Jersey: Tax Information Exchange Agreements – The Essentials

BACKGROUND

1. The purpose of TIEAs is to facilitate the exchange between countries of information relevant to the enforcement of tax laws. TIEAs have their origins in the OECD's initiative on "harmful tax practices", launched in 1998. In 2002 Jersey publicly committed itself to supporting the initiative. The need to exchange tax information is a major part of the initiative.

2. TIEAs have now been concluded between Jersey and 21 countries: the USA, the Netherlands, Germany, Norway, Sweden, Denmark, Greenland, the Faroe Islands, Finland and Iceland, the UK, France, Ireland, Australia, New Zealand, Portugal, the People's Republic of China, Turkey, Mexico, Canada and Indonesia. All are currently in effect, except the People's Republic of China, Turkey, Mexico, Canada and Indonesia which will come into effect some time in 2011.

3. Jersey is negotiating further TIEAs with Argentina, Brazil, the Czech Republic, Greece, India, Italy, Japan, Poland, the Republic of Korea and South Africa with Hungary, Spain, Luxembourg, Russia and Switzerland some way behind. Jersey has also approached Austria, the Slovak Republic and Saudi Arabia regarding TIEAs, of which formal responses are awaited. The agreements, once signed, take many months to come into legal effect. Both contracting countries have to go through internal ratification procedures.

4. The Taxation (Exchange of Information with Third Countries) (Jersey) Regulations 2008 set out how TIEAs will operate.

PURPOSE OF TIEAs

5. The purpose is stated in Article 1 of each TIEA:

exchange of information that is foreseeably relevant to the administration and enforcement of the respective laws of the Contracting Parties concerning taxes covered by this Agreement, including information that is foreseeably relevant to the determination, assessment and collection of such taxes, the recovery and enforcement of tax claims, or the investigation or prosecution of criminal tax matters.

6. It is plain therefore that the agreements concern both the determination and enforcement of civil tax liability and the investigation of possible tax fraud.

FISHING EXPEDITIONS

7. It has always been one of the fundamental principles of TIEAs that they do not permit "fishing expeditions" – that is, broad, vague and unsupported requests for information, from any source, made in the hope that something of interest may turn up.

8. The texts of the TIEAs are designed to ensure that such fishing expeditions are not allowed. Requests under TIEAs must be detailed and must specifically justify why they are made. There must already be in the other country an existing investigation or examination relating to tax concerning a specific person or persons.

WHAT TIMESCALE IS COVERED?

9. In criminal tax matters the information can concern potential offences committed at any time. However not all TIEAs are expressed this widely. The applicable timescale depends on the wording in the individual agreements. Conversely for civil tax matters the information that can be sought is limited to determining liability to tax after the TIEA came into force.

IN WHAT CIRCUMSTANCES MAY A REQUEST FROM THE OTHER COUNTRY BE MADE?

10. The requesting country has to make a formal request for information covered by Article 1 (see paragraph 5 above). It is irrelevant whether or not Jersey collects information of the sort requested for its own tax purposes, and it is also irrelevant whether or not it is a crime in Jersey to commit the alleged crime being investigated by the requesting country. The laws and procedures of the requesting country are paramount.

11. Requests can only be made when the requesting country's tax authority is unable to obtain the requested information by other means domestically, unless doing that would be disproportionately difficult.

WHAT INFORMATION COULD BE SOUGHT?

12. Each agreement states that each Contracting Party must be able to obtain and provide upon request:

a) information held by banks, other financial institutions, and any person, including nominees and trustees, acting in an agency or fiduciary capacity,

b) (i) information regarding the beneficial ownership of companies, partnerships and other persons, including in the case of collective investment funds and schemes, information on shares, units and other interests;

(ii) in the case of trusts, information on settlors, trustees, protectors and beneficiaries; and in the case of foundations, information on founders, members of the foundation council and beneficiaries,

provided that this Agreement does not create an obligation on the Contracting Parties to obtain or provide ownership information with respect to publicly traded companies or public collective investment funds or schemes unless such information can be obtained without giving rise to disproportionate difficulties.

13. It is plain that the TIEA request is intended to be able to see through banking confidentiality and through any company, trust or other fiduciary structure – and to focus on who has an interest in the assets concerned.

WHAT INFORMATION MUST THE REQUESTING COUNTRY PROVIDE TO JERSEY?

14. The agreement also sets out at length what information the requesting country must provide. The request must relate to an ongoing examination of or investigation into the tax affairs of a particular person, in respect of whom information is believed to be held in Jersey. The request must be detailed:

Any request for information shall be formulated with the greatest detail possible and shall specify in writing:

a)the identity of the person under examination or investigation,

b)the period for which the information is requested,

c) the nature of the information sought and the form in which the requesting Contracting Party would prefer to receive it,

d)the tax purpose for which the information is sought,

e) the reasons for believing that the information requested is foreseeably relevant to the administration and enforcement of the tax law of the requesting Contracting Party, with respect to the person identified in subparagraph a) of this paragraph,

f) grounds for believing that the information requested is held in the requested Contracting Party or is in the possession of or obtainable by a person within the jurisdiction of the requested Contracting Party,

g) to the extent known, the name and address of any person believed to be in possession of the requested information,

h) a statement that the request conforms with the laws and administrative practice of the requesting Contracting Party and that the information would be obtainable by the requesting Contracting Party under its laws or in the normal course of administrative practice in response to a valid request made in similar circumstances from the requested Contracting Party under this Agreement,

i) a statement that the requesting Contracting Party has pursued all means available in its own territory to ] obtain the information, except those that would give rise to disproportionate difficulties.

15. It is significant that sub-paragraph (g) above, relating to the person believed to have the required information, begins "to the extent known ...". It appears that a request can therefore be submitted without stating who in Jersey is believed to hold the information sought.

16. This raises the question how Jersey would deal with a request to the effect "we believe X has assets held in a Jersey trust called Y, but we do not know who holds the relevant records. Please find out, and get the information from them." In the case of a trust, since there is no register of trusts in Jersey, then it is hard to see how the Comptroller could act on the request - short of writing to all the trust companies to ask them if they administer the trust concerned. This would in our view be fishing, and we do not believe that he would do it.

17. It follows that the likelihood of success of a request from another country for information from Jersey under a TIEA depends heavily on how much information the requesting country already has.

18. If the request does not comply with the requirements of the TIEA, then Jersey ought not to act upon it and could be expected to decline the request. As per the individual agreements a country "may decline to assist" with a request:

a) where the request is not made in conformity with this Agreement;

b) where the requesting Contracting Party has not pursued all means available in its own territory to obtain the information, except where recourse to such means would give rise to disproportionate difficulty; or

c) where the disclosure of the information requested would be contrary to the public policy of the requested Contracting Party.

19. The agreement also sets out some other reasons why Jersey might decline to assist, including where complying would involve carrying out "administrative measures at variance with its laws and administrative practices" – which could perhaps be used to justify not embarking on general fishing expeditions, or not requiring, for example, the compilation of a register of trusts.

20. If the request conforms with the agreement, then Jersey will take steps to seek the information from the relevant people or organisations.

FROM WHOM COULD INFORMATION BE SOUGHT?

21. Where the Comptroller does not hold the requested information, he may seek it from those likely to hold it. The agreement states:

If the information in the possession of the competent authority of the requested Contracting Party is not sufficient to enable it to comply with the request for information, that Contracting Party shall use at its own discretion all applicable information gathering measures necessary to provide the requesting Contracting Party with the information requested, notwithstanding that the requested Contracting Party may not, at that time, need such information for its own tax purposes. [our emphasis]

22. The Regulations set out how this is to operate in practice. Regulation 2 deals with the Comptroller's power to request information direct from the "taxpayer". The "taxpayer" is defined as the "person whose liability to pay tax is under examination or investigation in a third country." The "taxpayer" may be required to provide (our emphasis added):

" a document or record in the taxpayer's possession that contains or in the reasonable opinion of the Comptroller may contain tax information that is relevant to a liability to tax to which the person is subject or may be subject, or to the amount of any such liability;

" tax information within the taxpayer's knowledge or belief that the Comptroller reasonably requires as being relevant to any such liability, or to the amount of any such liability; and

" evidence within the taxpayer's possession that the Comptroller reasonably requires as being relevant to the taxpayer's residential status for the purposes of these Regulations.

23. Regulation 3 deals with obtaining tax information from "any person other than the taxpayer". The type of person covered by this Regulation is not limited. It could be any person or organisation. It would include trust companies and banks. A person other than the "taxpayer" can only be required to provide information if the Comptroller has reasonable grounds for believing:

" that a taxpayer may have failed to comply, or may fail to comply, with a domestic law of a third country concerning tax; and

" that any such failure has led, is likely to have led or is likely to lead to serious prejudice to the proper assessment or collection of tax.

24. If the above applies, the Comptroller may require the person to provide tax information that is relevant to:

" a liability to tax to which the taxpayer is subject or may be subject;

" the amount of any such liability; or " the taxpayer's residential status for the purposes of these Regulations.

WRITTEN NOTICE FROM COMPTROLLER

25. The procedure in both cases, whether the information is sought from the "taxpayer" or any other person, is that the Comptroller must give a reasonable opportunity to provide the document or record, before issuing a written notice. The notice then has to give a period of at least 30 days to comply.

26. Normally the Comptroller must give written reasons for issuing the notice. However this does not apply where to give reasons would identify someone who has provided information relied upon in deciding to make the notice, or where the Comptroller is satisfied the "taxpayer" has committed a criminal offence of any kind in the other country, or where to do so would prejudice the assessment or collection of tax.

27. There is no prohibition in the Regulations against recipients of such a Notice informing their client (the "taxpayer") that a notice has been received. However in cases where the underlying investigation is or may be criminal, and where it is not apparent that the taxpayer has already been notified of the investigation, prudence would suggest making further inquiries of the Comptroller to be satisfied that it is appropriate before contacting the client. Depending on the facts, a SAR may be justified.

NON-COMPLIANCE WITH A NOTICE

28. If the Comptroller considers that a "taxpayer" has not complied with a notice, or there are reasonable grounds to suspect that he will not comply with a notice, he may apply to the Royal Court for an order to comply.

29. Where a person other than a "taxpayer" is believed to hold relevant information, and either that person has failed to comply with a notice, or there are reasonable grounds to suspect that he will not comply with a notice, or "the taxpayer to whom the requirement relates or any of the class of taxpayers to whom it relates" has failed or may fail to comply with the tax law of the other country and such failure is likely to lead to serious prejudice to the proper assessment or collection of tax, the Royal Court may, on the application of the Comptroller, compel provision of the information.

CRIMINAL OFFENCES UNDER THE REGULATIONS

30. It is a criminal offence not to provide information requested in a notice, and also an offence to fail to comply with a court order to provide information. The punishment is a fine.

31. It is also a criminal offence punishable by fine to alter, conceal, destroy or dispose of any document or information covered by a notice.

32. It is an offence to aid, abet, counsel or procure any of the above offences. This means for example that any directors of a company that has committed one of the offences may be personally guilty, and liable to the same punishment, if he assisted in, encouraged or helped bring about the offence by the company.

CHALLENGE TO A NOTICE

33. There is a right of appeal to the Royal Court, under Regulation 14, against a notice from the Comptroller. The appeal must be brought within 21 days of receipt of the notice. The notice is suspended until the Royal Court has heard the appeal. The court may confirm, vary or set aside the notice, and may award costs as it thinks fit.

34. A challenge could be based on a failure by the requesting country or the Comptroller to comply with any of the requirements of the TIEA or the Regulations.

35. There would also always remain the remedy of judicial review if the decision to issue the notice could be challenged as biased, unlawful, irrational, in breach of natural justice, etc, but the circumstances would have to be extreme for such a challenge to succeed. The most promising challenge would be under regulation 14.

36. Since the requirements for a detailed request are lengthy, there are many ways in which a request could be held to be inadequate. The Royal Court would no doubt be keen to ensure that no fishing expeditions are entertained: that there are sound reasons to believe that the person or persons under examination or investigation may be liable under the civil tax laws or criminal laws in the other country, and that the Jersey persons subject to the notice hold relevant information.

WHAT USE CAN BE MADE OF THE INFORMATION OBTAINED?

37. The agreements all make clear that information obtained under a TIEA should be kept confidential by the requesting country. The information should only be disclosed to persons or authorities (including courts and administrative bodies) who are concerned with the purpose in Article 1 – i.e. the administration and enforcement of laws concerning tax, including criminal tax matters. It may be made public in court proceedings in the other country.

38. The information may not be used by the other country for purposes other than those in Article 1 unless the relevant Jersey authorities consent in writing. It may not be disclosed to any other jurisdiction.

www.bakerandpartners.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions