Agreements with Bulgaria and Romania on the taxation of savings income.

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A decision made (04/12/2006) regarding Agreements with Bulgaria and Romania on the taxation of savings income.

Subject:	Agreements with Bulgaria and Romania on the taxation of savings income
Decision Reference:	MD-C-2006-0055		Exempt clause(s):	-
Type of Report: (oral or written)	Written		Person Giving Report (if oral):
Telephone or e-mail Meeting?			Report File ref:	Int. 9/14 (2)
Written report – Title	Agreements to be entered into with Bulgaria and Romania on the taxation of savings income
Written report – Author (name and job title)	International Finance
Decision(s): · To agree that a proposition, together with a report and text of signed agreements to be entered into with Bulgaria and Romania on the Taxation of Savings Income, should be lodged on Tuesday, 5 December 2006, and to request the States to ratify the agreements on 16 January 2007; · To agree that the draft Taxation (Agreements with European Union Members States) (Amendment) (Jersey) Regulations 200- should be lodged on 5 December 2006, for proposed debate on 16 January 2007.
Reason(s) for decision: Bulgaria and Romania are due to accede to the European Union on 1 January 2007. As a consequence Jersey is now called upon also to enter into an Agreement on the Taxation of Savings Income with each of these two countries. These Agreements are in the same terms as the Agreements entered into with the existing twenty-five EU Member States which in turn mirrored the two Model Agreements approved by the States on 22 June 2004. To bring the Agreements with Bulgaria and Romania into effect an amendment to the existing Taxation (Agreements with European Union Member States) (Amendment) (Jersey) Regulations 2005 is required. To this end the States need to make Regulations in pursuance of Article 2(1) of the Taxation (Implementation) (Jersey) (Law) 2004. Ratification by the States of the Agreements with Bulgaria and Romania is required to satisfy the relevant provisions of the 2004 Law.
Action required: · Draft Proposition, Report and text of Agreements (attached) to be forwarded to the Greffe for lodging on 5 December 2006 · Draft Taxation (Agreements with European Union Members States) (Amendment) (Jersey) Regulations 200- to be forwarded to Greffe for lodging on 5 December 2006 (and Greffe to insert relevant Projet references before publication) · Copy of Ministerial Decision to be forwarded to Greffe for publication.
Signature: Chief Minister		Date of Decision: 4 December 2006

Agreements with Bulgaria and Romania on the taxation of savings income.

PROPOSITION

THE STATES ARE ASKED TO DECIDE WHETHER THEY ARE OF OPINION –

To ratify the Agreements with Bulgaria and Romania on the Taxation of Savings Income as set out in the Appendix to the Report of the Chief Minister dated ……… [date of MD]

AGREEMENTS TO BE ENTERED INTO WITH BULGARIA AND ROMANIA ON THE TAXATION OF SAVINGS INCOME

1. The States are asked to ratify the signed Agreements to be entered into with Bulgaria and Romania on the Taxation of Savings Income attached as an Appendix to this Report.

Background

2. The States on the 22 June 2004 adopted P97/2004 and agreed –

(a) to approve the two Model Agreements, as set out in the Appendix to the Report of the Policy and Resources Committee dated 14 May 2004, as the basis of the Bilateral Agreements on Taxation of Savings Income to be entered into with each of the twenty-five Member States of the European Union;

(b) to authorise the President of the Policy and Resources Committee to sign these Bilateral Agreements or any documents ancillary thereto on behalf of the Island; and

(c) to charge the Policy and Resources Committee to prepare the necessary legislative changes to enable the implementation of these Agreements for consideration by the States.

3. The States on 21 June 2005 made Regulations providing for the bringing into effect of the Bilateral Agreements on Taxation of Savings Income entered into with each of the twenty-five Member States of the European Union.

4. Bulgaria and Romania are due to accede to the European Union on 1 January 2007. As a consequence Jersey is now called upon also to enter into an Agreement on the Taxation of Savings Income with each of these two countries. These Agreements are in the same terms as the Agreements entered into with the existing twenty-five EU Member States which in turn mirrored the two Model Agreements approved by the States on 22 June 2004.

Agreements with Bulgaria and Romania

5. To bring the Agreements with Bulgaria and Romania into effect an amendment to the existing Taxation (Agreements with European Union Member States) (Amendment) (Jersey) Regulations 2005 is required. To this end the States need to make Regulations in pursuance of Article 2(1) of the Taxation (Implementation) (Jersey) (Law) 2004 which provides that “the States may by Regulations make such provision as appears to them to be necessary or expedient for the purposes of –

(a) implementing an approved Agreement or approved obligation … “

6. The ratification by the States of the Agreements with Bulgaria and Romania is required to satisfy the above provision regarding the implementation of “an approved Agreement or approved obligation”.

7. With the bringing into force of the Agreements with Bulgaria and Romania, individuals resident in those countries will be subject to the same arrangements for exchange of information or retention tax as those currently applied to relevant individuals resident in the existing twenty-five EU Member States. The Guidance Notes issued to assist Jersey paying agents in the application of the Agreements entered into with the existing twenty-five EU Member States will have equal application to the Agreements with Bulgaria and Romania.

8. The first exchange of information and retention tax returns in respect of individuals resident in Bulgaria and Romania will be called for from paying agents in the Island in the first quarter of 2008 in respect of relevant interest payments made through 2007.

9. The regulations bringing the Agreements into effect will provide for the Agreements to enter fully into force when they are made subject to the provisions of Article 17 of the Agreements and Regulation 6 of the draft Regulations (see Pxxx2006). Bulgaria and Romania will be providing formal notification of the fulfilment of their constitutional requirements for entry into force of the Agreements. In turn Jersey will provide Bulgaria and Romania with similar written confirmation that Jersey has fulfilled its constitutional requirements.

10. The term ‘constitutional requirements’ is used by the EU Council Secretariat to include the ratification, publication and entry into force of the Agreements. The procedure adopted involves both parties exchanging signed Agreements in the language of each of the parties which then allows both parties to start their ratification procedures contemporaneously. The Agreements have been signed by the Chief Minister in accordance with the provisions of Article 18(2) of the States of Jersey Law 2005 and paragraph 1.8.3 of the Strategic Plan 2006-2011 adopted by the States on 28 June 2006. The fulfilling of the ‘constitutional requirements’ now calls for the ratification of the Agreements, to which this Project refers; the publication of the Agreements; and the making of the Regulations providing for the Agreements to enter into force.

11. The Agreements will be entered into the Official Record, as was the case with the Agreements entered into with the existing twenty-five EU Member States (see RCs 26-50, presented on 14 June 2005).

12. Should Bulgaria and Romania not accede to the European Union on 1 January 2007 the Agreements will be non-effective. If Bulgaria and Romania accede to the European Union with effect from 1 January 2007 but the full ratification procedures for the Agreements on the Taxation of Savings Income have not been fully completed by all the parties, as will be the case, it has been agreed (as was the case in 2005) that the provisions of the Agreements will be implemented from 1 January 2007 under provisional arrangements.

13. There are no implications for the financial or manpower resources of the States arising from the ratification and implementation of the Agreements with Bulgaria and Romania.