Jersey Executive Summary
Jersey Not In EU Fiscal Area
The
island of Jersey, one of the Channel Islands
between England and France, is a British Crown
dependency although in practice it is self-governing.
Britain is responsible for its external affairs
including negotiations with the European Union;
under the UK's accession treaty with the EU,
Jersey forms part of the single market but is
outside the EU fiscal area.
Economy Buoyant But Jersey Is Full Up!
Jersey
has a buoyant economy dominated by the finance
sector. Unemployment is very low. The political
stability in Jersey together with its consistently
low tax status and its international reputation
as an important financial centre make it an
attractive prospect to foreign investors and
workers. To protect the island's limited resources
the government tends to discourage labour-intensive
inward investment that is controlled by non-residents.
There are no investment grants or incentives,
but electronics and other knowledge-based industries
have been encouraged.
Jersey's Lowtax Specialisations
Jersey
has particularly strong banking, investment
fund and trusts sectors, with very well-developed
advisory and financial infrastructure. The Jersey
government statistical report shows that at
the end of September 2010, 45 banks held deposits
of GBP167.2bn of which GBP57.1bn were sterling
deposits.
There
are a number of low-tax business formats, including
International Business Companies, 'Exempt' companies,
and Limited Partnerships. However in accordance
with the Island’s commitment to the European
Council of Finance Ministers (Ecofin), Jersey
has pledged to ensure that no new International
Business Companies are capable of being formed.
The introduction of the new 'zero/ten' tax regime
on January 1, 2009 also put paid to the exempt
company, although non-financial services companies
qualify for the 0% corporate tax. Jersey's
0/10 corporate tax regime may prove to be short-lived,
however, due to concerns expressed by the EU
that it does not adhere to the 'spirit' of the
Code of Conduct on Business Taxation.
A
recent assessment of Jersey’s business
tax regime by the EU Code of Conduct on Business
Taxation Group (“the Code Group”)
focused on the interaction of the deemed distribution
and attribution provisions with the 0% general
rate of tax that applies to Jersey resident
companies. In
early 2011, a proposal was lodged by the Treasury
Minister, supported by the Council of Ministers,
to remove the deemed distribution and attribution
rules with effect from January 2012.
The
Treasury Minister, Senator Philip Ozouf said:
“We are confident that the evidence shows
this positive action will result in Jersey’s
0/10 tax regime being considered fully compliant
with the Code. We can then keep our existing
corporate tax regime while also meeting the
concerns of the EU.
Jersey v. the EU and the OECD?
Jersey's
unique situation with regard to the EU is both
a strength and a weakness. The island will remain
a favoured base for holding and trading companies
working into the EU, and for e-commerce activity;
but it has the European Commission and the OECD
to contend with.
Jersey
signed a 'commitment' letter to the OECD in
February 2002, but it contained an 'Isle of
Man' level playing field clause making changes
dependent on comparable changes in Switzerland
and the USA. By mid-2003, however, the OECD
seemed to have forgiven Jersey, and was assisting
it to design a '0/10' corporate tax system.
In May, 2002, it became clear that Jersey, along
with its fellow UK dependent territories Guernsey
and the Isle of Man, was ready to sign up to
the EU's information-sharing regime. After the
EU finally reached its compromise agreement
on the Savings Tax Directive in early 2003,
Jersey decided, along with Guernsey and the
Isle of Man, to apply a withholding tax to the
returns on personal savings for EU residents.
The Directive came into force on July 1, 2005.
Jersey
seems to have emerged from a second wave of
attacks by the OECD against offshore secrecy
in the wake of the 2008 financial crisis in
a strong position, and its commitment to fiscal
transparency through new Tax and Information
Exchange Agreements and its record as a reputable
financial centre should stand it in good stead.
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