Ratification of the Convention between Jersey and the Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital.
PROPOSITION
The States are asked to decide whether they are of opinion-
To ratify the Convention between Jersey and the Grand Duchy of Luxembourg for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, as set out in the appendix to the report of the Chief Minister dated 1st May 2013.
CHIEF MINISTER
REPORT
Background
1. In February 2002, Jersey entered into a political commitment to support the OECD tax initiative on transparency and information exchange through the negotiation of tax information exchange agreements to an agreed international standard.
2. In September 2009, the Global Forum on Transparency and Information Exchange for Tax Purposes, a body of which some 116 jurisdictions are now members, agreed a peer review process to assess compliance with the international standard. To oversee this process, a peer review group was set up chaired by France with four vice chairs from India, Japan, Jersey and Singapore.
3. Successive G20 summits have encouraged jurisdictions to make progress in agreeing, implementing and abiding by the necessary international agreements for information exchange. In response Jersey has maintained an active programme of negotiating agreements with EU, OECD and G20 member jurisdictions. This has served to enhance the Island’s international personality, and generally has helped to engender a more favorable view of the Island amongst the international community.
4. There are occasions when an approach is made to or received from a jurisdiction that is not an EU, OECD or G20 member expressing a wish to enter into the negotiation of a tax information exchange agreement. In accordance with the terms of reference of the peer review process set by the Global Forum, jurisdictions are required to enter into a tax information exchange agreement with any jurisdiction that considers itself to be a relevant partner. The views of the finance industry on the extent to which a tax agreement with the jurisdiction concerned would be supportive of business development are also taken into account when deciding what degree of priority to attach to the negotiations.
5. The international tax information exchange standard can be met through either a Tax Information Exchange Agreement (TIEA) or a Double Tax Agreement/Convention (DTA/DTC). The advantage of a DTA/DTC is that it offers benefits to individuals and the business community through the avoidance of double taxation or reduced rates of withholding tax, in addition to providing for exchange of information to the international standard. However, the majority of jurisdictions with whom the island has sought to negotiate an agreement have not been prepared to consider a DTA/DTC on the grounds that they would derive little, if any, benefit from such an agreement because Jersey is a zero tax jurisdiction.
6. The latest position in respect of the programme of negotiating tax agreements in attached as an appendix to this report. A total of thirty one TIEAs and eight DTAs have now been signed of which twenty four TIEAs and three DTAs are in force. Almost without exception the delay in bringing agreements into force is due to the length of time taken by the other parties to the agreements to complete their domestic procedures for the ratification of the agreements.
7. As a Vice Chair of the Global Forum Peer Review Group, Jersey has been determined to lead by example, and has attached particular importance to entering into agreements with the EU, OECD and G20 member jurisdictions. Agreements have been signed, or negotiations have been completed or are well advanced, with twenty five of the twenty seven EU member states, thirty three of the thirty four OECD members and seventeen of the nineteen G20 countries(the 20th member of the G20 is the European Union) .
8. Jersey is party to the Peer Review process of assessment of compliance with the international standards, and a report of the assessment of Jersey was published at the end of October 2011. The review concluded that Jersey’s domestic laws provide a satisfactory framework for the exchange of relevant information. The assessors said “overall, this review of Jersey identifies a legal and regulatory framework for the exchange of information which generally functions effectively to ensure that the required information will be available and accessible….. Jersey practices to date have demonstrated a responsive and co-operative approach”
The Convention with the Grand Duchy of Luxembourg
9. The Convention entered into with the Grand Duchy of Luxembourg (“the Convention”) is a continuation of the ongoing programme of entering into tax agreements to the international standard.
10. The Convention is attached as an appendix to this report. The Convention is in line with the OECD Model Tax Convention and provides for the avoidance of double taxation to facilitate exchange of goods and services and movement of capital, technology and people. The Convention also makes provision for information exchange to the agreed international standard.
11. Luxembourg is an EU and OECD member country with whom there are long established business links, particularly in the area of fund administration. As international finance centres with common interests, their entering into the Convention is therefore considered to be of particular relevance and importance from which both Parties will benefit. It is also in accordance with the Island’s general good neighbour policy in relation to the EU Member States. The finance industry was consulted and fully supports the signing of the Convention.
Procedure for signing and ratifying the Convention
12. The Convention was signed on the 17th April 2013 by the Assistant Chief Minister with responsibility for External Relations in accordance with the provisions of Article 18(2) of the States of Jersey Law 2005 and paragraph 1.8.5 of the Strategic Plan 2006-2011 adopted by the States on the 28th June 2006. The Council of Ministers authorised the Chief Minister to delegate the Assistant Chief Minister to sign on behalf of the Government of Jersey.
13. The Convention is now being presented to the States for ratification, following which it will be published and entered into the official record. The Convention will enter into force when the domestic procedures of both parties have been completed.
14. The States on the 15th June 2010 adopted the Taxation (Double Taxation) (Jersey) Regulations 2010. The Schedule to these Regulations lists the countries with whom Double Tax Agreements have been entered into. The necessary Regulations to provide for the inclusion in the Schedule of the Convention with the Grand Duchy of Luxembourg will be presented to the States for adoption immediately following the adoption of the ratification proposition .
Financial and manpower implications
15. There are no implications expected for the financial and manpower resources of the States arising from the ratification and implementation of the Agreement.
1st May 2013
Taxation (Double Taxation) (Amendment No. 2) (Jersey) Regulations 201-
Report
The States have been asked to ratify the following –
- The signed Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income between the Government of Jersey and the States of Guernsey;
- The signed Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income between the Government of Jersey and the Government of the Isle of Man;
- The signed Convention for the Avoidance of Double Taxation and the prevention of Fiscal Evasion with respect to Taxes on Income and Capital, and the signed Exchange of Notes, between Jersey and The Grand Duchy of Luxembourg.
These Regulations amend the Taxation (Double Taxation) (Jersey) Regulations 2010 by inserting the name of the country in the list of countries with which Jersey has made a Double Taxation Agreement or Convention.
These Regulations also insert the date upon which the Double Taxation Agreement with Singapore came into force.
With the coming into effect of the Double Taxation Agreement with Guernsey there is a need to repeal the Double Taxation Relief (Arrangement with Guernsey) (Jersey) Act 1956. These Regulations provide for the repeal of that Act and also provide for the repeal to have effect on the 1st January 2014 being the tax year following that in which the Double Taxation Agreement enters into force.
Financial and manpower implications
There are no implications for the fiancial or manpower resources of the States arising from the adoption of these Regulations.
Explanatory Note
Regulation 1 amends the Schedule to the Taxation (Double Taxation) (Jersey) Regulations 2010 (the “2010 Regulations”) by adding Guernsey, the Isle of Man and Luxembourg to the list of countries with which Jersey has made an agreement for the avoidance of double taxation. It also inserts the date upon which the double taxation agreement (“DTA”) with Singapore came into force.
Regulation 2 repeals the Double Taxation Relief (Arrangement with Guernsey) (Jersey) Act 1956 (the “1956 Act”), which is replaced by the DTA with Guernsey given effect under the 2010 Regulations as amended by these Regulations. The repeal of the 1956 Act will, by virtue of Regulation 3, take effect on 1st January 2014 being the tax year following that in which the DTA with Guernsey enters into force.
Regulation 3 sets out the title of these Regulations and provides that they will come into force forthwith, except for Regulation 2 which will come into force on 1st January 2014.
◊ | Final draft – 16th May 2013 | Page - 1 |
File No.571/5 |
Taxation (Double Taxation) (Amendment No. 2) (Jersey) Regulations 201-
Made [date to be inserted]
Coming into force [date to be inserted]
THE STATES, in pursuance of Article 2 of the Taxation (Implementation) (Jersey) Law 2004 and having regard to P.46/2013 and P.47/2013 both adopted by the States on [ ] June 2013, and following the decision of the States taken on the day these Regulations are made, to adopt P.[ ]/2013, have made the following Regulations –
1 Schedule amended
In the Schedule to the Taxation (Double Taxation) (Jersey) Regulations 2010 –
(a) after the matter relating to Estonia, there shall be inserted the following matter –
“Guernsey | The States of Guernsey. When used in a geographical sense, means the islands of Guernsey, Alderney and Herm, including the territorial sea adjacent to those islands, in accordance with international law, save that any reference to the law of Guernsey is to the law of the island of Guernsey as it applies there and in the islands of Alderney and Herm.”. | |
(b) after the matter relating to The Hong Kong Special Administrative Region of the People’s Republic of China, there shall be inserted the following matters –
“Isle of Man | The island of the Isle of Man including its territorial sea, in accordance with international law. | |
Luxembourg | The Grand Duchy of Luxembourg. When used in a geographical sense, means the territory of the Grand Duchy of Luxembourg.”; | |
(c) in column 3, opposite the entry in column 1 for Singapore, there shall be inserted the date “2nd May 2013”.
2 Double Taxation Relief (Arrangement with Guernsey) (Jersey) Act 1956 repealed
The Double Taxation Relief (Arrangement with Guernsey) (Jersey) Act 1956 shall be repealed.
3 Citation and commencement
(1) These Regulations may be cited as the Taxation (Double Taxation) (Amendment No. 2) (Jersey) Regulations 201-.
(2) Regulation 2 shall come into force on 1st January 2014.
(3) Regulation 1 and this Regulation shall come into force forthwith.
gov.je