The draft budget will be debated by the States Assembly on 28th November 2017 and offers a number of significant amendments to existing Jersey Tax Law.
We've picked out the highlights affecting individuals and companies.
Personal tax proposals
Increase in the minimum annual tax payable by new High Value Residents ‘HVR’. The minimum tax liability will rise from £125,000 to £145,000 and this is to be reviewed every five years from 2023. Existing High Value Residents will not be affected by this proposed change. To read more about the existing requirements of High Value Residency please click HERE.
A top-up mechanism is being introduced so that where a HVR does not have sufficient income to meet the lability, they will be deemed to receive income of £725,000 to meet the minimum tax payable of £145,000. The facility to access the income top up mechanism will also be available to existing HVRs.
Income tax exemption thresholds to be increased by 2.5% to £14,900 for single persons and £23,950 for married couples.
The second earners allowance to be increased to £5,850. This will remove differences in allowances between married and cohabiting couples who are both working.
Business tax proposals
The definition of financial services company is being widened. This means more companies will be subject to tax at 10%, rather than 0%. The definition of financial services company will from 2018 include any business with a permanent establishment in Jersey registered to carry out the following activities: general insurance mediation businesses, fund services as registrar, money service business, providing credit facilities to customers, and holding an insurance business permit.
A retail tax of 20% for large retailers in Jersey is being introduced. A large retailer is defined as a business with over 60% of its turnover relating to retail, turnover exceeding £2 million and net taxable profit of over £500,000. There is taper relief for retailers with profits over £500,000 but less than £750,000. Where profits are less than £500,000, tax at 0% will apply. There will be no difference to this taxation of retailers owned locally or off-island.
International Services Entity ‘ISE’ fees are to be increased. An ISE is a business that elects to be exempt from GST subject to meeting certain conditions. The ISE fee payable depends on the class of financial service business an entity is regulated under. The increase will be determined in reference to the June 2017 RPI figure. The ISE fees were last reviewed in 2010/11.
Parish rates to be removed as a deductible expense against Jersey rental income for landlords.
Anti-avoidance tax proposals
A general anti-avoidance rule with regards to stamp duty is being introduced. There is not currently any anti-avoidance legislation around this tax.
Anti-avoidance legislation is also being introduced around pension schemes, to prevent a pension fund being transferred overseas during a period of temporary non-residence. However, there are also proposals to introduce greater flexibility around the transfers of funds between pension schemes and the withdrawal of funds from smaller pension pots.
To discuss the implications of any of these proposals please contact Chris Cotillard, Director.
For a more detailed look at the proposed Jersey 2018 Budget it is available online HERE