A practical guide to tax in commercial property transactions in Jersey08 May 2019
Jersey's tax regime in commercial property transactions follows a similar structure to that in England and Wales. Nevertheless, the Jersey system has a number of particular quirks.
Stamp duty (like England and Wales' stamp duty land tax) is payable on property transfers and is calculated on a sliding scale. There are some specific reliefs from stamp duty but they are limited in scope. Stamp duty discretionary reliefs or discounts are available at the discretion of the Judicial Greffier and should be applied for in advance of completion.
Stamp duty must be paid before the passing of contracts and either the relevant stamps or the treasury receipt should be affixed to the contract.
The calculation of stamp duty will also depend on the type of property or property interest being transferred or created. For more information on the types of property that exist in Jersey, please refer to our Practical guide to property ownership in Jersey.
Stamp duty on freehold/ flying freehold purchases
Stamp duty liability is calculated on:
- the purchase price of the property where full market price is being paid; or
- the market value of the property where the property is being transferred as a gift, at less than market value or for something that does not have a monetary value.
The rates of stamp duty payable on commercial and residential property vary slightly.
Our stamp duty calculator will give you an estimate of the stamp duty payable on the relevant transaction. However, given the concessions that are available from the Judicial Greffier on a discretionary basis, we recommend that you contact us for a tailored estimate at the outset of a transaction.
Stamp duty in leasehold transactions
There are two types of lease in Jersey:
- "paper leases" which are granted for a term of up to nine years; and
- "contract leases" which are granted for a term of more than 9 years.
Paper leases do not attract stamp duty, no matter how high the rent reserved. Contract leases (which need to be passed by an Act of the Royal Court of Jersey) do attract stamp duty. Stamp duty is payable on both the rent payable under the lease and any premium (capital sum) paid.
The amount of stamp duty payable is calculated:
- on the rent by multiplying the annual rent by the number of years of the term (subject to a maximum of 21 years). 0.5% duty will be payable on the first £100,000 and 0.75% on the remainder; and
- on the premium at the same rate as if the premium was the market value of a freehold purchase.
Land transaction tax on share sales
Historically, there was no tax payable on the transfer of shares in a company. As a result, the practice of transferring a share with specific rights of occupation attached to it was popularised and has been used widely by residential developers. The acquisition of a share is not technically "an immoveable property right" and therefore did not attract stamp duty.
In 2010, land transaction tax was introduced which sought to bring the tax payable on the transfer of a share (with property rights) in line with the stamp duty that was payable on a freehold purchase. The law makes allowance for similar reliefs and concessions as would be available in stamp duty.
Land transaction tax, as the name suggests, does not affect all share sales and only applies to transactions where shares are to be acquired which confer specific rights of use and occupation of a residential unit.
Land transaction tax on loans and mortgage security
Where money is borrowed and secured against either residential or commercial property, stamp duty or land transaction tax is payable over the when the security is registered (in the case of property) or taken (in the case of shares. The tax will be payable at 0.5% of the amount of the loan being secured.
Goods and Services Tax
Goods and Services Tax (GST) works in a broadly similar way to the value added tax imposed in the UK. GST's current rate is 5% and is payable on any chargeable "supply". For the purposes of the GST regime, a "supply" includes the sale of property and the provision of premises for occupation purposes. Therefore GST may (depending on a number of factors) be payable by the buyer on the purchase price in freehold, flying freehold and leasehold property and payable by the tenant on rent.
Whilst GST may, technically, be chargeable on residential property it is generally levied at 0% meaning that no GST is paid. There are limited exceptions to this rule, such as the sale of guest or lodging houses.
Commercial transactions are subject to GST at the current rate of 5%, where applicable. It is the responsibility of the seller (or in the case of commercial rent, the landlord) to account for the GST and recover it from the buyer (or tenant).
Whether GST is chargeable in commercial transactions will depend on whether:
- a "supply" is being made and the value of such supplies;
- the parties to the transaction are registered for GST; and
- the asset is part of a transfer of going concern.
GST is not chargeable on the transfer of shares in a company (whether or not the shares confer exclusive property rights and whether or not those property rights relate to residential or commercial property).