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
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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