Tax Implications for Purchase or Sale of Jersey Property
David, Head of Taxation discusses the potential Jersey tax implications when an investor is considering purchasing or selling property located in Jersey.
When considering purchasing or selling property located in Jersey, investors should be aware of the potential Jersey tax implications.
There are a number of local taxes that can affect Jersey property transactions. This article provides an insight into the property taxes that can apply in different situations and outlines ways in which we can help you ensure transactions are structured in the most tax efficient manner.
You might be the owner of a local business that trades from property owned by the business and you are thinking about retirement in the near future, or perhaps you are a major property investor considering investing in Jersey property for the first time. Alternatively you might be a local resident thinking about transferring your family home to your children.
You will want to ensure that your property transactions are carried out in the most tax efficient manner and all tax obligations are dealt with correctly and on a timely basis. In our experience it is worthwhile looking into the tax implications of property transactions you are considering before taking any action.
Some of the more common questions we get asked by our clients include:
- I am buying a property to let out. What are the potential tax liabilities?
- I am buying a share transfer property. Does this mean this is exempt from stamp duty?
- I am selling my property rental business. Will I need to include GST in the sale price?
- I am planning to retire in the near future. What are the tax implications of transferring the property currently owned by my business directly to me?
- We would like our children to inherit our family home. Is it more tax efficient to transfer this during our lifetime?
We have substantial experience in providing advice to our clients in all of the above areas as well as ensuring any compliance requirements are taken care of.
Buying Jersey property
If you are thinking about acquiring a property in Jersey you will need to consider stamp duty, in relation to both the purchase price and any mortgage you may be required to take out.
A residential property that is acquired by share transfer will attract land transaction tax, instead of stamp duty, which is payable at the same rates as stamp duty.
Renting out property in Jersey
If you are considering purchasing a buy-to-let property, either personally or through a company, then you will need to be aware that the rental income is subject to income tax in Jersey although you can mitigate your tax liability by claiming appropriate reliefs.
You will also need to be prepared to comply with annual tax filing requirements and ensure any tax payments are made on a timely basis so as to avoid late filing penalties and the late payment surcharge.
Jersey property business
If you own a property rental/development business, in addition to the business being subject to Jersey income tax, there may also be a requirement for it to register for Jersey’s Goods and Services Tax (GST) depending on its size. Alternatively there may be a benefit in voluntarily registering for GST for example to reclaim input VAT suffered on expenses.
GST registration brings associated record keeping requirements, obligations to charge GST at the appropriate rate and submit GST returns and if relevant, pay over the appropriate amount of GST. Again failure to register or comply with compliance obligations will result in penalties.
Selling Jersey premises occupied by a business
GST is also a factor to be considered if you own a business that intends to sell the Jersey premises from which it operates. This might be the sale of the property on its own or as part of the sale of the business as a whole.
GST may need to be charged on the sale at the appropriate rate. In general, the sale/transfer of a residential property will be subject to GST at the rate of 0% and the sale/transfer of a commercial building will be chargeable at the standard rate of 5%.
Where, however, a business is not registered for GST because it is below the registration threshold, the business will not become liable to register for GST simply because of the sale/transfer of its premises.
If the property is sold as part of the whole business, this may be treated as a ‘transfer of a going concern’ (TOGC) and the sale will not be subject to GST, providing the conditions for a TOGC are met.
In such circumstances, any stamp duty is based on the GST inclusive price.
Sale of shares in a Jersey company owning Jersey property
If, instead of selling a property directly, you are selling the shares in a company that owns the property this may affect the GST implications. If the property is residential the GST will still be chargeable at the zero rate, but if the property is commercial then the transaction will be exempt from GST. This means no GST will be chargeable but also any GST incurred on costs of selling the shares will not be deductible as input GST.
You are considering gifting your Jersey home to your children and you want to know the implications of doing this during your lifetime or in the event of your death.
If you gift the property to your children during your lifetime there are residential housing laws and stamp duty considerations. If your children inherit a Jersey property in the event of your death the residential housing position should be more straightforward but there will be probate stamp duty to consider.
We can advise you on any Jersey property transaction you are intending to make, considering the structuring options and advising you on the most tax efficient course of action, before you implement your plans. You will then be able to make an informed decision and avoid any nasty surprises.
We can also assist with GST registration and filing requirements where relevant and your income tax compliance requirements to ensure you are meeting your tax obligations and avoid incurring any penalties.
Why not contact us for a free high-level discussion to see whether this is something that would benefit you. Contact David.
Disclaimer: Statements and opinions expressed in articles, reviews and other materials herein are those of the author(s).
While every care has been taken in the compilation of this information and every attempt made to present up-to-date and accurate information, we cannot guarantee that inaccuracies will not occur.
Baker Tilly Channel Islands Limited will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information.