By Neel Sahai
In 2002 political commitment was made in Jersey to reflect the OECD's principles in promoting transparency and exchange of information relating to tax matters. Since then Jersey has signed over 25 Tax Information Exchange Agreements (TIEA's), including one with India.
What is a TIEA and what is its purpose?
A TIEA is a bilateral agreement between two jurisdictions to establish a formal regime for the exchange of information relating to taxes. TIEA's are generally based upon an OECD model agreement to facilitate a level playing field in terms of how information is exchanged. The purpose of a TIEA is to act as a tool in the fight against fiscal crime.
How is information exchanged?
Tax information exchanges are carried out by request only. There are strict criteria written into agreements stating explicitly that no 'fishing expeditions' are allowed.
Information requests are sent to the 'Competent Authorities' of the respective jurisdiction and must include the following information:
- The identity of the person under examination or investigation;
- The information being sought;
- The tax purpose for which it is sought;
- Grounds for believing that the information requested is held in the jurisdiction;
- The name and address of any person believed to be in possession of the requested information, to the extent known;
- A statement that the request is in conformity with the law and administrative practices of the requesting jurisdiction and the TIEA; and
- A statement that the requesting jurisdiction has pursued all means available in its own territory to obtain the information.
As long as the above process is followed correctly, the information is provided by the Competent Authority within 60 days of the valid request being made.
What does this mean for clients who base their affairs in Jersey?
The process has been designed to protect the privacy and confidentiality of clients who have set up their affairs legally and correctly, but to identify those who have committed a fiscal crime.
There is concern amongst clients in India that the TIEA regime could be open to abuse by the Competent Authority, however the OECD and the Jersey authorities have carefully designed the process to minimise any risk of such abuse.
What are the benefits of a TIEA?
Jersey is highly ranked as a top tier international finance centre and it achieves this by complying with international rules, regulations and best practice. Many clients use Jersey as they feel reassured by this reputation. In order to retain this reputation, Jersey needs to demonstrate these qualities and this includes signing TIEAs.
The Indian Government announced in their last budget the issuing of a blacklist called the Notified Jurisdiction list, made up of jurisdictions that are not effectively exchanging tax information. The penalties for being on this list are significant and include onerous reporting requirements and large withholding tax payments. By signing the TIEA, Jersey should not be included on this blacklist, resulting in significant benefits to clients who use Jersey legitimately.
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