Tax Information Exchange Agreement with Croatia: Ratification

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A decision made 31 October 2013:

Decision Reference: MD-C-2013-0127
Decision Summary Title :	Ratification of Agreement with Croatia on the Taxation of Savings Income		Date of Decision Summary:	31st October 2013
Decision Summary Author:	Project & Research Officer		Decision Summary: Public or Exempt?	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title :	Ratification of Agreement with Croatia on the Taxation of Savings Income		Date of Written Report:	23rd October 2013
Written Report Author:	External Relations - Adviser		Written Report : Public or Exempt?	Public
Subject: Ratification of Agreement with Croatia on the Taxation of Savings Income
Decision(s): The Minister agreed to lodge ‘au Greffe’ a report and proposition inviting the States to ratify the Agreement with Croatia on the Taxation of Savings Income.
Reason(s) for Decision: Following the Croatian accession to the European Union on 1st July 2013 Jersey was called upon to enter into an Agreement with Croatia on the Taxation of Savings Income. This Agreement is in the same terms as the Agreements entered into with the other twenty-seven EU Member States which in turn mirror the two Model Agreements approved by the States on 22 June 2004.
Resource Implications: There are no additional financial or manpower implications for the States arising from the adoption of these draft Regulations.
Action required: The Greffier of the States to be requested to lodge ‘au Greffe’ the report and proposition inviting the States to ratify the Agreement with Croatia on the Taxation of Savings Income with a view to securing the earliest possible date for debate.
Signature:		Position: Minister for External Relations
Date Signed:		Date of Decision (If different from Date Signed):

Tax Information Exchange Agreement with Croatia: Ratification

PROPOSITION

THE STATES are asked to decide whether they are of opinion -

to ratify the Agreement with Croatia on the Taxation of Savings Income as set out in the Appendix to the Report of the Chief Minister dated

MINISTER FOR EXTERNAL RELATIONS

AGREEMENT TO BE ENTERED INTO WITH CROATIA ON THE TAXATION OF SAVINGS INCOME

1. The States are asked to ratify the signed Agreement to be entered into with Croatia 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 then twenty-five Member States of the European Union. Subsequently the States on 16 January 2007 made Regulations providing for the accession to the European Union of Bulgaria and Romania.

4. Croatia acceded to the European Union on the 1 July 2013. As a consequence Jersey is now called upon to enter into an Agreement with Croatia on the Taxation of Savings Income. This Agreement is in the same terms as the Agreements entered into with the other twenty-seven EU Member States which in turn mirror the two Model Agreements approved by the States on 22 June 2004.

Agreement with Croatia

5. To bring the Agreement with Croatia 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 Agreement with Croatia is required to satisfy the above provision regarding the implementation of “an approved Agreement or approved obligation”.

7. With the ratification and the bringing into force of the Agreement with Croatia, individuals resident in that country will be subject to the same arrangements for retention tax or exchange of information as those applied to relevant individuals resident in the other twenty-seven EU Member States.

8. The first retention tax returns or exchange of information will be called for from paying agents in the Island in the first quarter of 2015 in respect of relevant interest payments made through 2014 from the date the relevant Regulations are made (see para 12 of this report).

9. The Guidance Notes issued in 2005 to assist Jersey paying agents in the application of the Agreements entered into with the then Member States will have equal application to the Agreement with Croatia. In due course revised Guidance Notes will be issued to cover the move from the retention tax to autonomous exchange of information when this move has been ratified by the States and the necessary Regulations have been made.

10. The Agreement is attached as an appendix to an exchange of letters in which both parties undertake at the earliest possible date to comply with their respective constitutional formalities for the entry into force of the Agreement and to notify each other without delay when such formalities are completed. Pending the completion of these internal procedures the parties have agreed to apply the Agreement provisionally, within the framework of their respective domestic constitutional requirements, as from the date of accession of Croatia to the European Union.

11. The term ‘constitutional requirements’ is used by the EU Council Secretariat to include the ratification, publication and entry into force of the Agreement. The procedure adopted involves both parties exchanging a signed Agreement in the language of each of the parties which then allows both parties to start their ratification procedures contemporaneously. The Agreement has 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 Agreement, to which this Project refers; the publication of the Agreement; and the making of the Regulations providing for the Agreement to enter into force.

12. Since the full ratification procedures for the Agreement on the Taxation of Savings Income have not been fully completed by both parties, the provisions of the Agreement will be implemented under provisional arrangements. While the exchange of letters provided for the Agreement to be applied from the date of accession of Croatia to the European Union, the Agreement was not received in Jersey for signature until the end of September 2013. Accordingly the paying agents are not in a position to apply the Agreement with effect from the 1st July 2013 and for practical reasons therefore the decision has been taken to make the effective date for the application of the Agreement the date of the making of the Regulations.

Financial and Manpower Implications

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

23rd October 2013