Are the Wealthy Set to Benefit from Proposed Jersey Income Tax Cuts?
Jersey’s treasury minister, Philip Ozouf, has stated proposals for change in the country’s income tax rates – a shrewd move that could see massive financial benefits for wealthy expats choosing to make the island their home. If these changes go ahead, Jersey’s government could see an increase in residency, namely from those who have an international yearly income in excess of 1 million US dollars (or 625,000 GBP).
Jersey Income Tax Cuts in Numbers
It’s easy to say that these proposed cuts will see Jersey offering some of the lowest tax rates in the world, but a demonstration in real figures makes it more tangible. So let’s look at how the numbers stack up:
The existing rate is a tax of 20% on the initial, accountable 1million GBP of worldwide earnings, with an additional 1% on further income. In contrast, the proposed new rates will only see that 20% tax on the lower accountable earnings threshold of 625,000 GBP.
This represents a potential saving of 75,000 GBP plus per annum on payable income tax for ex pats living in Jersey; current rates make them liable for payments of 200,000GBP per 1 million GBP, while the changes will equate to 125,000 GBP of their first million of worldwide taxable income.
With additional benefits such as offshore pensions (QROPS), these new rates will prove to be an enticing proposition for the super rich.
How Will These Changes Affect QROPS?
Jersey has found itself in a position of disagreement with the European Union, alongside the Isle of Man and Guernsey; the EU are applying pressure on these countries to amend their corporate tax laws so that the current trading advantages cease to exist. The EU’s position is that the current set up, where overseas companies taking up residence on these islands escape the 10% taxation applicable to indigenous businesses, is unfair, giving them a trading advantage above those companies initially launched from these locations. Guernsey’s government have responded to the EU’s request with a promise to amend this disparity, but Jersey and the Isle of Man are standing firm against the revisions.
QROPS stand to be affected by the forthcoming tax changes in that the payment of benefits from an expat’s QROPS may fall under and be subject to the new income tax rates. This applies to payments made from any QROPS regardless of jurisdiction, as the tax rates are applied according to the QROPS owner’s residency status, not the residency status of the QROPS itself.