At present, the purchase of immovable property located in Jersey through the acquisition of the share capital of a property owning company (wherever domiciled) is exempt from stamp duty. However, the States of Jersey will shortly implement legislation to impose a tax equivalent to stamp duty on such a sale, effectively closing the "loophole".

The UK first introduced its Annual Tax on Enveloped Dwellings (ATED) on 1 April 2013 for properties worth over £2 million. Since then, the threshold has been steadily reduced and the tax now applies to all property worth over £500,000. Guernsey introduced such a measure back in November 2017, in a law which reflects much of the same language as that now proposed in Jersey.

The Taxation (Enveloped Property Transactions) (Jersey) 202- (the Law) was adopted by the States of Jersey on 8 February 2022. It is presently awaiting Privy Council approval, after which the law will come into effect seven days after registration by the Royal Court.

The Law can be viewed here.

While a number of limited exemptions are included, virtually all sales of property holding companies will now be subject to tax. The issue, transfer or redemption of units in a collective investment fund as defined in Article 3 of the Income Tax (Jersey) Law 1961 will be excluded transactions under the current draft, as will the transfer of shares from a nominee to the beneficial owner of the  company or to another nominee holding for their beneficial owner.

All non-excluded "relevant" transactions involving Jersey property (whether commercial or residential) which is owned by, or let under a contract lease (a lease for a term of over nine years registered before the Royal Court of Jersey) will be subject to the Law.

The Law defines a "relevant transaction" as a transfer to a person of a significant interest (more than 50%) in an entity (generally, this will be the acquisition of shares in a company or of a beneficial interest in any other body or company) which owns Enveloped Property in Jersey.

The Law will only apply where the market value of the Enveloped Property exceeds:

  • £500,000 in the case of domestic properties, or
  • £700,000 in the case of non-domestic properties

The Law provides that the Minister for Treasury and Resources may make an order to change these thresholds as required.

The market value of a contract lease will be determined by multiplying the annual rental (or market rent where a nominal rent is paid) payable under the lease by the number of years remaining in the term of the lease at the time of the transaction (capped at 21 years).

There are three different rates, one for domestic properties, one for non-domestic properties, and one for leasehold properties. The rates are calculated on a sliding scale depending on the market value for the Enveloped Property. In all cases, there will be an additional £80 registration fee payable on top of the calculated rate.

Where the Law applies, the person who acquires the significant interest as a result of the "relevant transaction" has 28 days to deliver a statement containing details of the transaction and attesting to the accuracy of the statement. This is similar to current law relating to Land Transaction Tax.

The owner of the Enveloped Property subject to the "relevant transaction", if it is registered or established or has a place of business in Jersey, must deliver a similar statement to the Comptroller within 28 days of the transaction unless the acquiring entity has already delivered such a statement.

Late payments incur a surcharge of 10%. Failure to deliver a statement as required can incur a penalty of up to £3,000.

If a person delivers a statement and/or supporting documents that it knows to be false or misleading, then they can be liable for imprisonment for 12 months and to a fine of level three on the standard scale.

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.