At present, the purchase of a property through the acquisition of the share capital of a property-owning company is exempt from stamp duty. However, the States of Jersey will shortly introduce legislation to impose a tax equivalent to stamp duty on such a sale, effectively closing the loophole.
Guernsey introduced such a measure back in November 2017, in a law that reflects much of the same language as that now proposed in Jersey.
Following debate on 18 January and 8 February 2022, it has been confirmed that the Taxation (Enveloped Property Transactions) Jersey 2022 will come into effect on 4 April 2022. The law, which can be viewed here, was approved with two amendments, the last of which is here.
The law will remove one of the significant benefits of a purchaser seeking to acquire the shares in the holding company rather than simply purchasing the freehold of the property – although there can be other tax implications for changing the holding structure.
Back in 2012, when the UK government announced its new tax programme to address the perceived advantages associated with owning high value UK residential property through companies or trusts, the United Kingdom saw a rush of trusts that owned real estate looking to extract affected properties from their current investment structures in a process known as de-enveloping. It can be anticipated that a similar trend may be seen in Jersey.
The transfer of shares in such a company by a nominee to either the beneficial owner of the company or to another nominee who holds the shares on behalf of the beneficial owner will be exempt from the new tax.
Similarly, the issue, transfer or redemption of units in a collective investment fund as defined in article 3 of the Income Tax (Jersey) Law 1961 will be excluded transactions.
While a number of limited exemptions are included, virtually all sales of property holding companies will now be subject to tax.
For further information on this topic please contact Jonathan Hughes, Katharine Marshall, Chris Renouf or Sarah Parish at Ogier by telephone (+44 1534 514000) or email ([email protected], [email protected], [email protected] or [email protected]). The Ogier website can be accessed at www.ogier.com.
Laura Shirreffs, senior associate, and Nathalie Le Cuirot, associate, assisted in the preparation of this article.