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JERSEY
DOUBLE -TAX TREATIES
- JERSEY INTERNATIONAL AGREEMENTS
Until
recently, Jersey did not normally enter
tax treaties as a matter of policy; for
some time double taxation agreements existed
only with the United Kingdom and Guernsey,
and a limited agreement with France exempting
a resident of either country from tax in
the other country on profits from shipping
and air transport.
However,
in response to the growing demands of the
OECD and its member governments for greater
fiscal transparency, Jersey has been keen
to foster an image as a reputable international
finance centre and has begun to sign more
tax treaties, and agreements for the exchange
of tax information.
In
addition to the DTAs with the UK and Guernsey
and the limited agreement with France, Jersey
has entered into tax treaties with Malta,
Denmark, Finland, Iceland, Sweden, the Faroe
Islands, Greenland, and Norway (the latter
seven countries being collectively known
as the 'Nordic Group'). A treaty with Estonia
awaits signature, while negotiations towards
a DTA with Belgium were described as "well
advanced" in April 2010.
Jersey
has signed 15 bilateral Tax and Information
Exchange Agreements, including with France,
the UK, Germany, Sweden, Norway, Iceland,
Greenland, Finland, the Faroe Islands, Denmark,
the Netherlands, Ireland, Australia, New
zealand and the United States. Limited double
taxation avoidance agreements have also
been concluded with some of these countries.
At
the time of writing all of these agreements
were in force, except the TIEAs with Ireland,
Australia and New Zealand, all of which
are expected to become enforceable some
time in 2010.
Ahead
of the signing of the TIEA with the UK in
March 2009, Jersey’s Chief Minister,
Terry Le Sueur said: “We are particularly
pleased to have Jersey recognised by the
UK as a member of the community of jurisdictions
committed to international co-operation
and information exchange on tax matters,
and to have their assurance that Jersey
will be treated as such by the UK authorities.”
He
added: “Last year the OECD Secretary
General referred to the fact that Jersey
has signed a number of Tax Information Exchange
Agreements, and called for clear political
recognition for those offshore financial
centres that have made this kind of progress.
We hope to see this reflected in the outcome
of the G20 Summit in London on April 2 and
that there will greater pressure put on
those countries, including some OECD members,
who have not yet shared Jersey’s commitment
to transparency and co-operation.”
In
its progress report on the implementation
of the internationally agreed tax standard,
issued in conjunction with the G20 London
Summit of April 2, the OECD listed Jersey
as a jurisdiction that has “substantially
implemented” said standard and thus
the jurisdiction gained a place on the Organization’s
‘white list’ of compliant jurisdictions.
Jersey Double Tax Treaties
The
UK and Guernsey treaties do not conform
to the OECD standard model treaty. Their
main features are as follows:
-
the
profits derived from an industrial or commercial
enterprise in one country will not be taxed
in the other country except to the extent
that they are attributable to a permanent
establishment;
- profits
of shipping or air transport attributable to
a resident of either country are not taxed in
the other country, regardless of 1.
-
an
individual resident in only one of the two
countries is exempt from tax in the other
country on personal, including professional
services performed in the other country on
behalf of a resident of his own country (but
they must be taxed in his own country)
- if
despite the above, tax is payable in both countries,
the tax paid in one country is allowed as a
credit against tax due in the other.
However
as far as Jersey is concerned allowance for
tax paid is only up to 20% of the taxable income
in the other country, i.e the Jersey rate of
tax is applied to, say, UK taxable income rather
than the amount actually levied by the UK Inland
Revenue. This
means that there is effectively only a partial
double taxation agreement between Jersey and
the UK.
The
agreement with the United Kingdom specifically
excludes dividends and debenture interest from
its provisions.
International
Business Companies (which are in any case being
phased out) are not entitled to the benefits of
the UK double tax treaty.
In
December 2009, the Jersey authorities released
guidance for Jersey residents with UK pensions
following the entry into force on November 27,
2009, of a bilateral Tax Information Exchange
Agreement (TIEA) signed by the two governments
in March 2009.
Alongside
the signing of the TIEA, the two authorities agreed
to amend the 1952 Arrangement between Jersey and
the United Kingdom for the Avoidance of Double
Taxation and the Prevention of Fiscal Evasion
with respect to Taxes on Income.
This
incorporates a major change to the tax treatment
of pensions, which means that Jersey residents
will no longer be taxed by the UK tax authorities
on certain pensions that they receive from the
United Kingdom.
The
Island's Comptroller of Income Tax, Malcolm Campbell,
commented that:
“Following
the enactment in the UK of the Double Taxation
Relief on International Tax Enforcement (Jersey)
Order 2009, Jersey residents in receipt of a UK
pension may apply to the UK Tax Authority, HM
Revenue and Customs (HMRC), to have, with effect
from the April 6, 2010, their UK pension paid
to them without the deduction of UK tax”.
“This
arrangement could mean significant savings in
terms of tax paid for some Jersey residents, who
could have been paying 40% tax to HMRC on their
pension and who may in future be subject to tax
at 50%. The arrangement means that, subject to
a claim being made and accepted by HMRC, Jersey
residents will only be paying tax in Jersey, at
a maximum rate of 20%, on their UK pension.”
The
arrangement also affects residents of the United
Kingdom who have been paying Jersey tax on their
Jersey pensions.
Under
the new regime, UK residents will be able to apply
to the Comptroller to stop Jersey tax being deducted
from their Jersey pensions, meaning that they
will only pay tax in the United Kingdom.
Jersey International
Agreements
It
became clear in May 2002 that Jersey, along with
its fellow UK dependent territories Guernsey and
the Isle of Man, would agree to be part of the
EU's information-sharing regime, whereby financial
institutions are obliged to pass details of income
on investments by nationals of EU member states
to their home tax administrations. The EU began
information-sharing in 2005, and after some hesitation,
Jersey decided to opt for a withholding tax on
the Swiss model. This withholding tax became effective
from July 1, 2005 at an initial rate of 15%, rising
to 20% from July 1, 2008. Jersey's Comptroller
of Income Tax reported in mid-2006 that GBP13
million was collected in withholding tax revenues
from bank deposits in the first six months of
the directive. For the year 2007, Jersey paying
agents retained and passed to the Comptroller
a total of GBP34.98 million of withholding tax.
This rose slightly to and GBP36.62m in 2008.
In
November, 2002, Jersey signed a Memorandum of
Understanding (MoU) with the Gulf state of Bahrain,
designed to facilitate cooperation between the
two countries on issues such as applications for
licences from financial institutions, and the
investigation of irregularities.
In
October 2003, the Jersey Financial Services Commission
announced that Jersey had signed a Memorandum
of Understanding (MoU) with the International
Organisation of Securities Commissions (IOSCO).
The MoU is designed to combat securities and derivatives
violations. It obliges signatories to share information
about the illegal use of their securities and
derivatives markets with each other. In signing
up to the MoU, Jersey joins another 24 members.
However, according to the JFSC, the island is
one of the first offshore finance centres to join.
"By signing this memorandum with IOSCO, Jersey
reinforces its status as a leading international
financial centre and gives international investors
greater confidence in the island," JFSC compliance
director, John Pallot explained.
In
2006, the JFSC signed Memoranda of Understanding
with the regulators in Dubai, Qatar the Netherlands
and the Cayman Islands. These agreements have
formalised arrangements for cooperation and information
sharing between the regulators and facilitated
the enforcement of, and compliance with, the laws
of their respective jurisdictions in a bid to
help protect investors and depositors and to promote
the integrity of financial services markets in
the two jurisdictions.
The
Jersey Financial Services Commission and the Cyprus
Securities and Exchange Commission signed a memorandum
of understanding in February 2007 that will further
co-operation between the two regulatory bodies.
The
JFSC signed a Memorandum of Understanding in April
2007 with two other authorities: the Office of
the Superintendent of Financial Institutions Canada
(OSFI) and the Irish Financial Services Regulatory
Authority (IFSRA).
The
JFSC and the British Virgin Islands Financial
Services Commission signed a memorandum of understanding
in August 2007.This establishes a formal basis
for co-operation, including the exchange of information
and investigative assistance.
In
October 2009, Jersey’s regulator, the Financial
Services Commission, signed a statement of cooperation
with four United States' financial regulators.
The
statement was signed by the JFSC’s Director
General, John Harris, and formalizes existing
arrangements for cooperation and information sharing
between the respective agencies and Jersey.
Jersey's
Chief Minister, Terry Le Sueur, said: “This
agreement recognizes that the commission and its
counterparts in the United States rely on the
quality of each other’s regulatory standards.
It is the latest in a number of such agreements
between the commission and other regulators around
the world, and reflects the cooperation that already
exists between Jersey and the United States.”
“Jersey
signed a Tax Information Exchange Agreement with
the US in 2002, and earlier this year I received
a letter from the US Treasury, setting out the
importance the US Administration attaches to this
transparency agreement,” he continued.
"In
the letter, Mr Michael Mundaca, from the US Treasury
Department, stated that the US Administration
believes it is important to distinguish between
those jurisdictions that are adopting international
standards for information exchange and those that
are not.”
“Close
co-operation with the US regulators during the
current period of change can only benefit an industry
which prides itself on meeting international standards,”
Le Sueur concluded.
In
November 2009, the JFSC Polish Financial Supervision
Authority signed a Memorandum of Understanding
(MoU) that will further regulatory cooperation
between the two bodies.
The
MoU establishes an agreed mechanism under which
the signatories commit to using their statutory
powers of cooperation to assist each other.
John
Harris, Director General of the JFSC, said: “I
am delighted to sign this Memorandum of Understanding
with the Polish Financial Supervision Authority.
The global financial crisis has highlighted the
need for close cooperation between regulators
and this Memorandum will assist in that regard
by establishing a formal framework for the exchange
of regulatory information and the provision of
investigative assistance. Such collaboration should
help to protect investors and depositors and promote
the integrity of financial services markets in
Jersey and Poland.”
In
December 2009, JFSC signed a Memorandum of Understanding
with Belgian regulator, the Banking, Finance and
Insurance Commission, formally enhancing cooperation
on regulatory matters.
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