Guidance Notes on International Savings Plans – Further Briefing
23 May 2019
The guidance notes on Jersey's international savings plans ("ISPs"), which were published by the Comptroller of Taxes on 22 May 2019 provide further details on how such plans should be established and operated. Because the ISPs are intended to be flexible, the guidance notes are very light touch. However, they are important given the regulatory framework under which the ISPs operate.
The key areas covered by the guidance notes are as follows:
- The ISPs must comply with the requirements of Article 118D of the Income Tax (Jersey) Law 1961 ("Tax Law") in order to be approved as an ISP. These requirements are:
- the plan's sole purpose must be to provide benefits in respect of employees wholly outside of Jersey in respect of a trade or undertaking;
- the plan must be established under an irrevocable trust under Jersey law by a person not resident in Jersey. Further, the plan must relate to a trade or undertaking outside of Jersey;
- the plan must have a corporate trustee (or otherwise 2 trustees) who are regulated by the Jersey Financial Services Commission for carrying on trust business;
- the plan is not one which is approved under Part 19 of the Tax Law pertaining to pension schemes. However it is possible for part of the plan to be approved as an ISP while the other part is approved as a pension plan.
- To obtain the ISP status, the trustee of the plan must notify the Comptroller that it is an ISP. This is a self-certification process, therefore the trustee must be satisfied that all of the requirements under Article 118D, plus the other requirements set out in the guidance notes are complied with. In our view it may be prudent for the trustee to take advice in respect of this assessment as the consequence of getting it wrong means that the plan would not qualify for the tax exemption under Article 118D of the Tax Law.
- Income derived by the ISP is exempt from Jersey income tax. Further, benefits paid from ISPs to persons not resident in Jersey are also exempt from Jersey income tax.
- The guidance notes do not restrict transfers to and out of ISPs.
- Loans, if any, provided to members are restricted to 30% of the aggregate value of the relevant member's accrued benefits under the ISP.
- Where the plan rules permit funds to be returned to the employer, such funds cannot include contributions which have been made by the members or funds representing benefits which have vested in rest of members.
- It is expected that ISPs will need to provide annual returns to the Comptroller. The details of such return will be provided in a later version of the guidance notes.
Bedell Cristin has been instrumental in shaping the ISP legislation and these guidance notes. For further information, please do not hesitate to contact Nancy Chien.