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The exempt company is regarded for all purposes of the Income Tax Law as not resident in Jersey, although it may be regarded as Jersey resident by other countries for their own taxation purposes. The company pays an annual fee of £500 irrespective of the level of its profits. Any Jersey source income, with the exception of Jersey bank interest for which a concessionary exemption exists, is liable to income tax at the standard rate of 20%.
Trading income is exempt from Jersey income tax except where the trade is carried on through an established place of business in the Island. Having Jersey resident directors holding board meetings and entering into contracts in the Island (i.e., effectively controlling the company) is not considered to be trading for this purpose if no physical presence exists on the Island. In addition, clerical functions such as invoicing operations are not regarded as the carrying on of a trade.
Dividends, interest and salaries/fees paid from an exempt company are free of all Jersey withholding taxes.
The main criterion for obtaining exempt company status is that no Jersey resident must have a beneficial interest in the company. Application for exempt company status, together with payment of the exempt company charge, must be made not later than 31 March in the year of assessment or within three months of the date on which the company is regarded as having become resident in the Island, whether by incorporation in Jersey or by holding of a board meeting in the Island. Furthermore, disclosure of beneficial ownership must be made to the Financial Services Department to the Department's satisfaction.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information contact Jonathan G. Hooley on Tel (indirect line): + 44 (0) 1481 721000, Tel (direct line): +44 (0) 1481 719544, Fax: +44 (0) 1481 722373.
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