Last year Jersey cemented its position as a leading centre for companies looking to list - as reflected in the rise in volume and value of Jersey companies listed on exchanges around the world. Here are some challenges that lie ahead in this jurisdiction over the next 12 months.
In affirming Jersey's AA+ credit rating, Standard & Poor's (S&P) noted the jurisdiction's mature political and institutional setting, flexible policy environment, wealthy economy and healthy financial position, underpinned by low debt and a high net general government asset position. Last year also saw a recommendation from the European Securities and Markets Authority (ESMA) for Jersey to be included in the first wave of 'third non-EU countries' whose managers can seek authorisation for a passport to market their alternative investment funds (AIF) to professional investors throughout EU Member States.
Memorandums of Understanding (MoUs) were signed between Jersey and South Africa, Rwanda, Denmark and Switzerland, providing a framework for the exchange of confidential regulatory information and co-operation regarding the supervision and regulation of firms. Jersey signed tax information exchange agreements (TIEAs) with Korea and Spain, and 2015 also saw the Channel Islands Financial Ombudsman (CIFO) introduced: a pan-Channel Islands organisation set up to resolve complaints about financial services provided in or from Jersey, Guernsey, Alderney and Sark. The office is independent and will provide an informal, speedy, effective and free alternative to going to court for complainants.
This year, a number of legislative and regulatory requirements will affect those operating in Jersey.
Common Reporting Standards
The Common Reporting Standard (CRS) is the global standard for
the automatic exchange of financial account information and aims to
prevent cross-border tax evasion. The CRS has been designed to
provide maximum consistency with US FATCA.
Jersey has committed to the early adoption of the CRS. This means that account information for 2016 will be automatically reported in 2017.
The OECD'S BEPS action plan is designed to align international tax rules and tackle base erosion and profit shifting. The final reports remain centred on three issues:
- establishing international coherence of corporate income taxation
- restoring the full effects and benefits of international standards
- ensuring tax transparency while promoting increased certainty and predictability.
In Jersey, the emphasis will now be on an ongoing commitment of the Government to support the OECD action on BEPS – the active engagement of the territory in the key initiatives involved in the fight against tax evasion, fraud and abusive tax avoidance.
It is key that your business understands the potential issues of the BEPS project, the fundamental changes it introduces and is able to take appropriate action. Talk to your contact at TMF Group Jersey about the changes and your organisation can prepare for the requirements set out in the BEPS Action Deliverables.
On 13 December 2013, Jersey and the US signed an agreement to improve international tax compliance and to implement FATCA. As a result, the 30% withholding tax and account closure requirements will not apply, apart from in circumstances of unresolved significant non-compliance. Under the terms of the agreement, financial institutions have now started to provide the Jersey Taxes Office with the required information which in turn will then forward that information to the Competent Authority in the US.
The Inter-Governmental Agreement (IGA) with the UK is sometimes known as UK FATCA. This is because the information exchanged under the UK IGA is similar to that exchanged with the US under FATCA. It can also at time be referred to as CDOT (crown dependencies and overseas territories). The overall aim of the UK IGA is to improve tax compliance through the automatic exchange of information.
Jersey financial institutions, such as banks and trust companies, will have to send information held on their UK resident customers to the Jersey Taxes Office which will then send the information to HM Revenue and Customs (HMRC). The information that must be exchanged is described in Article 2 of the IGA. It includes information relating to individuals, companies and other entities, such as trusts.
The agreement is reciprocal, meaning that we will automatically receive tax information on Jersey residents who hold accounts in the UK. The Common Reporting Standard will replace the UK IGA in due course.
Excluded property changes – trusts owning UK residential property
In tandem with the changes to domicile status for tax purposes, the Government intends to amend the rules on excluded property so that trusts or individuals owning UK residential property through an offshore company, partnership or other opaque vehicle will pay IHT on the value of such UK property in the same way as UK domiciled individuals. The measure will apply to all UK residential property whether it is occupied or let and of whatever value. Some structures may, therefore, prove to be expensive to retain, particularly if they are also subject to the Annual Tax on Enveloped Dwellings and each will need to be considered on its own merits.
There will be no change to the IHT position for non-doms or excluded property trusts in relation to UK assets other than residential property, or for non-UK assets. Therefore, offshore trusts are expected to continue to offer a number of planning opportunities both before and after April 2017.
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.