The States of Jersey, the Island’s Parliament, has for some years pursued the policy of restricting immigration in the interest of preserving the Island’s environment and quality of life. As part of this policy the Housing Minister exercises tight control over who may acquire residential accommodation. Under the Housing Regulations in force at the present time, with the exception of a certain limited number of properties, no person may purchase or lease residential accommodation without the consent of the Housing Minister under the appropriate housing regulations. Consent to purchase will only be granted to persons who do not have established residential connections with the Island if they are either essentially employed (“J” category licences which usually have an expiry date); or are considered to be of economic or social benefit and the granting of the consent is viewed to be in the best interests of the community 1(1)(k) permits).
The Jersey Minister for Finance and Resources recently undertook a review of the 1(1)(k) resident regime, with a view to assessing the impact “k” residents have on Jersey. The result has been the recognition of their financial and economic contribution to the Island, renewed commitment to creating the right environment to attract and maintain high net worth individuals and the introduction of a new potentially more beneficial tax regime.
The purpose of this memorandum is to consider the general requirements and the application procedure associated with the granting of consent to wealthy individuals purchasing property in Jersey under Regulation 1(1)(k) of the Housing (General Provisions)(Jersey) Regulations 1970 and introduce the proposed new taxing regime for these residents.
Although the term “economic benefit” embraces a number of factors, the primary consideration is the individual’s ability to make a substantial contribution to the Island’s revenue through the taxing of the applicant’s income. Individuals granted consent to purchase property under regulation 1(1)(k) will be subject to taxation under specific taxation procedures which are applicable to any individual granted the appropriate consent on or after 1 January 2005.
Such an individual who is in receipt of non-Jersey sourced income will be liable to Jersey income tax in accordance with the following rates:
• The first £1million of non-Jersey income will be taxed at a rate of 20%.
• The next £500,000 in excess of £1million will be liable to Jersey income tax at a rate of 10%.
• The remainder of that income will be taxed at a rate of 1%.
All Jersey income, which would include Jersey rental income, income from Jersey businesses, companies and trusts, would be taxed at a rate of 20%.
The draft law relating to the taxation of wealthy individuals has been lodged and will be debated soon. Under the new proposals the tax rate applicable to rental income from Jersey land will continue to be taxed at 20%; however income from all other sources would be subject to the following rates:
• The first £625,000 will be taxed at a rate of 20%; and the remainder taxed at a rate of 1%
Purchasing property in Jersey / June 2011
Under both the present and proposed regime, the Housing Minister will not however consider any applicant who is unable to guarantee an annual tax contribution of at least £125,000.
The Housing Minister will therefore have regard to the source and level of a person’s income arising in, or remitted to, Jersey and the certainty attaching to the receipt of that income in the future.
The applicant will be legally required to purchase or lease property which has been allotted 1(1)(k) status; such properties are usually deemed to be outside the price range of the generality of local purchasers and normally exceed £1.25 million, although more modest properties are also available.
Consideration will also be given to the number of dependants and the extent to which these may in time acquire housing rights if consent is granted.
It is necessary to apply for a consent from the Housing Minister to purchase property under Regulation 1(1)(k) of the Housing (General Provisions)(Jersey) Regulations 1970.
All meetings with the local authorities should be preceded by a written application enclosing the details outlined in point 4 below. The level of the requisite tax payable by the applicant will be discussed at this stage.
Subject to receiving appropriate reassurances on the potential level of taxation payable, we would put forward an application to the Housing Minister for a consent to purchase an appropriate house as a 1(1)(k) immigrant. If successful, an “in principle” consent is granted, this consent being valid for three months; should the applicant experience difficulties in finding a suitable property before it expires, the Housing Minister will normally grant an extension.
Once a suitable property has been found, the Housing Minister will grant his consent for the purchase to go ahead. Alternatively a formal application may be submitted with respect to a specific property.
The following six points outline the necessary information required to prepare an application for consent to purchase residential property in the Island:
• Personal details, full name, date of birth, number of children and their respective ages together with certified copies of the applicant’s passport and verification of current address.
• A synopsis of the client’s business background and full CV.
• A list of assets and personal wealth; to include a list of assets held upon trust where appropriate (together with supporting evidence).
• An indication of approximate yearly income, together with supporting evidence.
• Documentary evidence that the applicant does not possess a criminal record.
• Two references: one should be from the applicant’s legal advisor and the other from either an accountant or banker, either of whom should have known the individual for at least five years.
If you would like any further information about the implications of these regulations, then please contact one of the persons below to discuss your personal circumstances.