Jersey Tables Legislation For New Economic Substance Rules
29 October, 2018
The Jersey Government has announced that it will release for public consultation guidance notes on the introduction of a new economic substance requirement for certain taxpayers to access Jersey’s tax regime.
The change will seek to ensure that Jersey-resident companies undertaking certain identified activities demonstrate economic substance in Jersey from 2019 onwards, based on a framework agreed between the Crown Dependencies and the EU’s Code of Conduct Group on Business Taxation, which is intended to ensure their regimes keep pace with international tax developments.
Following the Budget, the Jersey Government on October 23 stated that Ian Gorst, Jersey’s Minister for External Relations, lodged the draft Taxation Companies Economic Substance Law in parliament, which will be discussed on December 4, 2018.
The Jersey Government noted that Jersey was identified as a cooperative jurisdiction by the Code Group in December 2017. It said this finding followed an intensive year-long screening process where the tax structures of more than 90 global jurisdictions were subject to detailed analysis. However, the Code Group identified possible concerns about the absence of legal requirements to ensure adequate economic substance in the island, it said.
The Government said that it made a number of commitments to address concerns relating to the possibility that profits from “relevant activities” are registered in Jersey without adequate economic activity taking place in the island.
The law proposed takes into account 35 responses received from corporate groups, individuals and industry groups to a consultation document released in Autumn 2018. Respondents from the financial services industry reportedly said that due to the high-quality good governance rules in Jersey and high professional standards, most companies within the scope of the draft law will be able to demonstrate that they meet the requirements.
On tabling the legislation, Gorst said: “I am delighted that Jersey is the first jurisdiction to lodge new legislation to meet the concerns on economic substance expressed by the EU Code of Conduct Group on Business Taxation. As well as meeting the commitment made in 2017, the lodging of this legislation demonstrates Jersey’s well-deserved reputation as a jurisdiction of substance that is committed to the development of new international standards in fair taxation and to the maintenance of a good neighbor policy with the EU.”