Offshore Benefits

Jerseys Position

An Island in the English Channel approximately 45 square miles with a population of around eighty five thousand, Jersey, together with the other Channel Islands, is a dependency of the Crown but enjoys autonomy in relation to its domestic affairs including government and taxation.

Business Environment

Jersey's highly reputable business standards and reliable communications infrastructure have enabled the Island to promote itself as a well regulated international finance centre. Given the Island's low taxation regime, political stability and international credibility, Jersey has become an attractive place in which to do business. Additionally, the Island’s administration is protective of the Island's international financial reputation and therefore screens operations that could potentially put this reputation at risk.

Political

The Island has its own legislative assembly, the States of Jersey, which comprises of 53 elected members. This body administers a well-regulated, efficient financial centre with up-to-date legal and judicial frameworks and its own courts of law. Jersey is neither part of the United Kingdom nor a colony and is not represented in the UK parliament. The UK is, however, responsible for the Island's defence and International affairs. The Island enjoys a special relationship with EU member States under Protocol 3 of the UK's Treaty of Accession to the European Community. Jersey's constitutional position in relation to the EU cannot be changed without the unanimous agreement of the Member States, including of course the UK, which by long established convention does not legislate with regard to Jersey without prior consultation. The common customs tariffs for trade between the Island and non-member states apply, with free movement of trade between the Island and Member States although the Island is not supported by EU funds.

Legal

Jersey has its own legal and judicial administration system based on Norman and more recently on English law, as well as its own courts of law. In addition Jersey has introduced its own Electronic Communication (Jersey) Law to improve the positioning of the Island as a leading e-commerce jurisdiction. This Law covers aspects of electronic communications, the legal recognition of electronic signatures and electronic records and the removal of obstacles in other legislations relating to the use of electronic communication and storage in place of traditional methods. There is also an approvals scheme for businesses and other organisations providing cryptography services, such as electronic signature services and confidentiality services.

Economy

Jersey's economy is stable with a substantial strategic reserve, a balanced budget and no public debt. The economy is mainly dependant on financial services with more than 80 banks operating on the Island and many investment and trust funds administering over £200 billion in total. The Island both supports and complements the City of London and other world finance centres. Jersey is in monetary union with the UK which it benefits from and contributes to the free flow of capital throughout the European Community and beyond. The Island issues its own notes and coins and the UK currency is circulated freely and on par with the local currency on the Island. Although the Island is not a participant in European Monetary Union, its financial institutions deal and transact in the Euro and all other major currencies around the world. In addition to the Island's strong and healthy financial industry, the Island has successful tourism and agricultural industries and is developing a framework to position Jersey as the offshore e-commerce capital of Europe providing a balance to the Island’s economy.

Taxation

The Island's low taxation policies have remained unaltered since 1940 with 20% on income tax, no Value Added Tax, no capital gains taxes and no estate or inheritance duties. Provided that certain conditions are met, the method of taxation adopted by locally incorporated subsidiaries depends on the tax jurisdictions of the parent company. In countries where there is no equivalent to the Controlled Foreign Companies legislation, the profits of the offshore subsidiary may not be taxable in the parent companies jurisdiction, nor any other, provided the offshore subsidiary is structured appropriately in the offshore jurisdiction.

Company Types

A Jersey incorporated company falls into one of two tax categories within the Island:

Income Tax Companies
Companies, which are liable to Jersey income tax, are subject to tax at the standard rate of 20% in respect of their net taxable world-wide income. Dividends paid to shareholders by companies, which are liable to Jersey income tax, are not deductible as expenses and are deemed to be received by shareholders under the deduction of Jersey tax. It is worth noting that even at 20% Jersey remains an attractive location in which to declare a company's corporate tax.
Exempt company
Exempt company subject to meeting the criteria and payment of a fixed fee per annum. Article 123 of the Income Tax (Jersey) Law (1961) provides that all companies incorporated in Jersey and all companies incorporated elsewhere but managed and controlled from Jersey are regarded as resident for tax purposes within the Island. However, if a company meets certain conditions, it can be treated as non-resident in Jersey for tax purposes, thereby exempt from Jersey income tax on it's income, except Jersey source income (excluding bank interest) which would be liable to tax at the rate of 20%. The main condition for achieving exempt company status under the Income Tax Jersey, Guide To The Exempt Company (1996 1-9), being that no residents of Jersey may have any interests in the company (subject to certain limited exceptions). Dividends and interests paid by exempt companies are not subject to local taxes.

Jersey's VAT position

Under the current Taxation (Jersey) Law, no VAT is levied on products and services in the Island. However, the global VAT implications on an e-commerce enabled Website will vary substantially depending on whether the Internet Website is being used merely to order the goods followed by a physical delivery of those items, or whether the product is actually supplied online. The advent of the Internet where consumers can source digitised products and services such as e-books, e-tickets, subscriptions, software and insurance from a VAT free jurisdiction such as Jersey, will cause this volume of traffic to increase. As a result, the EU Commission has started to consider the issue of taxation concerned with the Internet and e-commerce back in 1997, however it still faces a number of challenges.