A Jersey Taxing question.

[Gastines]

Anyone in a similar position who could clarify this question?

A friend has a property in Jersey,rented out,rent collected by agent and deposited in Jersey bank. This also is on deposit and accrues interest, capital and interest staying in Jersey where it is taxed. The chap is resident in France and has been for about 20 years and is a French tax payer owning property and land here. A problem has arisen this year for the first time and he is getting conflicting advice from Jersey and French accountants. Exactly what should he declare on his French tax return and do the French Impot take the tax paid in Jersey into account?

I may add this is for a friend,I wish I had the same problem. Any help,advice greatly appreciated.

[cooperlola]

I don't know if this helps?

http://www.lowtax.net/lowtax/html/jje2tax.html

Taxable income in Jersey will certainly have to be declared and will count towards the level of tax paid, much as rental income from the UK would be.  Whether the tax is payable in both countries depends upon the treaties outlined in the link above (I admit I haven't had a close read!)

EDIT : As the income is classified here as "unearned" it will probably incur social charges at the very least.

[Pickles]

Firstly, your friend should be aware that Jersey is still considered by the Fisc to be a "paradis fiscale", so they are not inclined to be benevolent in any dealings which concern Jersey, from what I understand. (Although the topic does not concern me directly, it came up as an interesting aside during our property purchase).

The only double taxation agreement currently in force between Jersey and France is limited to income and gains arising from shipping and aviation activities.

A Tax Information Exchange Agreement is in the process of ratification between Jersey and France, but it is not yet in force and would not of itself prevent double taxation.

My understanding therefore is that the income will have to be declared in both countries and may be taxed in both with no relief in France for tax already paid in Jersey. The only allowance therefore would be that the taxable amount in France would be the Jersey income minus expenses, with the Jersey tax being an expense, as opposed to the situation which would obtain if there were a double taxation agreement in place (where the taxable amount would be Jersey income minus expenses, and the French tax calculated on that would then have the Jersey tax deducted from it).

Regards

Pickles

[Gastines]

Many thanks for quick replies. I'll give him the bad news later. It would appear that his Jersey accountant and Solicitor might not be paid this year!

[Pickles]

The interest earned from the bank deposit is/should be subject to a withholding tax in Jersey in lieu of the sharing of information with other tax authorities.

Regards

Pickles

[parsnips]

[quote user="Gastines"]Anyone in a similar position who could clarify this question?

A friend has a property in Jersey,rented out,rent collected by agent and deposited in Jersey bank. This also is on deposit and accrues interest, capital and interest staying in Jersey where it is taxed. The chap is resident in France and has been for about 20 years and is a French tax payer owning property and land here. A problem has arisen this year for the first time and he is getting conflicting advice from Jersey and French accountants. Exactly what should he declare on his French tax return and do the French Impot take the tax paid in Jersey into account?

I may add this is for a friend,I wish I had the same problem. Any help,advice greatly appreciated.[/quote]

Hi,

      As far as the bank interest goes, he should be able to contact the bank and opt for "disclosure", and have the interest paid gross , then declare it in France on form 2047 page 2 secB , then 2042 2TS.

       The rent is more difficult , there seems to be a partial agreement between France and Jersey signed in 2009--a "Tax Information Exchange Agreement"--which has eased relations over tax matters (under which the "disclosure" option --see above--is possible). Whether any relief against tax paid in either jurisdiction is available is a question for the experts as relations between France and Jersey seem to be changing( in a good way). In the meantime , has he previously declared the rents? If not ,he might find it better to continue that way, until he can find a professional who can give him a definitive answer.

[Gastines]

Many thanks for the comprehensive replies.I have printed all the info and will pass it on for him to digest before he starts writing a fairly hefty cheque I fear.

[allanb]

I'm sure Parsnips is right about taking the "disclosure"

option and having the interest paid gross.  When I opened a Jersey savings account a few years ago, the bank sent me the disclosure form without waiting for me to ask.

But as long as Gastines' friend hasn't done this, and tax has been deducted in

Jersey, doesn't the interest fall within the "directive épargne"

instruction - i.e. shouldn't he report it net on 2047, 2B and line BG, and

get some relief by showing the credit at 25%, as shown in the last line of the credit

percentage table?

I'm not at all sure about this, but I've always understood that it's what the "directive épargne" bit refers to.  If it's wrong, I trust that somebody will say so.

[Pickles]

[quote user="allanb"]But as long as Gastines' friend hasn't done this, and tax has been deducted in

Jersey, doesn't the interest fall within the "directive épargne"

instruction - i.e. shouldn't he report it net on 2047, 2B and line BG, and

get some relief by showing the credit at 25%, as shown in the last line of the credit

percentage table?[/quote]

Yes, you are correct. The difficult issue is the rent ... and the possibility that neither has been declared in the past.

Regards

Pickles

[Sprogster]

Pickles, you are somewhat out of date in that following the signing between France and Jersey of the TIEA, and Jersey's positioning on the OECD 'white list', there has been a total change in attitude towards Jersey by the French Fisc, to the extent the they hold up Jersey as the model for other offshore centres to follow. It also helps that there is a lot of political support in France from Normandy and Brittany, both of whom are very keen to improve trading links with the Island.

The vice Chair on the OECD tax oversight committe is actually from Jersey, having been specifically invited by the French Chairman.

I belive there are elements of the France/Jersey TIEA that do go further into certain areas of double tax relief on pension income.