Jersey: Doing Business In Guernsey And Jersey - Taxation

Last Updated: 24 February 1998
On the surface Guernsey and Jersey operate very similar tax regimes. As a general matter both islands raise the majority of their revenue from tax on income. Both islands tax income at 20%. With the exception of dwellings profits tax in Guernsey both islands do not tax capital gains. Both islands do not levy any form of direct taxes on capital held or donated and both islands do not levy any form of value added tax or other similar tax on turnover.

However, scratch the surface and you will find differences in the ways in which both companies and individuals are taxed which can have an important bearing on the way that businesses may want to structure themselves.

Taxation Of Individuals

The starting point in both islands for determining the tax liability of individuals is residence. An individual resident in either island potentially is liable to tax there on his worldwide income. What constitutes residence for these purposes in Guernsey is set out in statue. In Jersey it is not and instead follows UK case law concepts. In both islands someone who spends more than 182 days on the island will become resident. However, the similarities stop there. In Guernsey an individual can maintain a home and spend up to 89 days in Guernsey without becoming resident. In Jersey anyone with a home on the island is resident even if he spends just one day on the island. In Guernsey an individual can become resident if he visits the island with the intention of setting up a home in Guernsey and in fact does so either in the same or the following year. No such rule exists in Jersey.

Ordinarily an individual is liable to tax on income as it arises, ie as he becomes entitled to it. However, individuals in both islands can benefit from a remittance basis of taxation m the non-local income under which a tax charge can be postponed or possibly avoided altogether if their connection with the island is sufficiently remote. In Guernsey the availability of this treatment depends on the individual concerned having a home elsewhere. In Jersey it depends on the number of days that the individual spends in Jersey and on his lifestyle. This can be attractive to wealthy individuals who only want to spend limited amounts of time in the islands.

For the majority who cannot make use of these sorts of opportunities an individual's tax liability will depend in part on the extent of the reliefs available to him. Both islands offer a wide range of reliefs. However, the approach to relieving the tax burden on individual large personal allowances. Jersey on the other hand provides smaller personal allowances but has adopted thresholds below which individuals pay no tax at all.

Set out in Box I is the comparative tax liability of a married individual earning £50,000 per annum whose spouse has no income, who pays interest of £2,400 per annum on a bank loan and who makes an allowable contribution of £7,500 per annum to a pension arrangement.

The tax advantage enjoyed by the employee living in Guernsey will potentially be offset by the fact that most fringe benefits, eg company cars and accommodation provided by an employer, are taxable in Guernsey but not taxable in Jersey. The individual in Guernsey will also pay his tax at an earlier date under the Employment Tax Installment (ETI) Scheme. In Jersey only Social Security payments are deducted from an employee's salary.

The other significant difference that affects employees is the prior year basis of taxation that applies to income from employment in Guernsey but not in Jersey. As set out in Box 2 most forms of income are taxed on a prior year basis of taxation in Guernsey. The major exception being in the case of investment income where the individual concerned has both Guernsey and non-Guernsey investment income. In Jersey only business income in taxed on a prior year basis of taxation.

Taxation on a prior year basis is beneficial where, as typically will be the case, the amount of the income is increasing each year. However, it can create anomalies. In particular the ability of the Income Authority in Guernsey to choose which year's income falls out of charge to tax can create unexpected results. It is essential to plan for such matters with care in Guernsey.

Taxation Of Companies

The starting point for determining the tax liability of a company in both Guernsey and Jersey is again residence. However, in the case of companies there are rather more marked differences between the definitions of residence for these purposes.

Jersey continues to follow the UK concept of central management and control so that the company is regarded as resident in Jersey if its directors control its affairs from Jersey. Although like the UK the place of incorporation is now also relevant. The residence of a company in Guernsey on the other hand is determined primarily by place of incorporation. Control can also be relevant. However in the case of Guernsey this means control in an ownership sense rather than in a strategic management sense. Thus the place where the directors meet and take decisions regarding the company's affairs is of no particular relevance in Guernsey. This difference in the definition of residence can have a fundamental impact on many internationals structures providing both planning opportunities and potential pitfalls.

There are also differences in the treatment of other fundamental matters such as the treatment of dividends, for example scrip dividends are generally taxable in Guernsey, whereas in Jersey they are not, However differences of perhaps greater practical significance affect the concessionary treatments provided to business carrying on international business.

In 1993 both Guernsey and Jersey introduced a new tax regime for companies wishing to carry on international business for the island concerned. In Guernsey, the companies concerned are referred to as companies with international status. In Jersey they are referred to as international business companies (IBCs). In Guernsey but not Jersey "international status" can apply to other entities such as limited partnerships.

In Guernsey companies with international status are subject to the, same tax treatment as any other resident or trading in Guernsey. The only difference is that provided they satisfy the conditions to qualify for international status they will be subject to tax at a rate agreed with the Income Tax Authority at somewhere above 0% up to a maximum of 30%. This rate applies to all the income they receive.

In Guernsey it is not possible for an entity that has previously been resident in or that has previously traded in Guernsey to acquire international status, ie conversions are not possible. By concession in Jersey conversions are allowed

The regime that applies in Jersey is different in a number of other respects. As already noted the status can only apply to companies. Secondly they are subject to fixed rates of tax which distinguishes between international income, ie income from activities carried on outside the Island and other activities. Income from international activities is subject to low rates of tax which depending on the level of the profit concerned vary from 2% down to 1/2%. (If a proposal currently under consideration is introduced it will be possible to agree a rate of taxation for income from international activities). Income from other activities, ie activities carried on in Jersey are taxed at 30%. However, in addition to these "headline" differences more subtle differences also apply. For example, in Jersey the income is taxed under Schedule D Case VI. This means that the income is taxed on a current year basis rather than the prior year basis that applies to other trading income in Jersey and applies to entities with international status in Guernsey. It also means that no relief is available in Jersey for losses incurred by such a company.

In Jersey but not in Guernsey it is possible, to establish a bank as an IBC, However, it is possible for a bank to achieve much the sane tax treatment in Guernsey by taking advantage of the concessionary regime, available to banks in Guernsey in respect of international business .

Computation Of Taxable Income

On the whole the basis of taxable income in both Guernsey and Jersey follows the principles established by case law in the UK. However, there are again a number of differences between the two islands.

Both islands have introduced a system of capital allowances. The prevailing rate for plant and machinery in Jersey is 25% and in Guernsey is 20%. However of particular interest in Guernsey is the repairs allowances available to landlords. This allowance is available at rates varying from 5% in respect of undeveloped land to 25% in respect of dwelling houses and glasshouses and is an attractive relief for landlords. There is no equivalent relief in Jersey.

The method of relieving interest and other similar payments also differs, In Jersey relief is given primarily by deducting tax from the interest or other payment concerned. In Guernsey there is no requirement to withhold tax unless the payment is made, to a person outside the island.

Both islands offer some relief for foreign taxes. However, with certain exceptions for UK and Guernsey taxes, in Jersey this relief is restricted to allowing a deduction from the income concerned in computing the amount of tax payable. In Guernsey subject to various restrictions a credit (ie a deduction form the tax payable rather than just from the income on which the tax is payable) is often available.

Guernsey has also recently introduced a formal arrangement for relieving losses against the profits of other group companies. In Jersey comparable relief has to be achieved by use of management charges or other similar means. However, Jersey allows a two year carry back of trading losses. Whereas Guernsey only allows a one year carry back.


As noted above, most income in Guernsey is assessed on a prior year basis. In Jersey only trading income is assessed on this basis. However, other differences in the ways that income tax is assessed and the time at which is becomes payable also apply.

Guernsey allows spouses to elect to have their tax liabilities to be assessed separately. This does not affect the amount of tax that they pay. However, it means that they become responsible for filing their own tax return and settling their own tax liability. A similar arrangement is not available in Jersey.

The basis on which the profits are assessed in the two islands also differs. In Jersey a single assessment is raised on the partnership for which all the partners are jointly and severally liable. In Guernsey each partner is assessed separately on his or her share of the profits.


Quite apart from the effect that the ETI scheme may have on the timing of the payment of tax in Guernsey, the time at which tax is payable generally in Guernsey is earlier than it is in Jersey. In Guernsey income tax is payable in two equal installments. The first half way through the year of charge and the second at the end of the year of charge. In Jersey income tax is not payable until some time after the year of assessment (ie. Jersey's equivalent of Guernsey's year of charge).

The precise time at which income tax becomes payable in Jersey depends on the issue of the relevant assessment and this tends to vary depending on the identity of the taxpayer concerned. However, in the case of individuals typically assessments are not issued until the September following the year of assessment.


The tax systems in both Guernsey and Jersey may appear to the outsider to be similar. However it is not safe to assume that because if something applies in Guernsey it will be done in the same way in Jersey.

There are many important differences which make consideration of how the two systems will apply to a particular situation important so that the best outcome can be achieved.



                               GUERNSEY        JERSEY
                               (NOTE 1)
                                  £               £

Income                          50,000         50,000

Pension                         (7,500)        (7,500)
Loan interest                   (2,400)           -
Married person allowance       (11,000)        (5,200)
Earned income allowance            -           (3,400)

Total                           29,100         33,900

Tax @20%                         5,820          6,780
Less tax withheld on interest      -             (480)

Total                            5,820          6,300

Married person with income from employment of £50,000 paying loan interest of £2,400 and allowable pension payment of £7,500. Spouse has no income.

Note 1: Income assessable in Guernsey in the year of charge 1997.



                      GUERNSEY                  JERSEY

Business              Preceding year            Preceding year

Employment            Preceding year            Current year

Land and buildings    Preceding year            Current year

Other sources         Preceding year/           Current year
                      Current year (Note 1)

Note 1: Income from sources outside Guernsey is assessed on an actual basis. If the taxpayer has income from sources both within and outside Guernsey all income is taxed on a current year basis.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions