Jersey: corporate re-domiciliation and tax residency changes

Whether for administrative, tax, confidentiality, economic substance or other reasons, the ability to re-domicile a company into – or out of – Jersey is a useful feature of Jersey law. This is distinct from the ability of a Jersey company to alter its tax residency by becoming resident in another jurisdiction, because Jersey tax law allows a Jersey company to be tax resident elsewhere (and not resident in Jersey). This tax relocation is often a more popular route, providing the selected tax residency with the flexibility of a Jersey corporate structure.

Jersey law and re-domiciliation

Jersey law permits companies incorporated in Jersey to re-domicile out of Jersey; and conversely allows companies incorporated outside Jersey to re-domicile into the island and become Jersey companies.

The term ‘re-domiciliation’ means the process by which a company or other legal entity incorporated in a particular jurisdiction moves its place of incorporation or registration (that is, it ‘redomiciles’) to a different jurisdiction. This process is also often described as ‘migration’ or ‘continuation.’ Jersey law also permits certain other entities to re-domicile into and out of Jersey, such as limited partnerships.

A Jersey company can alter its tax residency by becoming resident in another jurisdiction. Jersey tax law allows a Jersey company to be resident elsewhere provided that it is centrally managed and controlled outside Jersey in a country or territory where the highest rate at which any company may be taxed is 10 percent or higher. Moreover, the company must also be resident for tax purposes in that country or territory. This tax relocation is often a more popular route, providing the selected tax residency with the flexibility of a Jersey corporate structure.

Effects of re-domiciliation

A re-domiciliation allows a company the luxury of the continuity of its existence and operations while enabling it to change the origin of incorporation; for administrative, tax, confidentiality, economic substance or other reasons.

A company re-domiciling will continue to be bound by all of its existing contractual obligations without the need for complex and costly arrangements effecting an asset or business transfer or the assignment or novation of contractual arrangements as the company remains the same corporate entity with the same legal personality.

Generally speaking, the effect of a re-domiciliation is that:

• the property and rights of the company immediately prior to the re-domiciliation will continue to be the property and rights of the company post re-domiciliation.
• the company will continue to be subject to all criminal and civil liabilities, contracts, debts and other obligations.
• all legal proceedings which are pending by or against the company may still be continued by or against it once it has completed its re-domiciliation.

The Companies (Jersey) Law 1991 prescribes the requirements for each process, making it easier for companies to navigate re-domiciliation.

Re-domiciling into Jersey

A company intending to re-domicile into Jersey is required to apply to the Jersey Financial Services Commission (JFSC) for authorisation to seek to continue as a company incorporated under the laws of Jersey.

As well as the usual corporate authorisations and new constitutional documents, applicants should also consider other licensing or regulatory requirements. For example, a company seeking to conduct business in Jersey, and employ staff, may need licenses under the Control of Housing and Work (Jersey) Law 2012. Likewise, licenses or permits may be needed under the Financial Services (Jersey) Law 1998 or the Collective Investment Funds (Jersey) Law 1988 for companies carrying on regulated activities.

Existing entities and investors looking to establish structures in Jersey can be assured that in opting for Jersey, they are choosing a jurisdiction that is open for business, while retaining the highest regulatory standards, safe in the knowledge that whatever comes next, we have a track record of implementing innovative measures to ensure Jersey remains a competitive and attractive place to do business.

Re-domiciling out of Jersey – Tips for a Jersey Company

Similar to continuances into Jersey, the company must apply to the JFSC for authorisation for continuance as a body incorporated under the laws of a foreign jurisdiction. As well as the usual corporate authorisations and director statements, the company must also obtain confirmation from Revenue Jersey and the Department of Social Security in Jersey that they have no objections to the proposed re-domiciliation.

In addition, the requirements of the jurisdiction into which the Jersey company proposes to re-domicile will also need to be met and therefore a co-ordinated approach will be needed with the other advisers.

In ensuring the Revenue Jersey response arrives from the Comptroller of Revenue, the applicant can request an email is sent to confirm that, on the basis of the submission:

• the Comptroller deems the submission to satisfy the applicant’s obligations under the Jersey Revenue Laws, and that there are no unsettled liabilities of tax.
• the Comptroller will not make a determination under Article 6 of the Taxation (Companies- Economic Substance) (Jersey) Law 2019 that the economic substance test has not been met.
• the Comptroller does not object to the migration of the company.
• if the circumstances or facts outlined in the submission or supporting documents should change, then this should be notified to Revenue Jersey.
• annual income tax returns will continue to be required until the company has migrated out of Jersey.

Under Jersey law, the solvency of a company is assessed on a cashflow basis, and it would be possible for a company with accumulated losses on its balance sheet to re-domicile out of Jersey, if the cashflow solvency statement can be made by the directors.

For a company’s continuance out of Jersey, each director and proposed director must provide a detailed statement. This statement should confirm, after thorough inquiry into the company’s affairs, their reasonable belief in two key areas.

Firstly, the company’s current and future ability to discharge its liabilities as they become due, both before and after its incorporation under the laws of a new jurisdiction. Secondly, considering the company’s future prospects, the intentions regarding the management of the company’s business, and the expected financial resources available post-application approval, the company will maintain its ability to meet its liabilities promptly under the new jurisdiction’s laws.

This article first appeared in Solicitors Journal in April 2024: Jersey: corporate re-domiciliation and tax residency changes – Solicitors Journal