Channel Islands traditionally belong to the offshore areas. With similarities in the approach to taxation of nonresidents, all the islands, however, differ from each other. Each has its pluses and minuses, of which it may be noted, not long ago adopted stricter formalities for the incorporation of companies: obligatoriness of the rule, “Know your customer” (due diligence) requirements for local directors, etc. The best optimum alternative for the incorporation of companies in the Channel Islands, in our opinion, is Jersey. Corporate Law of this island is represented by the Law “About Companies” in the wording of 1991 (Companies Jersey Law, 1991). The legal system is based on the principles of English common law, but has some features which were borrowed from the French legal system.
The modern corporate law permits the incorporation of companies of various organizational and legal forms of which it is possible to identify:
companies, exempted from the taxation – Exempt Companies and Limited Partnerships – Limited Partnerships.
The status of “offshore” companies are companies incorporated in Jersey:
– that do not carry out activities directed to generate profits within the country of incorporation;
– that have one of the two privileged status – “exempted” (from taxes), or international business company;
– true owners (beneficiaries) of which are the residents of Jersey.
At the same time authorized person-resident who are holders of shares in the company are not considered as its beneficiaries. And the fact that these securities are in the property of residents, it is not an obstacle to the attribution of the status of offshore companies which they were issued. Partnerships are not considered as objects of taxation on the islands. Profits of members-nonresident are taxed only to the extent to which it is derived from sources in Jersey. In order to incorporate the partnership it is necessary at least to have two natural or legal persons, one of them is as the main partner and other is like the limited partner. Partnership shall be incorporated in the Registration Chamber, and it should indicate the names of the main partners.
The annual report shall be rendered by all incorporated companies in the Islands. Summary report of the Company of the closed type and directed to the register does not contain information concerning to income, and in fact this is just a list of shareholders (which can be nominee shareholders). Public companies are obliged to disclose not only the names of the shareholders, but also the details of the directors, as well as attach the balance sheet to the report and to pass the financial audit. This report must be considered in a mandatory manner by not only the general meeting of shareholders, but also the Registrar of Companies, where every person, if desire, can read it officially. Companies exempted from the taxation in Jersey pay an annual fee (beginning from 250 pounds). It should be emphasized that the company’s application for such status must be submitted every year to the Chief of Financial Services Department no later than March 31, in other words the company would have to pay the usual taxes, but it is very difficult to restore “released” status faded once.
There are no property tax, value added tax and taxes on dividends for non-residents on the islands. The strictness in the administration of companies in Jersey, high annual fees and costs related with maintaining the tax-exempt status, make the company very expensive and involve, as a rule, those for whom the Channel Islands have a specific interest.