otherwise it is treated as a Jersey resident ‘income tax’ company.

Jersey partnerships are liable to income tax, and the calculation of tax due is along similar lines to that for company profits. Foreign partnerships where control and management takes place abroad are charged tax only in respect of Jersey income Foreign Partnerships are not liable for tax on foreign income

An exempt company or an IBC is not obliged or entitled to deduct tax when paying interest or royalties to non-residents. For all companies, interest and royalty payments are deductible as trading or management expenses when calculating the profits chargeable to income tax, although mechanisms vary. There are some limitations on the deductibility of interest paid abroad by resident ‘income tax’ companies. Deposit interest from Jersey banks payable to non-residents is exempt from Jersey income tax.

Banking Law

There are over 60 major international banks in Jersey, most subsidiaries of the major clearing banks predominately providing services to Foreign Nationals and expatriates.

Employment Law

Steps are currently being taken to consolidate existing employment law to introduce a Jersey Conciliation and Arbitration Service, and Industrial Tribunals.

Nationals of European Union member states have free right of movement in Jersey for the purposes of work and establishment. Non EU nationals must apply to the States Defense Committee of the Aliens Office for permission to reside or work in Jersey.

Geography People and Culture

Jersey’s climate is temperate with mild winters and cool summers. The terrain is gently rolling plains with low, rugged hills along the north coast. The population is 90,502 (est. July 2004 est.) with the ethnicity broken down as UK and Norman-French descent. English and French are official languages and Norman-French dialect is spoken in country districts.

Immigration and Residency

Nationals of European Union member states have free right of movement in Jersey for the purposes of work and establishment. Non EU nationals must apply to the States Defense Committee of the Aliens Office for permission to reside or work in Jersey. Generally a work permit will be granted only if no suitably qualified local exists. Preference is given to UK and other European Union nationals.

However, long-term residency in Jersey is carefully controlled; with certain exceptions consent for residency will be given only to a person owning a residence, and in turn the purchase of a residence is subject to consent, which is given in only a limited number of cases, usually involving a luxury dwelling or an individual who is clearly going to contribute significantly to the island through payment of local taxes.

Legal and Political System

Jersey has no political parties, Cabinet or Prime Minister. Queen Elizabeth II is the Chief of State and is represented on the Island by a Lieutenant Governor and Commander in Chief (Air Chief Marshall Sir John Cheshire since 24 January 2001) and Bailiff (Philip Martin Bailhache since February 1995). Jersey is self governing in all matters except defence which is the responsibility of the United Kingdom.

The government is conducted by an Assembly of the States through committees of the States that have delegated administrative and executive responsibilities. The States currently is made up of the Bailiff, the Lieutenant Governor (who is not allowed vote),12 senators, 12 parish constables, 29 deputies, the Dean of Jersey (who also does not have a vote), and as advisers, the Attorney General and the Solicitor General. The Bailiff is the President of the Assembly and acts as its Speaker. He is also president of the Royal Court. The Bailiff has no political power but has the right to speak in the Assembly for the purpose of ensuring orderly debate. He also has a casting vote, which, by tradition, is used to maintain the status quo and allows the Assembly to reconsider the matter at a later date.

The Attorney General and the Solicitor General are the Law Officers of the Crown and are appointed by the Crown. They have the right to speak but cannot vote. Points of law raised in debate are often referred to them for explanation and clarification.

Economy

The Jersey currency is the pound which is on a par with the British pound; there are no exchange controls.

The economy is based largely on international financial services, agriculture, and tourism. Potatoes, cauliflower, tomatoes, and especially flowers are important export crops, shipped mostly to the UK. The Jersey breed of dairy cattle is known worldwide and represents an important export income earner. Milk products go to the UK and other EU countries. In 1996 the finance sector accounted for about 60% of the island’s output. Tourism, another mainstay of the economy, accounts for 24% of GDP. In recent years, the government has encouraged light industry to locate in Jersey, with the result that an electronics industry has developed alongside the traditional manufacturing of knitwear. All raw material and energy requirements are imported, as well as a large share of Jersey’s food needs. Light taxes and death duties make the island a popular tax haven.

Legislation relating to offshore and non-resident business

If you require more information on any particular statute please contact us.

Banking Business (Jersey) Law 1991
Banking Business (General Provisions) (Jersey) Order 1991
Collective Investment Funds Law 1988
Companies (Jersey) Law 1991
Companies (Amendment No.6) (Jersey) Law 2000
Income Tax(Jersey) Law 1961
Insurance Business (Jersey) Law 1996
Insurance Business Law (General Provisions) (Jersey) Order 1996
Limited Partnerships (Jersey) Law 1994
Trusts (Jersey) Law 1984
Terrorist Financing Order 2001