JerseyTax Guide

2012

PKF Worldwide Tax Guide 2012I

foreword

A country’s tax regime is always a key factor for any business considering moving into new markets. What is the corporate tax rate? Are there any incentives for overseas businesses? Are there double tax treaties in place? How will foreign source income be taxed?

Since 1994, the PKF network of independent member firms, administered by PKF International Limited, has produced the PKF Worldwide Tax Guide (WWTG) to provide international businesses with the answers to these key tax questions. This handy reference guide provides clients and professional practitioners with comprehensive tax and business information for 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 tax experts within PFK member firms 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 Kaarji Vaughan, PKF Melbourne for co-ordinating and checking the entries from countries within their regions.

The WWTG continues to expand each year reflecting both the growth of the PKF network and the strength of the tax capability offered by member firms throughout the world.

I hope that the combination of the WWTG and assistance from your local PKF member firm will provide you with the advice you need to make the right decisions for your international business.

Jon HillsPKF (UK) LLPChairman, PKF International Tax Committee jon.hills@uk.pkf.com

PKF Worldwide Tax Guide 2012 II

important disclaimer

This publication should not be regarded as offering a complete explanation of the taxation matters that are contained within this publication.

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.

PKF Worldwide Tax Guide 2012III

preface

The PKF Worldwide Tax Guide 2012 (WWTG) is an annual publication that provides an overview of the taxation and business regulation regimes of 100 of the world’s most significant trading countries. In compiling this publication, member firms of the PKF network have based their summaries on information current as of 30 September 2011, while also noting imminent changes where necessary.

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 www.pkf.com

PKF INTERNATIONAL LIMITEDAPRIL 2012

©PKF INTERNATIONAL LIMITEDALL RIGHTS RESERVEDUSE APPROVED WITH ATTRIBUTION

PKF Worldwide Tax Guide 2012 IV

about pKf international limited

PKF International Limited (PKFI) administers the PKF network of legally independent member firms. There are around 300 member firms and correspondents in 440 locations in around 125 countries providing accounting and business advisory services. PKFI member firms employ around 2,200 partners and more than 21,400 staff.

PKFI is the 10th largest global accountancy network and its member firms have $2.6 billion aggregate fee income (year end June 2011). The network is a member of the Forum of Firms, an organisation dedicated to consistent and high quality standards of financial reporting and auditing practices worldwide.

Services provided by member firms include:

Assurance & AdvisoryCorporate FinanceFinancial PlanningForensic AccountingHotel ConsultancyInsolvency – Corporate & PersonalIT ConsultancyManagement ConsultancyTaxation

PKF member firms are organised into five geographical regions covering Africa; Latin America; Asia Pacific; Europe, the Middle East & India (EMEI); and North America & the Caribbean. 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, insolvency and business development committees work together to improve quality standards, develop initiatives and share knowledge and best practice cross the network.

Please visit www.pkf.com for more information.

PKF Worldwide Tax Guide 2012V

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

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

PKF Worldwide Tax Guide 2012 VI

AAlgeria . . . . . . . . . . . . . . . . . . . .1 pmAngola . . . . . . . . . . . . . . . . . . . .1 pmArgentina . . . . . . . . . . . . . . . . . .9 amAustralia - Melbourne . . . . . . . . . . . . .10 pm Sydney . . . . . . . . . . . . . . .10 pm Adelaide . . . . . . . . . . . . 9.30 pm Perth . . . . . . . . . . . . . . . . . .8 pmAustria . . . . . . . . . . . . . . . . . . . .1 pm

BBahamas . . . . . . . . . . . . . . . . . . .7 amBahrain . . . . . . . . . . . . . . . . . . . .3 pmBelgium . . . . . . . . . . . . . . . . . . . .1 pmBelize . . . . . . . . . . . . . . . . . . . . .6 amBermuda . . . . . . . . . . . . . . . . . . .8 amBrazil. . . . . . . . . . . . . . . . . . . . . .7 amBritish Virgin Islands . . . . . . . . . . .8 am

CCanada - Toronto . . . . . . . . . . . . . . . .7 am Winnipeg . . . . . . . . . . . . . . .6 am Calgary . . . . . . . . . . . . . . . .5 am Vancouver . . . . . . . . . . . . . .4 amCayman Islands . . . . . . . . . . . . . .7 amChile . . . . . . . . . . . . . . . . . . . . . .8 amChina - Beijing . . . . . . . . . . . . . .10 pmColombia . . . . . . . . . . . . . . . . . . .7 amCroatia . . . . . . . . . . . . . . . . . . . .1 pmCyprus . . . . . . . . . . . . . . . . . . . .2 pmCzech Republic . . . . . . . . . . . . . .1 pm

DDenmark . . . . . . . . . . . . . . . . . . .1 pmDominican Republic . . . . . . . . . . .7 am

EEcuador . . . . . . . . . . . . . . . . . . . .7 amEgypt . . . . . . . . . . . . . . . . . . . . .2 pmEl Salvador . . . . . . . . . . . . . . . . .6 amEstonia . . . . . . . . . . . . . . . . . . . .2 pm

FFiji . . . . . . . . . . . . . . . . .12 midnightFinland . . . . . . . . . . . . . . . . . . . .2 pmFrance. . . . . . . . . . . . . . . . . . . . .1 pm

GGambia (The) . . . . . . . . . . . . . 12 noonGeorgia . . . . . . . . . . . . . . . . . . . .3 pmGermany . . . . . . . . . . . . . . . . . . .1 pmGhana . . . . . . . . . . . . . . . . . . 12 noonGreece . . . . . . . . . . . . . . . . . . . .2 pmGrenada . . . . . . . . . . . . . . . . . . .8 amGuatemala . . . . . . . . . . . . . . . . . .6 am

Guernsey . . . . . . . . . . . . . . . . 12 noonGuyana . . . . . . . . . . . . . . . . . . . .7 am

HHong Kong . . . . . . . . . . . . . . . . .8 pmHungary . . . . . . . . . . . . . . . . . . .1 pm

IIndia . . . . . . . . . . . . . . . . . . . 5.30 pmIndonesia. . . . . . . . . . . . . . . . . . .7 pmIreland . . . . . . . . . . . . . . . . . . 12 noonIsle of Man . . . . . . . . . . . . . . 12 noonIsrael . . . . . . . . . . . . . . . . . . . . . .2 pmItaly . . . . . . . . . . . . . . . . . . . . . .1 pm

JJamaica . . . . . . . . . . . . . . . . . . .7 amJapan . . . . . . . . . . . . . . . . . . . . .9 pmJersey . . . . . . . . . . . . . . . . . . 12 noonJordan . . . . . . . . . . . . . . . . . . . .2 pm

KKazakhstan . . . . . . . . . . . . . . . . .5 pmKenya . . . . . . . . . . . . . . . . . . . . .3 pmKorea . . . . . . . . . . . . . . . . . . . . .9 pmKuwait . . . . . . . . . . . . . . . . . . . . .3 pm

LLatvia . . . . . . . . . . . . . . . . . . . . .2 pmLebanon . . . . . . . . . . . . . . . . . . .2 pmLiberia . . . . . . . . . . . . . . . . . . 12 noonLuxembourg . . . . . . . . . . . . . . . .1 pm

MMalaysia . . . . . . . . . . . . . . . . . . .8 pmMalta . . . . . . . . . . . . . . . . . . . . .1 pmMauritius . . . . . . . . . . . . . . . . . . .4 pmMexico . . . . . . . . . . . . . . . . . . . .6 amMorocco . . . . . . . . . . . . . . . . 12 noon

NNamibia. . . . . . . . . . . . . . . . . . . .2 pmNetherlands (The) . . . . . . . . . . . . .1 pmNew Zealand . . . . . . . . . . .12 midnightNigeria . . . . . . . . . . . . . . . . . . . .1 pmNorway . . . . . . . . . . . . . . . . . . . .1 pm

OOman . . . . . . . . . . . . . . . . . . . . .4 pm

PPanama. . . . . . . . . . . . . . . . . . . .7 amPapua New Guinea. . . . . . . . . . .10 pmPeru . . . . . . . . . . . . . . . . . . . . . .7 amPhilippines . . . . . . . . . . . . . . . . . .8 pmPoland. . . . . . . . . . . . . . . . . . . . .1 pmPortugal . . . . . . . . . . . . . . . . . . .1 pmPuerto Rico . . . . . . . . . . . . . . . . .8 am

international time Zones

AT 12 NOON, GREENwICH MEAN TIME, THE sTANDARD TIME ELsEwHERE Is:

PKF Worldwide Tax Guide 2012VII

QQatar. . . . . . . . . . . . . . . . . . . . . .8 am

RRomania . . . . . . . . . . . . . . . . . . .2 pmRussia - Moscow . . . . . . . . . . . . . . .3 pm St Petersburg . . . . . . . . . . . .3 pm

sSierra Leone . . . . . . . . . . . . . 12 noonSingapore . . . . . . . . . . . . . . . . . .7 pmSlovak Republic . . . . . . . . . . . . . .1 pmSlovenia . . . . . . . . . . . . . . . . . . .1 pmSouth Africa . . . . . . . . . . . . . . . . .2 pmSpain . . . . . . . . . . . . . . . . . . . . .1 pmSweden . . . . . . . . . . . . . . . . . . . .1 pmSwitzerland . . . . . . . . . . . . . . . . .1 pm

TTaiwan . . . . . . . . . . . . . . . . . . . .8 pmThailand . . . . . . . . . . . . . . . . . . .8 pmTunisia . . . . . . . . . . . . . . . . . 12 noonTurkey . . . . . . . . . . . . . . . . . . . . .2 pmTurks and Caicos Islands . . . . . . .7 am

UUganda . . . . . . . . . . . . . . . . . . . .3 pmUkraine . . . . . . . . . . . . . . . . . . . .2 pmUnited Arab Emirates . . . . . . . . . .4 pmUnited Kingdom . . . . . . .(GMT) 12 noonUnited States of America - New York City . . . . . . . . . . . .7 am Washington, D.C. . . . . . . . . .7 am Chicago . . . . . . . . . . . . . . . .6 am Houston . . . . . . . . . . . . . . . .6 am Denver . . . . . . . . . . . . . . . .5 am Los Angeles . . . . . . . . . . . . .4 am San Francisco . . . . . . . . . . .4 amUruguay . . . . . . . . . . . . . . . . . . .9 am

VVenezuela . . . . . . . . . . . . . . . . . .8 amVietnam . . . . . . . . . . . . . . . . . . . .7 pm

PKF Worldwide Tax Guide 2012 1

Jersey

Jersey

Currency: British Pound Dial Code To: 44 Dial Code Out: 00 (GBP)

Member Firm:City: Name: Contact Information:St Peter Port, John Bradley 01481 727927Guernsey john.bradley@pkfci.com

a. taXes payable

FEDERAL TAxEs AND LEVIEsCOMPANy TAxAll 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:• Allentitiescarryingoutbankingbusinessesthroughapermanentestablishment

in Jersey, whether through a Jersey company, a branch or some other structure• Allentitiescarryingonthebusinessoftrustbusinessthroughapermanent

establishment• Allentitiescarryingoninvestmentbusiness,independentfinancialadviceand

similar activities through a permanent establishment• Allentitiescarryingonthebusinessoffundsadministrationorfundscustody

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.

Public utility companies such as those providing electricity, water, gas, telecommunications and postal services continue to be taxed at 20%. From January 2011, profits arising from the importation of oil are also subject to tax at the rate of 20%.

Jersey rental income and profits from property development and the exploitation of land in Jersey also continue to be taxed at the rate of 20%.

All other companies are liable at the rate of 0%.

The tax year runs from 1 January to 31 December, although companies may adopt a year end of their choice. 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.

Income from trades, professions and vocations is subject to tax in the accounting period ending in the year of assessment. Other income is assessed in the year in which it arises.

CAPITAL GAINs TAxThere is no capital gains tax in Jersey. Capital gains are not included in ordinary taxable income.

BRANCH PROFITs TAxThere 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.

PKF Worldwide Tax Guide 20122

sALEs TAxEs/VALUE ADDED TAx (VAT)From 1 June 2011, the rate of Goods and Services Tax (GST) is 5%. GST is 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:• standard-rated supplies – eg the sale of new and used goods including

those under a hire purchase agreement, renting and hiring out of goods, business stock used for private purposes, the provision of services (eg hairdressing or hotel accommodation), charging admission for access onto premises, and imported goods.

• Exempt supplies – eg financial services, insurance, postal services, medical and pharmaceutical supplies made by registered professionals or institutions, and supplies to charities.

• Zero-rated supplies – eg exports, the supply of a dwelling, supplies made on medical prescription and international services.

FRINGE BENEFITs TAxTaxable benefits include, amongst other things, the private use of a company motor vehicle, rent-free accommodation and free board and lodging. Employees are responsible for payment of tax on benefits.

LAND TRANsACTIONs TAxA 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.

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 £22,000 in respect of the first £1 million. Thereafter new bands have been introduced increasing the charge to 3.5% on any property value between £1 million and £1.5 million, to 4% on the next £500,000 and 5% on any remaining value exceeding £2 million. These increases are in line with increases in stamp duty on freehold property transactions.

LOCAL TAxEsTaxes 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:

DEPRECIATIONNo deduction is permitted in respect of depreciation on capital items. However, annual allowances, calculated using the reducing-balance method, are allowed as follows:• Plantandmachinery–25%;glasshouses–10%• Motorvehicles–25%(costreducedto£21,000forexpensivecars).

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 treated as an allowance for the following year. This allowance can be carried forward indefinitely, if necessary.

sTOCK/INVENTORyUK 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.

DIVIDENDsDividends 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

Jersey

PKF Worldwide Tax Guide 2012 3

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 (eg 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.

DEEMED INTERIM DIVIDENDs UP TO 31 DECEMBER 2011 – JERsEy TRADING COMPANIEs LIABLE AT 0%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.

DEEMED FINAL DIVIDEND UP TO 31 DECEMBER 2011 – JERsEy TRADING COMPANIEs LIABLE AT 0% AND JERsEy FINANCIAL sERVICEs COMPANIEs LIABLE AT 10%A further deemed dividend will arise on the occurrence of one of the following trigger events:• Theindividualceasestoownmorethan2%oftheordinarysharecapitalofthe

company• Thewindingupofthecompanyorthedeathoftheshareholder• Wherethecompanyistreatedasacompanysubjecttofullattributionforthe

following year• TheownerofthesharesceasestoberesidentinJersey.

FULL ATTRIBUTION FOR INVEsTMENT HOLDING COMPANIEs UP TO 31 DECEMBER 2011INCOMEIncome 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%.

REPEAL OF THE DEEMED DIsTRIBUTION AND ATTRIBUTION RULEs wITH EFFECT FROM JANUARy 2012Following a review of Jersey’s corporate tax regime by the EU Code of Conduct Group, those elements deemed harmful (ie those detailed in the above three paragraphs) were repealed with effect from January 2012. This means that the ‘’Zero-ten’’ regime under which most companies pay tax at 0% will be retained. Transitional rules will need to be considered to cover the distribution from January 2012 of profits previously subject to the repealed regime.

sHAREHOLDER LOANsA 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 DEDUCTIONsFrom 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.

LOssEsLosses 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.

Jersey

PKF Worldwide Tax Guide 20124

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. Double taxation agreements have also recently been signed with Malta and Estonia. Associated with its negotiations in relation to Tax Information Exchange Agreements (TIEAs), Jersey has entered into limited double taxation arrangements relating to income and mutual agreement procedures with:

Australia Germany NetherlandsDenmark Greenland New ZealandEstonia Guernsey NorwayFaroe Islands Iceland Republic of IrelandFinland Malta 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).

TAx INFORMATION ExCHANGE AGREEMENTs (TIEAs)Jersey has signed TIEAs with the following countries:

Argentina Germany NorwayAustralia Greenland PolandCanada Iceland PortugalChina India Republic of IrelandCzech Republic Indonesia South AfricaDenmark Japan SwedenFaroe Islands Mexico TurkeyFinland Netherlands United KingdomFrance New Zealand USA

d. corporate Groups

Tax provisions relating to groups of qualifying companies were introduced with effect from January 2009. 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).

e. related party transactions

There is no transfer pricing or related party legislation in Jersey.

f. witHHoldinG taX

Prior to the repeal of the deemed distribution and attribution rules detailed in Part B above the position was as follows:- Withholding tax was deducted from dividends and deemed dividends paid to Jersey residents by Jersey companies out of profits taxed at less than 20%. No withholding tax was 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 were 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 (ie 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% was deducted from certain interest payments, although there was no withholding tax on interest on short-term loans

Jersey

PKF Worldwide Tax Guide 2012 5

(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 was 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.

Jersey has entered into various agreements with several EU countries under the EU Savings Directive. In accordance with the agreements, EU resident individual 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 increased 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, eg 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%.

Earned income arising outside of the island is assessable on the basis of the net 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 £13,370 for a single person (£14,920 for those aged 63 and over) or £21,440 for married couples (£24,540 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.

Where these limits are exceeded by the individual or couple concerned, personal allowances are available as follows:

2012 2011

Single person £0 £0

Married person £0 £0

Child allowance £3,000 (each child) £3,000 (each child)

The Enhanced Child Allowance for a parent whose child is in full time higher education in 2012 is £6,000.

There is an Additional Personal Allowance for single parents of £4,500 for 2012.

From 1 January 2006, an income tax instalment scheme (ITIS) has been introduced. The effect is that tax is deducted from salary on an ongoing basis.

Jersey

PKF Worldwide Tax Guide 20126

“20% MEANs 20%”With effect from 2007 the granting of personal allowances for high earners was withdrawn in phases up to 2010 and 2011 was the first year without any personal allowances for certain individuals. Where a taxpayer’s income exceeds certain exemption thresholds, a form of marginal relief is 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 still available to such individuals are: • ChildAllowance• SingleParentAllowance(knownasAdditionalPersonalAllowance)• EmploymentExpenses• PensionContributions• LifeAssuranceonpoliciesmadebefore1January2007.

HIGH NET wORTH INDIVIDUALsUntil 31 December 2010, individuals who were new to the island applying for a “1(1)K licence” to live in Jersey were taxed on their Jersey source income at 20%. The first £1,000,000 of non-Jersey source income was also taxed at 20% but the next £500,000 was taxed at 10% and non-Jersey source income above the £1.5 million level was taxed at just 1%.

Following approval from the Island’s Government, with effect from 1 January 2011, the minimum contribution for the issue of future 1(1)(k) licences has been set at £125,000. Future new residents will be taxed on their worldwide income at the rate of 20% on the first £625,000 and at the rate of 1% on any income in excess of this amount.

Jersey

PKF Worldwide Tax Guide 2012 565

www.pkf.com$100