Legal Framework and Formation Rules and Fees
Jersey trusts are governed by The Trust (Jersey) Law 1984, as amended in 2006, which codified trust law largely along the lines of English-based common law, and the Trusts (Amendment) (Jersey) Law 1989. Trust company business is regulated under the provisions of the Financial Services (Jersey) Law 1998.
Appeal against judgements of the Royal Court of Jersey lie to the Jersey Court of Appeal and finally to the English Privy Council.
Although Jersey law has its roots in the Norman law (a 'Roman' or 'Civil' law code), the Trusts (Jersey) Law 1984 codified an entirely 'Anglo-Saxon' body of trust law, resolving many uncertainties and increasing protection for beneficiaries. Subsequent amendments included the recognition of 'purpose' trusts in 1996 (the normal form of Jersey trusts is 'discretionary'). This has led to an increase in corporate use of Jersey trusts.
Jersey is a party to the Hague Convention on the Law Applicable to Trusts and Their Recognition. Jersey trust law explicitly excludes foreign inheritance laws and does not recognize foreign judgements.
Trust management, particularly for wealthy UK individuals, was Jersey's traditional business, but successive tightenings of UK anti-avoidance legislation have reduced the possibilities for UK citizens. However, Jersey's trust business has continued to grow based on a more international clientele, and following the introduction of the purpose trust, a surge in corporate trust work and the recent introduction of Foundations. There are also Collective Investment Funds based on trusts.
The creation of a trust is free from Government duty and there are no registration or audit requirements as such in Jersey, although the tax authorities of beneficiaries' jurisdictions (eg the UK) may require annual reports. Jersey trusts may 'migrate' to other jurisdictions by changing trustees and the applicable law of a trust; likewise, foreign trusts may migrate to Jersey.
The trustees of a non resident trust are not required to make returns or provide accounts of the trust to the Comptroller of income tax. Trust accounts must be kept and trust documents are normally in English.
In the case where the beneficiaries of a Jersey trust are non resident, income arising from sources outside Jersey is not liable to income tax in Jersey, nor are distributions to the beneficiaries. This exemption is automatic, and does not need to be applied for.
Interest on bank deposits made by the trustees of a nonresident trust is not taxed because of a government concession.
However, if any of the settlor, the life tenants or the beneficiaries are Jersey-resident, the tax picture becomes more complex, and exemption from Jersey tax will be partial, at best; however if only the settlor is Jersey-resident, full exemption may be available on application to the Comptroller, subject to stringent conditions. If tax is due on a Jersey trust, then it is assessed on the trustee; a non-resident trustee will however be assessed only on income arising in Jersey.
There are no special provisions in Jersey law covering Unit Trusts, which are therefore treated in the same way as ordinary Jersey trusts, and have the same tax regime.
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