SIGNIFICANT DEVELOPMENTS
There have been no significant tax or regulatory developments in the past
year.
TAXES ON CORPORATE INCOME
Income tax/Corporations pay income tax at a rate of 20% on taxable income.Exempt companies/A company that is resident in the Island, whether incorporated in Jersey or in any other jurisdiction, may make a claim to be exempt from Jersey taxation and for all purposes be treated as not resident in the Island if the following conditions are met.
1. The company is a Collective Investment Fund; or
2. No Jersey-resident individual has an interest in the company. (Interest for this purpose is interpreted very widely.)
An exempt company is liable to a fixed levy of ε600 per annum.
International Business Company/From January 1, 1993, corporate vehicle known as an International Business Company (IBC) was brought into existence, paying tax at a low rate on profits from international activities. An IBC will be resident pin Jersey for tax purposes, but its special status modifies the impact of the Income Tax Law in a number of ways. Profits
from its international activities will be subject to tax at rates that range from 2.0% on the first ε3 million of profit to 0.5% on profits that exceedε10 million, subject to a minimum tax charge ofε1,200. From 1997, the IBC may make an application to have its international profits taxed at one single rate of tax, being not less than 2.0 pence on the pound. Losses cannot be carried forward. As with exempt companies, beneficial ownership must be in the hands of nonresidents of Jersey.
CORPORATE RESIDENCE
All Jersey-registered companies are regarded as resident in the Island, unless the company is granted exempt-company status.
A company is deemed resident in the jurisdiction from which management and control are exercised. Normally, a company is so controlled from the Island if the majority of the board of directors is resident or if board meetings are held on the Island.
OTHER TAXES
None.
BRANCH INCOME
Branch income is taxed at the standard 20% rate. No further tax is withheld on the transfer of profits abroad.
Income determinationInventory valuation/Inventory is valued at the lower of historical cost or net realizable value. LIFO is not permitted. Generally, there are no material differences between accounts prepared on a normal accounting basis and those prepared on a tax basis.Capital gains/Capital gains are not subject to tax.Intercompany dividends/Intercompany dividends are taxed at source and are not further liable to tax in the hands of the recipient. If the parent company is an investment holding company resident in Jersey, relief for management expenses may be obtained by reclaiming tax paid at source on income to the extent of justifiable management expenses, regardless of the proportion of shares owned.
Foreign income/Income tax is levied on foreign-branch income when earned and on foreign dividends, interest, rents, and royalties. Double taxation is mitigated by either the granting of unilateral relief to the extent of taxing foreign income net of foreign taxes or by treaty relief (the United Kingdom and Guernsey only), which gives credit for foreign tax. Treaty
relief does not apply to U.K..-source dividends or debentures.
Stock dividends/Stock dividends are not treated as income.
Other significant items/None.
DEDUCTIONS
Capital allowances/Capital allowances are available by the diminishing-balance method on machinery and equipment, including vehicles, at a rate of 25%. For this purpose, all such assets are pooled, and the allowance is calculated by reference to the value of the pool. On disposal of an asset,
the lower of cost and sale proceeds of the asset is deducted from the pool. A balancing charge is levied if the proceeds exceed the balance of the pool. Motor vehicles costing more than ε20,000 and greenhouses are subject to special rules and are not pooled with other assets.By concession, an alternative is to claim for the full cost of replacement in the year of replacement. The capital allowances are not applicable to
buildings or the depletion of natural resources.
Net operating losses/Trading losses may be offset against total profits of the same accounting period and/or, for accounting periods ending after January 1, 1992, carried back and set against income of the same trade of the previous accounting period. Unrelieved trading losses may be carried forward and set against the income from the same trade in future accounting
periods.Payments to foreign affiliates/Patent royalties, long-term interest, and annual payments are subject to taxation at source, and relief is obtained by retention of the tax deducted. Short interest, unless owed to an authorized bank, is not normally deductible, unless the advance, in respect
of which it is paid, is used wholly and exclusively for the purposes of the trade. Other fees must be paid
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