INSIGHT INTO CHANNEL ISLAND TAX INCENTIVES FROM KPMG

04.05.18

Financial incentives are a key factor in drawing high net worth individuals to the Channel Islands, but getting to grips with the tax position can be a challenge. John Riva, Head of Tax at KPMG Channel Islands Limited, breaks it down into an easy-to-understand guide

A dynamic and open environment for entrepreneurs and businesses, a stable and secure location for retirees and an excellent standard of living for families; the Channel Islands offer an enchanting option for those looking to relocate.

Residents of the islands - located off the French Coast, just a 40 minute flight from London - are privy to award winning restaurants, stunning scenery, excellent healthcare and schools, a low crime rate, and a vibrant community focused on enjoying all that the outdoors has to offer.

These attributes alone are fundamental to why people choose to relocate here, but the tax position is also a key factor.

JERSEY

The largest of the Channel Islands exercises tight control over who is given consent to live on the island – with high net worth individuals most commonly granted approval. The primary consideration for being granted residency is an individual’s ability to make a substantial contribution to the island’s revenue, through taxing of the applicant’s income.

Any successful applicant will need to guarantee an annual tax contribution of no less than £145,000. In doing so, the individual would be entitled to be taxed under a special regime. Broadly, individuals who meet this criteria are subject to tax at 20% on the first £725,000 of their worldwide income and the remainder will be taxed at 1% (with the exception of income from Jersey real estate which will be taxable at 20%).

GUERNSEY

Guernsey tax residence is based on the number of days an individual spends on the island, with one day being counted if they are present on the island at midnight. Those living there for more than 91 midnights a year are subject to Guernsey tax at 20% on worldwide income in the calendar year in which the income arises, subject to the applicability of one of several tax caps.

These include the £110,000 tax cap on non-Guernsey source income and the £220,000 tax cap on worldwide income, not including from Guernsey real estate. With effect from 1 January 2018, an individual who becomes resident in Guernsey and purchases an open market Guernsey property of circa £1.5million, can elect to pay a tax cap on their worldwide income of £50,000 per annum for their year of arrival and three subsequent years.

Finally, if an individual meets the conditions to be ‘resident only’, they are able to elect to pay the standard charge of £30,000 per annum, in which case they will not be subject to Guernsey tax on their non-Guernsey source income.

It’s important to note that both Jersey and Guernsey do not levy capital gains tax or inheritance tax. No relocation decision should ever be based solely on tax implications. There are a great number of factors that need to be considered when selecting a location to become your new home; however, it never hurts to find a jurisdiction that offers an attractive tax regime.

To find out more visit www.kpmg.com/channelislands

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