Jersey: "Zero/Ten" Corporate Tax Reforms In Jersey

Last Updated: 22 December 2008
Article by Francis Katamba

Jersey is introducing changes to the way that companies are taxed in order to ensure that the island meets international standards while maintaining its competitive edge in the offshore financial services sector.

The introduction of the "Zero/Ten tax regime", which is enshrined in the Income Tax (Amendment No. 28) Jersey Law 2007, means that the standard rate of corporate income tax will be zero per cent. A special rate of 10 per cent will apply to financial service companies, including banking, trust advisory services and entities providing fund functionary services.

The changes take effect for existing companies from 1 January 2009 and will apply to all new companies that have been established since 3 June 2008. This legislation replaces the previous system whereby companies incorporated in Jersey as "exempt" companies paid a fixed £600 per annum exempt fee and were then not liable for corporation tax.

Two principal factors lie behind these changes to the law. Firstly, there has been growing international pressure in recent years for Jersey to move away from a system of taxation that discriminates between resident and non-resident companies. The European Union (EU) has been particularly active in pushing for the abolition of these types of provisions, which it considers to be harmful tax practices, and has introduced a code of conduct in respect of its own taxation of businesses.

Jersey remains outside of the EU, but Dawn Primarolo, the United Kingdom's Paymaster General, has praised Jersey for updating its business taxation system in accordance with EU and Organisation for Economic Co-operation and Development standards.

Secondly, an important part of the financial package that an offshore jurisdiction offers is its tax system, and Jersey has faced growing international competition from other offshore jurisdictions offering a zero per cent tax rate or a tax exemption for non-resident companies.

Annual Exempt Fee to be Abolished

As a result of the new legislation, the current exempt company legislation will be abolished so that companies incorporated as Jersey exempt companies will no longer be liable to pay a £600 per annum exempt fee. Generally these companies, together with all other corporate vehicles, will now fall within the zero tax rate.

In broad terms the 10 percent rate will apply to specified entities providing financial services including banks, most investment and licensed trust companies and most functionaries, as well as to investment funds or entities holding a funds services business licence. There is no intention to tax investment funds themselves or to bring in the 10 percent rate for structures that may meet the regulatory test but do not trade through an established place of business in the island.

The reasoning behind the change is that zero tax is necessary to safeguard Jersey's position as a leading financial centre, while ensuring that sufficient revenue is raised by entities operating within the finance sector to fund Jersey's public spending requirements.

Local utilities companies, such as the providers of gas, electricity and telecommunications, will continue to be taxed at 20 per cent, as will Jersey rental income and Jersey property development profits.

Shareholder Tax to be Introduced

Shareholder taxation measures are to be introduced, which will be designed to prevent trading profits from being rolled up and extracted tax-free by individuals resident in Jersey. Amongst other things, these will include:

  • The definition of "distribution" being extended to catch any withdrawal of trading profits (whether by way of capital distribution, sale of shares or liquidation);
  • A deferred distribution charge being introduced that will effectively charge interest on the deferral of distributions;
  • A deemed distribution charge being introduced where trading profits have not been distributed within three years to avoid indefinite roll up; and
  • Anti-avoidance measures being revised to cover circumstances where companies are owned by offshore trusts and/or companies.

In addition, shareholder loans will be charged tax on the amount of the loan made in the year of assessment. Account will be taken of any amounts repaid and credit given for amounts repaid in subsequent years of assessment. While the shareholder loan provisions do not apply to holders of shares in utility companies and companies subject to full attribution, they do extend to members of the family or household of a shareholder.

Personal Tax Rate

The tax changes have been introduced alongside a "20 means 20" policy for Jersey tax residents whereby the rate of personal tax will be 20 per cent with a phasing out of tax allowances over a number of years to 2011 other than in restricted areas such as approved pension contributions.

The States of Jersey also introduced, as part of the new fiscal strategy, the Goods and Services (Tax) Law 2007. This came into effect in May 2008 and the provision of financial services is now taxable at three per cent when customers based in Jersey are invoiced.  To further protect the competitiveness of the finance industry, GST is not charged on services provided to International Service Entities (ISE).

As the ISE category will include most special purpose vehicles including companies, trusts and partnerships, it is not anticipated that there will be any adverse tax effect on the international client base. An annual fee of £50 will be payable for ISE status and it will be possible for administrators to make bulk applications without disclosure of individual customer details.

Business As Usual

The broad intention of the reforms is to keep Jersey competitive from a tax perspective and for persons using Jersey to embrace zero tax as a positive advantage. The overall message for businesses and investors is that the Zero/Ten tax regime should have a minimal effect on international business and structures using Jersey. It is very much business as usual under a new tax structure, anticipated to provide a simple, efficient and sustainable framework for business taxation.

This article first appeared in the JEP Finance Industry Review supplement, on 10 September 2008.

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.

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
Mondaq Advice Centre (MACs)
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.