Charitable structures under Jersey law can take the form of incorporated statutory associations; unincorporated associations; and charitable trusts. Charities can also be established in the form of Jersey companies limited by guarantee or as Jersey law foundations. [Incorporated statutory associations and public trusts which can hold title to real estate in Jersey pursuant to the Loi (1862) sur les teneures en fidéicommis et l’incorporation d’associations are not dealt with in this briefing.]
Taxation Provisions and Reliefs for Charities in Jersey
Jersey companies limited by guarantee used for charitable purposes are subject to a 0% rate of income tax in Jersey. Jersey based trustees of charitable trusts and Jersey foundations established for charitable purposes are in principle liable to Jersey income tax on their revenue profits. However Article 115 of the Income Tax (Jersey) Law 1961 as amended ( the “1961 Law”) provides certain exemptions from Jersey income tax for charitable purpose entities.
Article 115 Provisions
- Any income of a charity registered under the Charities (Jersey) Law 2014 (the “2014 Law”) which is applied in accordance with that Law is exempt from tax. This exemption also applies to income of an excepted foreign charity (within the meaning of Article 22 of the 2014 Law).
- Where a Jersey foundation or trust is not registered under the 2014 Law but all its purposes are charitable purposes or purposes which are ancillary or incidental to its charitable purposes within the meaning of the 2014 Law and donations to the foundation or trust are not solicited from the public and the income of the foundation or trust is applied in making grants or donations to charities registered under the 2014 Law or to excepted foreign charities under Artilce 22 of the 2014 Law then such income is exempt. To obtain the benefit of this exemption the foundation or trust has to notify the Tax Authority in Jersey that it intends to rely upon this exemption before income arises.
- There is a grandfathering provision for Jersey foundations or trusts which were established in Jersey prior to the 2014 Law coming into force and where the income of such foundation or trust was exempt under the provisions of Article 115 of the 1961 Law in force before the 2014 Law became effective and the foundation or trust is not registered under the 2014 Law, it does not solicit donations from the public and it operates in accordance with the customary/common law definition of charity in Jersey by having any of the following purposes:
- The advancement of education
- The relief of poverty
- The furtherance of religion
- A purpose beneficial to the whole community
- The service of any church or chapel or any building used solely for the purposes of divine worship.
The income arising to such foundations and trusts is exempt from tax provided it is applied to one of the charitable purposes listed above.
Tax Concessions and Practices
In addition to the above provisions in the 1961 Law, there are certain tax concessions and practices in Jersey published by the Tax Authority which are relevant to charitable organisations.
Under miscellaneous concession M3 the profits of charitable and voluntary organisations from fund-raising events ( e.g. lotteries, raffles) are not assessed to tax where there is public awareness that the profits from such activities will be devoted to charity and the monies are so applied.
The general miscellaneous tax concession M1 which relates to Jersey trustees of a trust for the benefit of non-Jersey residents may also be relevant to charitable trusts which are not registered under the 2014 Law and which are for the benefit of named charities, not-for-profits or philanthropy objects or persons who are established or resident outside Jersey or which distribute their trust monies to Jersey charities which are exempt from tax under Article 115 of the 1961Law.
Under concession M1 where all of the beneficiaries of a trust;
- Are non-Jersey resident individuals
- Are legal bodies and arrangements ultimately owned by non-Jersey resident individuals
- Are Jersey charities exempt from tax under Article 115 of the 1961 Law
then by concession the trustees are not taxed on any non-Jersey source income and the statutory exemptions in Article 118B of the 1961 Law are available to those trustees.
The statutory exemptions in Article 118B include exemption from Jersey income tax for:
- Jersey bank interest
- Any distribution received from a Jersey resident company which is made out of profit/gains taxed at the rate of 0% in the company
- Interest paid by a Jersey resident company
There are further taxation related provisions in Jersey relevant to charities covering the following:
- Entitlement to recover Jersey income tax on certain donations received by way of a lump sum payment or pursuant to a deed of covenant
- Entitlement to reclaim any goods and services tax (“GST”) paid and exemption from the requirement to register for GST
- Entitlement to reduced rates of stamp duty and land transaction tax in Jersey.
This document is a brief guide to the subject matter covered, and is not intended to be a detailed or comprehensive statement of the law. It should not be relied upon or treated as legal advice and is provided for general information purposes and to promote discussion. You are recommended to take professional legal and other appropriate advice before pursuing any particular course of action.
Howard Consulting Limited