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Jersey: E-Commerce

Offshore Activities

The natural bonding of the Internet and Offshore stems from the fact that both, of their nature, manage to avoid tax. Businesses which can operate on the Internet without, so to speak, touching ground in a high-tax jurisdiction will naturally migrate to offshore jurisdictions; while businesses that already have offshore existence will find it highly convenient to be able to use the Internet to trade with their high-tax customers without having to make a landing in their countries.

As a major offshore jurisdiction with many tens of thousands of offshore enterprises already installed, including many trading companies, it is only a matter of time before Jersey becomes a centre of e-commerce activity. The island's geographical location, its good telecommunications links and its sophisticated business infrastructure add to the inevitability of an e-future for Jersey.

By locating websites in Jersey to carry out functions previously based in high-tax jurisdictions such as sales and marketing, treasury management, supply of financial services, and most of all, the supply of digital goods such as music, video, training, software etc, businesses can take advantage of low rates of taxation for increasingly substantial parts of their operation.

In many countries, the distribution of goods from a warehousing facility does not constitute the carrying on of a trade or business in that jurisdiction, so that even for physical goods, in many cases it will be possible to avoid a permanent establishment (taxable presence) altogether in many high-tax jurisdictions where trading activities currently take place.

In June, 2005, then President of Jersey's Policy and Resources Committee, Senator Frank Walker revealed that the Island would be seeking to restrict access to a VAT 'loophole' available to UK retailers establishing operations there.

The provision in European law whereby retailers operating outside of the European Union can sell products priced at under GBP18 to EU consumers free of VAT has seen many large online retailers such as Tesco, Amazon, Asda and Woolworths setting up mail order arms in Jersey, a move which has outraged their UK-based counterparts.

However, Senator Walker said that in future, only UK retailers seeking to establish "legitimate operations", which employ islanders and pay Jersey taxes, will be permitted to locate mail order operations on the Island.

"The publicity we have received regarding this practice has been very unwelcome. It is a real concern - it has been damaging," he explained. However, he went on to add that licences already granted to such firms will not be revoked.

A company operating an e-commerce facility in Jersey will be able to have International Business Company status and will therefore have very low local taxes to pay.

For information about the impact of e-commerce on a number of the main offshore activities which take place in Jersey, click on a link below to go to our specialist E-commerce site Offshore-e-com.com

To see an analysis of the current state of legal and tax issues surrounding offshore e-commerce, click here.

Internet Gaming

In 2004 the Economic Development Committee presented a proposition to the States of Jersey outlining its vision for Gambling within the Island and the EDC is pressing ahead with reform and modernisation of the current Gambling (Jersey) Law 1964. The first and longer term strategy will lead to a new Gambling (Jersey) Law and associated Regulations and a new Gambling Commission (Jersey) Law. These Laws will provide the regulatory framework and the boundaries/opportunities that will enable the gambling industry in Jersey to operate efficiently and effectively in the twenty-first century.

In March 2005 the States of Jersey agreed to request the EDC to bring forward legislation for approval by the States to allow on-line gambling. The States also agreed in principle, that a Gambling Commission should be established in the Island and that the purpose of the Commission should be licensing, regulation, harm reduction/social responsibility and ensuring that gambling issues did not harm the Island’s international reputation.

The EDC, in conjunction with the Policy and Resources and Finance and Economics Committees, has also been tasked with negotiating the introduction of a new public Lottery to be operated jointly for the benefit of the public and charitable institutions in the Island.

Additionally, the Department pressed ahead with the production of new Regulations under the existing Law to allow (in the first stage) for the operation of on-line gambling in disaster recovery mode.

Companies licensed within an approved list of jurisdictions are allowed to apply for a licence to host their disaster recovery services in the Island. In the event that their licensing jurisdiction and/or their licensed operations are affected by some kind of disaster, they are allowed by the terms of their Jersey Disaster Recovery Licence to switch over to a Jersey server for a time-limited period.

The Gambling (Remote Gambling Disaster Recovery) (Jersey) Regulations 2008 came into force in January 2008, greatly increasing the attractiveness of the Island in this regard.

The Regulations were updated in 2010 as a result of the approval by the States Assembly for Establishment of a regulatory and licensing regime for e-gaming for Jersey. Under the original 2008 regulations an operator can be licensed if he is already licensed and regulated in another jurisdiction. With the introduction of a regulatory and licensing regime for Jersey an operator will be able to obtain a fully operational license for the island and not be required to be regulated in another approved jurisdiction.

Gambling (Remote Gambling Disaster Recovery) (Amendment) (Jersey) Regulations 2011 came into force on March 17, 2011.



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