By Neil Oliver

It is said that in life only two things are certain; death and taxes. For a jurisdiction that has built its reputation on a low tax regime, the EU code group's challenge to Jersey's corporate tax regime had the potential to be unsettling for Jersey's taxpayers. International organisations looking to structure their business and managers seeking to set up investment funds look for certainty when selecting a jurisdiction, so certainty over corporate taxation coupled with its top class regulatory environment is essential to maintaining Jersey's status as a leading international finance centre.

It is excellent news that any uncertainty regarding Jersey's zero-ten corporate tax regime has now ended. At its meeting in September 2011, the EU Code of Conduct on Business Taxation Group accepted that Jersey's proposal to end shareholder taxation through attribution of profits or deemed dividends would remove the harmful effects of the zero-ten corporate tax. This decision was ratified by ECOFIN in December 2011 thereby strengthening Jersey's position as a market leading jurisdiction for the establishment of companies and funds. This is undoubtedly a very welcome and positive development for Jersey.

Jersey has always sought to maintain its general zero percent rate of income tax for companies. Tax neutrality is extremely important for maintaining its competitive position. It allows businesses to structure commercial operations in Jersey secure in the knowledge that there will be no taxation burden. Recent legislation has ensured that this neutrality would be maintained for funds and similar vehicles. The EU announcement is good news for other sectors of Jersey's finance industry ensuring that a simple system of tax neutrality will maintain Jersey's attraction to all international businesses.

The cost of repealing the shareholder taxation rules is limited to a cash flow effect to the extent that profits continue to be distributed to Jersey resident shareholders. The economic benefit of a neutral regime and the business it attracts to Jersey should compensate for the £10 million loss of tax which has been budgeted for.

Clarity over corporate taxation positions Jersey extremely well to prosper in the future. Jersey has maintained throughout that zero-ten remains a viable, strong tax regime that is easily understood by service providers and their clients and at the same time ensures that Jersey offers stability and remains competitive with other jurisdictions. The EU's decision gives finance firms even greater confidence in Jersey as a solid, robust and attractive centre in which to do business.

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