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 it is 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.

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 government's 2009 statistical report shows that 47 banks held deposits of GBP170.6bn at the end of September 2009. Fund assets domiciled on the island stood at GBP163bn, having fallen from GBP239.9bn on September 30, 2008.

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. 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's 0/10 corporate tax regime may prove to be short-lived, however, due to concerns expressed by the EU that it does not adhere to the 'spirit' of the Code of Conduct on Business Taxation. A fiscal strategy review is being undertaken by the government with a view to reporting back in time for the 2011 budget in late 2010.

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 European Commission and the OECD to contend with.

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.

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's 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 seems to have emerged from a second wave of attacks by the OECD against offshore secrecy in the wake of the 2008 financial crisis in a strong position, and 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.

JERSEY: EXECUTIVE SUMMARY