Jersey: Country and Foreign Investment Regime
Back to Jersey
Information: Business, Taxation amd Offshore
In this section:
- Jersey: Geography
- Jersey: Population, Language
and Culture
- Jersey: Releationship with
the EU
- Jersey: Government
- Jersey: Relationship with the
UK
- Jersey: Economy and Currency
- Jersey: The Channel Islands
Stock Exchange
- Jersey: Entry and Residence
- Jersey: Business Environment
- Jersey: Import of Foreign Capital
- Jersey: Investments by
Foreigners
Jersey Geography
Jersey
is situated off the north-west coast of France in the
English Channel. It is the largest and most southerly
of the Channel Islands with an approximate area of 45
sq miles. The nearest part of the French coast lies
14 miles to the east in Normandy while 85 miles to the
north is Weymouth on the English coast. Touristically,
the island is best known for its sandy beaches in the
south and west and high cliffs in the north. Much of
the land is used for agriculture. There are plenty of
scenic walks with a variety of wildlife. The climate
is moderate; Jersey is the sunniest part of the British
Isles with an average 1,915 hours of sunshine each year
for the period 1961 to 1990.
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Jersey Population Language and Culture
The
resident population by July, 2012 is an estimated 94,949.
English and French are both official languages and used
widely. In the country areas a Norman-French dialect is
spoken. The capital, St Helier lies on the island's southern
cape within one hour's flying time of London and Paris;
there are frequent flights to a number of UK and Continental
destinations.
Prior
to the Norman Conquest the Channel Islands formed part
of the territory belonging to the Duchy of Normandy. In
1204 when Normandy was freed from English rule the islands
retained their allegiance to the King of England. Successive
English monarchs have ruled the Islands through their
claim to the Duchy of Normandy but have observed the Islands'
established laws and customs. Royal charters have confirmed
the independence of the Islands' judicial systems and
administration, the right to tariff-free trade with England
and freedom from English taxes.
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Jersey Relationship with the EU
Jersey
is not a member of the EU. Protocol No 3 of the UK's Treaty
of Accession to the UK excludes the island from most of
the effects of the Treaty, other than those concerning
trade in goods.
There
is free movement of industrial and certain agricultural
goods between the island and the UK according to historic
Charter rights; and between the island and EEA countries
except for some sensitive products. The island applies
the external common customs tariff of the EU.
EU
(and hence UK) VAT does not apply to Jersey. Historically,
Low Value Consignment Relief (LVCR) enabled retailers
on Jersey to send goods valued at no more than GBP15 to
the UK mainland without applying VAT. The British Government
decided to scrap LVCR from April 1, 2012.
Jersey's
constitutional position in relation to the EU cannot be
changed without unanimous agreement of the member states,
including of course the UK, which by long-established
convention does not legislate in regard to Jersey without
prior consultation.
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Jersey Government
The Channel
Islands consist of two 'bailiwicks', Jersey and Guernsey,
and there are no constitutional links as such between
the two. Jersey is a British Crown dependency. The Queen
of England is the head of state and represented by a lieutenant
governor. The United Kingdom is responsible for its defence
and external relations but by long established constitutional
convention it is self-governing in matters of domestic
policy. The island has its own legislative assembly, the
States of Jersey, and a comprehensive independent legal,
fiscal and administrative system. The power to appoint
certain local administrators is vested with the Crown;
and with certain minor exceptions, legislation passed
by the island's assembly must be validated by the UK Privy
Council - normally this is just a formality.
The States
of Jersey is a unicameral, directly elected body and there
are no party politics. Apart from the few senior offices
in the gift of the Crown, most executive powers are administered
by committees of the States. This provides for direct,
effective administration, but may be short on checks and
balances. However, over many years the States has aimed
at creating a well-regulated, efficient financial centre
with up-to-date legal, judicial and regulatory frameworks.
Broadly, it seems to have succeeded: in 1998 the UK Government
carried out a review of the island's financial regulatory
regime with generally positive results (see next section).
The Government department which previously regulated the
finance sector was reborn in 1998 as the Financial Services
Commission, which now operates as an independent regulatory
agency. To some extent this change was a response to isolated
financial scandals which had threatened the island's generally
good reputation.
The island
is not directly represented in the United Kingdom Parliament.
By convention Parliament does not legislate for the island
without its consent in matters of taxation or on local
issues. The Island's assembly is consulted before any
international agreement is reached which would affect
it.
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Jersey Relationship With The UK
In
1998 the British Government announced that there would
be a review of financial regulation and structure in Jersey,
Guernsey and the Isle of Man. The review was carried out
by Anthony Edwards, a former senior Treasury civil servant,
and was published in November, 1998. Saying that 'the
islands are in the top division of offshore centres' Mr
Edwards gave the islands a generally satisfactory report,
making 154 recommendations that applied to Jersey. The
great majority of these covered matters that were already
in the legislative pipeline or were readily agreed to
by the administration. Some recommendations however were
more contentious for the island.
The
difficult recommendations were:
- That the
Financial Services Commission should have powers to
prosecute and to 'name and shame'
- That all
limited companies and limited partnerships should file
accounts
- That trustees
should be obliged to make proper disclosures to beneficiaries
- That trustees
should waive self-incrimination privileges
The administration's
initial replies amounted to a qualified refusal of these
recommendations, largely based on the existence of common
law safeguards and in defence of confidentiality, but
subsequent pressure from the FATF and the OECD, together
with the consequences of the September terrorist attacks
in the US have led to a considerable tightening up.
In
2001, for instance, the jurisdiction introduced a law
obliging trust and company service providers to obtain
an operating license from the Financial Services Commission,
in much the same way as banks and investment funds have
always been obliged to. This license commits the organisation
to record the beneficiaries of all assets handled, provide
adequate anti-money laundering training for staff, and
report all suspicious transactions to the authorities.
Jersey's
standards of anti-money laundering regulation have in
fact been the subject of favourable international comment,
and the G7 Financial Stability Working Group on offshore
centres places Jersey in Group 1 - those which meet international
standards of financial regulation and international co-operation.
Another
review questioning financial supervision and transparency,
taxation in relation to financial stability and international
cooperation in Britain's three Crown Dependencies (Guernsey,
Jersey, and the Isle of Man) and six Overseas Territories
(Anguilla, Bermuda, British Virgin Islands, Cayman Islands,
Gibraltar, Turks and Caicos Islands) was released in late
2009. Authored by Michael Foot, former Chairman of the
UK office of Promontory Financial Group, the report was
largely complimentary of the way in which the Crown Dependencies
conduct their economic and fiscal policies. Indeed, Foot
concluded that these territories made a significant contribution
to the liquidity of the UK market during his review, providing
net financing to UK banks of USD332.5bn, with Jersey by
far the largest net contributor. Foot also noted that
the Crown Dependencies have good frameworks for tackling
money laundering and terrorist financing, as recognised
by the Financial Action Task Force (FATF) and that all
three had met the Organization of Economic Cooperation
and Development (OECD) standard for tax transparency by
the G20 meeting in April 2009.
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Jersey Economy and Currency
The economy
is stable and is based largely on financial services,
agriculture and tourism; of these, financial services
is dominant, accounting for more than half of gross domestic
product. The island has a balance of payments surplus,
without external debt, and has low unemployment. The finance
sector is dominated by banking, fund management and trust
management.
The Jersey
government statistical report shows that at the end of
December 2011, 40 banks held deposits of GBP158.087bn
of which GBP54.276bn were sterling deposits.
The Financial
Services Commission estimates that 30% of the top 500
European companies and over 10% of the top 700 Asian-Pacific
companies used Jersey's financial facilities in 2009.
The Government has also encouraged development of light
industry, and there is significant activity in the electronics
sector.
GDP was an
estimated GBP3.7 billion in 2009, and GDP per head was
GBP40,000.
According
to the Government website, due to the nature of Jersey's
economy Gross Value Added (GVA) and Gross National Income
(GNI) are now used as performance indicators. Total GVA
for 2010 was GBP3.5bn, with GNI estimated to be GBP4bn.
A real term fall of 13% in GVA has been recorded over
the last three years and 2010 is the lowest recorded since
1998.
The Jersey
currency is the pound which is on a par with the British
pound; there are no exchange controls.
Nearly 100,000
companies are registered in Jersey, with many more foreign
companies administered from the island.
Jersey
remains the highest rated offshore international finance
centre according to competitive rankings published by
the City of London, and was the only offshore jurisdiction
in the top twenty in the last report, released in March
2010. In 2010, 2011 and 2012 Jersey was placed 21st in
the Global Financial Centres Index (GFCI) overall.
Geoff
Cook, Chief Executive of Jersey Finance Limited, commented:
“Considering
the impact of the financial crisis and the scrutiny that
has been directed at offshore finance centres, it is extremely
encouraging that Jersey has improved its rating and retained
its leading position among its offshore rivals. We are
now the only jurisdiction in the offshore category in
the top twenty so these rankings are very positive for
us.”
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The Channel Islands
Stock Exchange
The Channel
Islands Stock Exchange ("CISX") commenced operations on
October 27, 1998 with 23 founder members. Its aim is to
provide trading and listing of investment funds, debt
instruments and shares in companies and to bring the expertise
available in the Channel Islands to the expanding network
of international businesses requiring expert offshore
financial services in the European time-zone. Ownership
of the CISX lies in the hands of its listing members,
who have to be established in the Channel Islands. Management
and control are vested in a board of directors who are
elected. Based in St Peter Port, Guernsey, the CISX provides
a listing facility and screen-based trading. Trading members
do not have to be established in the Channel Islands,
but must be licensed, regulated or supervised by a regulatory
body in a jurisdiction recognised by the CISX. In August
2007 the exchange welcomed its 50th member.
The exchange has developed specialist niches in floating
property funds, open and closed-ended investment funds,
debt, securities and special purpose vehicles and is attracting
increasing interest from alternative investment funds.
The CISX also lists international trading companies and
not just those based in Guernsey.
The
4,000th listing on the exchange occurred on May 19, 2011,
when the Market Authority admitted London Mining (Jersey)
plc, a special purpose vehicle, listed a $110 million
8% guaranteed convertible debt bond. The listing was sponsored
by Walkers Capital Markets Ltd.
In
2010, the exchange experienced trading volumes in excess
of 67 million trades alongside the admission of 357 securities
to the Official List, 198 represent specialist debt securities.
Business was also strong in the Exchange’s other
niche markets such as alternative investment funds and
structured funds.
In
September, 2002, the US Securities and Exchange Commission's
awarded the Channel Islands Stock Exchange (CISX) designated
offshore securities market status. In December, 2003,
the CISX gained approval by the UK Financial Services
Authority as a Designated Investment Exchange.
Although
the CISX is as open to listings from Jersey as from within
Guernsey, in practice the exchange trades four times as
many Guernsey-domiciled securities as those from Jersey.
The exchange said in 2004 that it was trying to remedy
this imbalance; it is also promoting several new product
areas, including eurobonds and structured funds.
In October, 2009, it was announced that Jersey
companies have been approved for listing on the Hong Kong
Stock Exchange. The move is a significant development
for Jersey’s finance industry, which is seeking
to increase business flows from the Asia Pacific region.
The
formal inclusion of Jersey companies on the Hong Kong
Exchange’s approved list is the result of more than
a year’s negotiation, research and document preparation
involving government officials in Jersey, representatives
from Jersey Finance, and the finance industry.
The
approval enables Jersey’s finance industry to compete
on an equal footing with other competitor jurisdictions,
which have been established longer in Asia. Jersey has
achieved this recognition ahead of some of its closest
competitors, including Guernsey and the Isle of Man.
Robert
Kirkby, Technical Director of Jersey Finance, commented:
“Gaining access to a major capital market such as
Hong Kong is further excellent news for Jersey and is
a step forward in our ability to attract new business
from the region. The move by the Exchange authorities
adds weight to Jersey’s reputation as a rigorously
supervised, highly regarded jurisdiction and also demonstrates
how the market in Asia views the quality and robustness
of Jersey company law. Moreover it gives further impetus
to the formal opening of our second overseas office in
Hong Kong later this month and is very welcome news.”
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Jersey Entry and Residence
Nationals
of European Union member states have free right of movement
in Jersey for the purposes of work and establishment.
Non EU nationals must apply for permission to reside or
work in Jersey. Generally a work permit will be granted
only if no suitably qualified local exists. Preference
is given to UK and other European Union nationals. Long-term
residency in Jersey is carefully controlled; with certain
exceptions consent for residency will be given only to
a person owning a residence, and in turn the purchase
of a residence is subject to consent, which is given in
only a limited number of cases, usually involving a luxury
dwelling or an individual who is clearly going to contribute
significantly to the island through payment of local taxes.
On the other
hand, consent is usually granted quite readily for commercial
property transactions.
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Jersey Business Environment
In terms
of business and communications infrastructure, Jersey
offers Western European standards. The business environment
is particularly well-attuned to the finance sector as
a result of the island's long-term policy of promoting
itself as an international finance centre, accompanied
by a well-developed regulatory structure, and careful
supervision of incoming finance-sector businesses in order
to screen out doubtful operations.
Jersey's
political stability, low taxes and international credibility
make it an attractive place in which to do business. However,
in order to protect limited local resources, the administration
does not welcome foreign-owned businesses unless they
will clearly contribute to the diversity or quality of
the services available on the island. Every business that
operates in Jersey needs to have a Regulation of Undertaking
Licence and the process takes approximately 3 weeks. A
business which is planning to trade under a business name
needs to be registered with the Jersey Financial Services
Commission (JFSC). Restrictions on numbers of employees
and the controls on residential accommodation are further
ways in which the administration limits business expansion.
These rules are not applied to exempt (since abolished)
or non-resident companies, which are permitted to hold
board meetings on the island and to have some fairly minimal
administrative activities there.
By
2001, restrictive housing policies had begun to act as
a serious brake on business activity, and in January 2002
the Housing Committee of the States of Jersey published
a long-deferred major strategic policy report for 2002-2006,
in which it called for sites for more than 1,100 new homes
to be zoned in the first five years of the new Island
Plan.
At
the time, the Island Plan included provision for only
750 new homes, but the Committee said the larger number
will allow them to provide 500 rental and 600 first-time
buyer homes. Even so, said the Committee, the real shortfall
in homes was probably as high as 1,450 - but it considered
that development of the additional sites could be phased
over a longer period than five years, thus reducing pressure
on the construction industry. Alongside this more extended
programme, it was considered beneficial to create a residential
land bank.
"Restricting
too tightly the supply of land will only have the effect
of increasing land values and will ensure that any newly-rezoned
sites continue to be the subject of intense speculation,"
warn the committee.
Pressure
on the availability and price of houses continues to be
one of the major constraints on development of the island's
business community, with incoming managers and specialists
facing dramatic restrictions on their ability to find
reasonably priced accommodation, in the face of a rabidly
'NIMBY' (not in my back yard) existing population. Several
banks which have relocated to the Isle of Man in recent
times said that pressure on staff and property costs in
Jersey had influenced their decisions.
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Jersey Import of Foreign Capital
There
is no exchange control in Jersey. Jersey companies may
be freely incorporated with a share capital denominated
in any currency and there are no restrictions on inward
or outward investment or on the repatriation of dividends,
interest and profits. Bank interest on deposits, payable
to a nonresident, is exempt from Jersey income tax. Royalties
are treated for the purposes of tax in the same way as
interest.
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Investments by
Foreigners
The
authorities deter "active" foreign investment (new businesses
and permanent immigration) but welcome "passive" investment
(purchase of real estate for investment purposes, or the
purchase of existing business assets). This is part of
the administration's general policy of protecting the
island's scarce resources. Therefore the island does not
offer investment incentives, other than its permissive
tax regime as such.
It
became clear in May 2002 however 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, the Savings Tax Directive, whereby financial institutions
will be obliged to pass details of income on investments
by nationals of EU member states to their home tax administrations.
The EU introduced this information-sharing on 1 July 2005,
although Jersey along with Guernsey, the Isle of Man,
Austria, Belgium, and a number of 'third countries' including
Switzerland, decided instead to opt for a withholding
tax on interest income which was applied initially at
a rate of 15%. This rate increased to 20% on July 1, 2008,
and to 35%, on July 1, 2011.
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Information: Business, Taxation amd Offshore
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