Jersey Executive Summary

Jersey Not In EU Fiscal Area

The island of Jersey, one of the Channel Islands between England and France, is a British Crown dependency although in practice is it self governing. Britain is responsible for its external affairs including negotiations with the European Union; under the UK's accession treaty with the EU, Jersey forms part of the single market but is outside the EU fiscal area. Jersey does not generally enter double-tax agreements, but has treaties with the UK and Guernsey, and a limited treaty with France.

Economy Buoyant But Jersey Is Full Up!

Jersey has a buoyant economy dominated by the finance sector. Unemployment is very low. The political stability in Jersey together with its consistently low tax status and its international reputation as an important financial centre make it an attractive prospect to foreign investors and workers. To protect the island's limited resources the government tends to discourage labour-intensive inward investment that is controlled by non residents. There are no investment grants or incentives, but electronics and other knowledge-based industries have been encouraged.

Jersey's Lowtax Specialisations

Jersey has particularly strong banking, investment fund and trusts sectors, with very well-developed advisory and financial infrastructure. The Jersey Financial Services Commission's quarterly report for the period to December 31, 2008 shows that almost 50 banks held deposits of GBP206 billion. The Net Asset Value of funds under administration has reached record levels of GBP241.2 billion and has, for the first time, overtaken the level of bank deposits held.

There are a number of low-tax business formats, including International Business Companies, 'Exempt' companies, and Limited Partnerships. However in accordance with the Island’s commitment to the European Council of Finance Ministers (Ecofin), Jersey has pledged to ensure that no new International Business Companies are capable of being formed from 1st January, 2006. The introduction of the new 'zero/ten' tax regime on January 1, 2009 also put paid to the exempt company, although non-financial services companies qualify for the 0% corporate tax.

Jersey v. the EU and the OECD?

Jersey's unique situation with regard to the EU is both a strength and a weakness. The island will remain a favoured base for holding and trading companies working into the EU, and for e-commerce activity; but it has the EU and the OECD to contend with. After several years of 'hands-off' policy in regard to Jersey taxation, the UK government in 2002 threatened Jersey with sanctions if it didn't fall in line with EU information-sharing rules.

Jersey signed a 'commitment' letter to the OECD in February 2002, but it contained an 'Isle of Man' level playing field clause making changes dependent on comparable changes in Switzerland and the USA. By mid-2003, however, the OECD seemed to have forgiven Jersey, and was assisting it to design a '0/10' corporate tax system.

It remains to be seen how Jersey will emerge from a second wave of attacks by the OECD against offshore secrecy in the wake of the 2008 financial crisis, but its commitment to fiscal transparency through new Tax and Information Exchange Agreements and its record as a reputable financial centre should stand it in good stead.

In May, 2002, it became clear that Jersey, along with its fellow UK dependent territories Guernsey and the Isle of Man, was ready to sign up to the EU information-sharing regime. After the EU finally reached its compromise agreement on the Savings Tax Directive in early 2003, Jersey decided, along with Guernsey and the Isle of Man, to apply a withholding tax to the returns on personal savings for EU residents. The Directive came into force on July 1, 2005.

JERSEY: EXECUTIVE SUMMARY