Jersey’s government has introduced a bill requiring businesses that operate on the island to be able to demonstrate adequate economic substance, as it aims to avoid the EU’s blacklist of uncooperative tax jurisdictions.
The bill has been designed to address concerns of the EU Code of Conduct Group on Business Taxation about the need for relevant businesses to demonstrate adequate economic activity.
Jersey was placed on the EU’s so called ‘grey list’, which means while it has been deemed a cooperative jurisdiction, it will have to demonstrate that it has addressed certain concerns surrounding tax matters, in this case with regard to having ‘real economic activity’ before December 2018.
Senator Ian Gorst lodged the bill, ‘Taxation Companies Economic Substance Law’ for debate by the Jersey States Assembly at its sitting on December 4, 2018.
Law firm Ogier stated that the law tests that companies are carrying on “relevant activities” to demonstrate that they are “directed and managed” in Jersey, and that their “core income generating activities” take place in Jersey.
“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,” said Gorst.
“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 neighbour policy with the EU.”
Other domiciles that have been required by the EU to demonstrate economic substance include Bermuda, the Cayman Islands, Guernsey and Isle of Man. All of these jurisdictions have agreed to modify their tax regimes to comply with the rules set by the EU Code of Conduct Group, lest they be deemed a non-cooperative jurisdiction and placed on the blacklist.
Ian Gorst, European Union, Blacklist, Captive insurance, Jersey