Jersey trust taxation and U.S. reporting

Jersey law and trust administration

The Trusts (Jersey) Law sets out rules for creating and administering trusts under Jersey law. It defines a trust through the relationship between trustees, trust property, and beneficiaries, and addresses trustee duties and powers. These provisions describe administration of trust property; the law's title alone does not determine how a particular trust is taxed.^[1]

The law addresses trustee appointment, retirement, and discharge, and includes provisions on trustee duties, co-trustee action, impartiality, and general powers. It also covers delegation, remuneration, expenses, and corporate trustees acting by resolution. Those provisions identify administrative matters governed by the statute, while tax treatment of distributions is described separately by Revenue Jersey.^[1]

The law also contains a Part that applies only to a foreign trust. The Revenue Jersey distribution guidance uses a different test for an overseas trust, based on whether its trustees reside outside Jersey.^[1][2]

Jersey treatment of trust distributions

Revenue Jersey states that income distributions from trusts or settlements are liable to Jersey tax. For distributions from a Jersey trust, the guidance says tax is deducted before payment at a stated rate, and the recipient still declares the income on a personal tax return. The stated reason is that the authority needs total income from all sources to calculate some tax reliefs properly.^[2]

For an overseas trust or settlement, Revenue Jersey defines the category by trustee residence outside Jersey. A recipient may be eligible for double taxation relief on taxed income if the trust is from the United Kingdom or Guernsey, where agreements exist. The relevant tax calculation is needed for that relief.^[2]

Revenue Jersey also publishes guidance on automatic exchange of financial account information under the Common Reporting Standard. Its guidance says FATCA and CRS reports are separate, and places responsibility on the reporting party to identify the jurisdiction to which client information is transmitted on its return. Financial account reporting is separate from, and not a substitute for, the distribution tax rules above.^[3]

U.S. reporting for connected U.S. persons

The IRS describes a U.S. person as including a U.S. citizen or resident. It says U.S. persons who create a foreign trust or transact with one can have U.S. income tax consequences and information reporting requirements. The IRS connects filing duties to the person's role and activity, such as transfers, ownership under grantor trust rules, or receipt of distributions.^[6]

The IRS says Form 3520 is generally required for a U.S. person who creates or transfers property to a foreign trust, makes a loan to one, receives distributions or certain use of trust property, or is treated as its owner under grantor trust rules. The form also covers certain large gifts or bequests from foreign persons. The IRS instructions say a separate Form 3520 applies to transactions with each foreign trust.^[6][7]

For a U.S. person treated as the owner of a foreign trust, the IRS says the trust must timely file Form 3520-A and furnish annual statements to U.S. owners and beneficiaries. If the trust does not file, the U.S. owner completes a substitute Form 3520-A and attaches it to a timely Form 3520. The IRS guidance also identifies Form 8938 and FinCEN Form 114 as possible additional reporting regimes, subject to their own conditions.^[6]

Jersey tax treatment and U.S. reporting answer different questions. Revenue Jersey describes Jersey tax on distributions and recipient declarations. The IRS describes information filings and U.S. tax consequences based on U.S. person status and connections to a foreign trust. A Jersey trustee residence description does not by itself answer whether a U.S. person has an IRS filing obligation.^[2][6]

In more detail

U.S. reporting can depend on whether a person transfers property to a foreign trust, receives a distribution, or is treated as an owner. The IRS describes Form 3520 as covering certain transfers and distributions, as well as ownership of part of a foreign trust by a U.S. person.^[8]

A foreign trust with a U.S. owner files Form 3520-A annually, according to the IRS. Each U.S. person treated as an owner is responsible for the trust's Form 3520-A filing and for furnishing annual statements.^[8]

For a U.S. person treated as the owner of a foreign trust under grantor trust rules, the IRS says the trust's income is generally taxed to that person.^[6]

Key points

A U.S. person who transfers property directly or indirectly to a foreign trust generally must report the transfer on Form 3520.^[9]

A U.S. person reports certain direct or indirect distributions from a foreign trust on Form 3520.^[9]

Related reading

See Jersey information exchange and U.S. trust reporting for related reporting topics. Trusts and statutory regimes under Jersey law describes Jersey trust arrangements and statutory regimes. Jersey trusts for U.S. citizens provides a broader Jersey guide. Malta trust taxation and U.S. reporting covers trust taxation and U.S. reporting in another jurisdiction.

Questions and answers

Related resources

Related glossary terms

• Foreign trust loan: Form 3520 filing rules address a loan received by an owner or beneficiary, or a related U.S. person, and outstanding qualified obligations from the trust.
• Section 679: Section 679 addresses certain transfers by U.S. persons to foreign trusts. It treats some property transfers as ownership when the trust has a U.S. beneficiary.
• Recognition of a trust: The Hague Convention describes recognition of a trust, its minimum legal effects, and limits tied to applicable law. Jersey law also addresses recognition.

Related articles and guides

• Malta trust taxation and U.S. reporting: Malta summarizes trust tax treatment and administrative obligations for a trust with at least one Malta-resident trustee, and IRS forms for U.S. persons.
• Jersey Courts and Trust Legal System: Jersey's trust statute gives its courts defined powers and sets proper law rules, with the limits the statute itself states. Written for U.S. citizens.
• Bermuda Trust Law and U.S. Reporting: Bermuda law describes trusts as relationships in which trustees manage assets for beneficiaries or stated purposes, and U.S. reporting duties apply on top.

Tools and official documents

• Form 3520-A: annual information return of a foreign trust: Form 3520-A is a foreign trust's annual information return for a U.S. owner: ownership, annual statements, attachments, related forms and filing timing.

Related pages

• Jersey: overview: Start page for this jurisdiction.
• Trust legislation
• Types of trusts
• Trustee regulation and licensing
• Reporting and information exchange