By Uglobal Staff
Applicants for Jersey’s High Value Residents program will face increased costs this year, after the Channel Island raised the minimum income tax payment for HVRs from 125,000 pounds ($175,200) to 145,000 pounds ($203,232), and introduced further inflation-based increases on a five-year cycle starting in 2023.
The shift, which will add around 300,000 pounds to Jersey’s tax base in 2019, increases the minimum income needed to qualify for HVR status from 625,000 pounds to 725,000 pounds. That’s in line with inflation since 2011, when the 125,000 pound minimum payment was first introduced, said Kevin Lemasney, director of High Value Residency at Locate Jersey, the agency that administers the program.
The increase should ensure that Jersey’s HVR program continues to attract individuals who can contribute to the island’s economy, Lemasney said. Jersey has had an HVR program since the 1970s, but in recent years has favored applicants with high incomes, rather than simply high net worth, in an attempt to attract younger, more productive individuals.
“The original program probably attracted more retired people who’d sold their businesses and were no longer economically active,” Lemasney explained. “Now the dynamic has changed, and we’re attracting a far younger clientele who are wealth creators.”
Jersey’s HVR program offers two main benefits: a favorable tax rate and the right to buy property in Jersey. New arrivals pay income taxes of 20 percent on their worldwide income up to 725,000 pounds, but just 1 percent on most additional income. They are also entitled to buy a house in Jersey at a minimum price of 1.75 million pounds.
For many investors, that’s an attractive proposition. The HVR program aims to admit around 15 families a year but has averaged 20 a year over the past five years, with about 85 percent of new arrivals coming from the United Kingdom, Lemasney said.
In 2016, the latest year for which data has been made public, Locate Jersey received 119 high-value residency enquiries, and admitted 17 applicants. New arrivals in 2016 increased the island’s tax base by at least 1.75 million pounds, and also spent more than 100 million pounds on property, generating stamp duty revenues in excess of 5 million pounds — about a fifth of all the stamp duty collected in 2016.
That’s delivered a welcomed boost to Jersey’s finances and helped stabilize an economy that until recently had been facing significant deficits. In 2014, according to a government report, the 34 HVRs who had relocated under the post-2011 rules paid a total of 3.8 million pounds in taxes, accounting for about 1 percent of the island’s total tax revenues.
The increased minimum tax rate isn’t likely to deter the kinds of people Jersey is trying to attract, said Jo Stoddart, managing director of Quintessential Relocation Consultants, a boutique firm that helps high net worth individuals relocate to the Channel Islands. “If you have that kind of net worth, [being taxed on] an extra 100,000 pounds a year isn’t going to be a big deal,” she said. “Those people are going to come anyway.”
For many HNWIs, the additional tax payment will be offset by the potential savings available to Jersey residents. Besides the favorable income tax rate conferred by HVR status, new arrivals can benefit from a swathe of favorable tax rules available to all Jersey residents, explained Adam Brookes, the Jersey-based tax manager for KPMG Channel Islands.
“There is no inheritance tax, capital taxes, or wealth taxes and the rate of GST [goods and service tax] and stamp duty is relatively low when compared to other jurisdictions,” he said. The lack of capital taxation can make Jersey an especially attractive destination for people planning to dispose of significant assets, Brookes pointed out.
That said, taxation isn’t usually top of HVR applicants’ minds, Brookes said. People come because they fall in love with the island — its climate, its history, its natural beauty — and see tax policies as “an added bonus,” he said. “Jersey is an attractive destination for many reasons,” he continued. “Primarily the move is a lifestyle choice, with the added sweetener that their tax affairs are likely to be less complicated going forward.”
Jersey residency isn’t intended for people who are simply looking for a place to park their money, or to obtain an extra travel document, Lemasney added. “It’s not a passport program,” he said. “Those who choose to come and live in Jersey come for the lifestyle, to integrate, and to set up a family home here.”
That’s reflected in the application process: in addition to the usual financial documents and police checks, applicants must submit a personal letter explaining their reasons for wanting to relocate and multiple personal and professional references speaking to their moral character.
That isn’t usually a problem for applicants, Lemasney said, but it’s an indication of Jersey’s hands-on approach and its pickiness about who it lets in. “We guard our reputation,” Lemasney said. “We take our reputation very, very seriously, so we want people of good character coming to the island.”
Applicants are also required to submit detailed financial records, including details of their business assets and personal income projections for the next three years. Completed applications are processed within two weeks, and successful applicants can move to Jersey immediately upon receiving their letter of approval.
The only fee is a 7,500 pound charge, paid by successful applicants, for a Jersey registration card. There are no restrictions on the number of minor or adult dependents who can accompany an applicant, but all dependents are barred from working in Jersey or from living outside the family home, until they’ve spent 10 years on the island.
There’s also no formal residency requirement for HVR recipients, although it’s assumed they will permanently relocate. “We aren’t counting people’s numbers of days here, but we’d expect that this is their principal place of residence,” Lemasney said. “If people are looking for somewhere they aren’t going to spend time, then there are cheaper and easier jurisdictions to get residency in than Jersey.”
The bottom line, Lemasney said, is that Jersey is looking for people who genuinely want to integrate and who appreciate the safe, close-knit nature of the community. “A lot of what we do is about managing expectations,” he said. “We’ve got to make sure the fit is right, for you and for the island.”