Are Jersey & Guernsey Safe Offshore Havens for UK/US Person

Jersey &  Guernsey Safe Offshore Tax Havens

When US Persons think of going offshore with their assets, oftentimes they will think of moving their assets into a BVI or into a Belize corporation – – or possibly a Sociedad Anonima in one of several different countries. There are also taxpayers who move their money into foreign trusts through a Wyoming trust — or even create retirement (non-employment) plans in country such as Malta. For taxpayers who reside outside of the United States in countries such as the UK and then become US persons, it is not uncommon to have their foreign assets in countries such as Jersey and Guernsey—each which can provide tax benefits to UK Citizens/Residents. The question then becomes whether these tax and reporting benefits extended to a UK Person who becomes a US Person.

Common Example (UK to US)

Arthur is a UK citizen who has lived in the United Kingdom for most of his life. He opened up several banks and investment accounts in Jersey and Guernsey — due to the tax benefits provided by way of the UK/Jersey and UK/Guernsey tax treaties. Fast forward to five years later and Arthur was relocated to the United States — initially on an L1 visa but is now a Lawful Permanent Resident. After speaking with a tax specialist, he realizes that he has various international information reporting requirements such as FBAR and FATCA.  He is now concerned what the US tax treatment for his Jersey/Guernsey assets will be – 

Tax Treaties (UK vs US)

Just as the United States has entered into nearly 60 bilateral tax treaties, the United Kingdom is also entered into its own set of tax treaties.  The United Kingdom has a tax treaty with Guernsey as well as a tax treaty with Jersey.  And, while the United States entered into a tax treaty with the United Kingdom, the United States has not entered into a tax treaty with either Guernsey or Jersey. Therefore, the tax benefits that may exist between the US and UK on key issues such as the treatment of withholding and pension income would not be the same as between the United States and countries that have not entered into a tax treaty with the United States — such as Jersey and Guernsey. As a result, tax implications that may have been avoided for Arthur when he was residing in the UK as a non-US person in conjunction with the UK /Jersey treaty or the UK/Guernsey tax treaty would not benefit him from a US tax perspective. This means that there may be significant additional tax implications as a result of the income being derived from these other countries.

Getting into Offshore Tax Compliance

Since Arthur was unaware of these reporting and tax requirements, he missed out on filing several international information reporting forms such as the FBAR (Foreign Bank and Financial Account Reporting) and FATCA Form 8938 (Foreign Account Tax Compliance Act). But, the Internal Revenue Service offers various international tax amnesty programs that taxpayers can use to safely get into compliance – while minimizing and even avoiding certain penalties.

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