Jersey, a 45-square-mile island off the coast of France, falls subject to the British monarchy but retains complete financial and political autonomy. The island has used its autonomy and singular constitutional relationship with Great Britain to maintain a certain degree of fiscal independence for centuries, and the profit-minded have been exploiting Jersey’s tax laws for almost as long.
As early as the late seventeenth century, Jersey gained attention from British officials as a hub for international smuggling, but Britain failed to bring the island’s government to heel.
- Jersey has been used for international smuggling as early as the 17th century.
- Wealthy Brits moved or transferred wealth because of the lack of taxes.
- Residents of Jersey pay income tax rates of 20%.
Jersey first gained a reputation as a tax haven in the 1920s, when wealthy Brits began moving to the island, or, in many cases, simply transferring their wealth to the island, in order to benefit from its lack of wealth and inheritance taxes.
In 1928, the Jersey government introduced an income tax of 2.5%. Under the German Occupation of the Channel Islands, the income tax was raised to 20%, where it remains, but the island still does not have an inheritance, wealth, corporate, or capital gains tax. As deposits from wealthy individuals filled the nation’s coffers, the revelation that most any tax could be avoided in Jersey brought the banking business to roost on the island, giving birth to one of the most popular offshore destinations for U.S. dollars, rubles, yen, and other global currencies.
Jersey Individual Taxes
With respect to offshore accounts, no registration of trust accounts is required among the companies that administer individual financial accounts on the island. While the Jersey Financial Services Commission (JFSC) maintains that the trusts face strict regulation in fund sources, ownership, beneficiaries, and anti-money laundering provisions, high measures of privacy surround the accounts.
JFSC officials who entered into cooperative agreements fostering disclosure with the United States and the United Kingdom contend that the confidentiality associated with the trusts equate with standards afforded to any other financial accounts. To combat tax fraud or money laundering, banks require significant documentation regarding the source and nature of deposits, such as sales contracts from real estate or business transactions and proof of income from employers.
Income tax rates of 20% apply to high-net-worth individuals establishing residency in Jersey. Those prospective residents, to whom a limited number of opportunities are available, must contribute at least £145,000, or about $159,900 in 2020, annually and meet minimum income requirements of £725,000, or about $799,480. Income that exceeds the minimum is subject to an additional 1% tax.
Jersey Corporate Tax Structure
In 2008, Jersey eliminated all taxes for corporations doing business on the island, with the exception of financial services firms, which are taxed at 10%, and utilities, rentals, and development projects, which are all taxed at 20%.
As of 2019, there were 27 banks, with deposits of about $155 billion, licensed to operate in Jersey. Among the banks that conduct business in Jersey are Citibank, the U.S. consumer division of Citigroup Inc. (NYSE: C), and Credit Suisse Group AG (NYSE: CS), the Zurich-based multinational financial services firm.
Many of the Channel Island's residents work in the financial services field. No taxes are levied against capital gains or capital transfers, but a 5% tax on goods and services was implemented in June 2011. Additionally, a stamp duty of up to 9% applies to the transfer of immovable property within the nation’s borders, and its individual parishes collect property taxes.