The Jersey Government has issued details of new legislation that would introduce economic substance requirements for companies resident in Jersey for tax purposes.
The proposed legislation 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 substance in the Island.
The proposed legislation would require certain companies to demonstrate they have substance in the Island by being directed and managed in the Island; conducting core income generating activities in the Island; and having adequate people, premises, and expenditure in the Island.
The new substance requirements would apply to certain categories of geographically mobile financial and other service activities, as identified by the OECD’s Forum on Harmful Tax Practices. These include banking; insurance; shipping; fund management (excluding collective investment vehicles); financing and leasing; headquarters; and holding companies.
The proposed legislation would also include robust and dissuasive sanctions for failure to meet the substance requirements.
The legislation would apply to accounting periods starting on January 1, 2019.
The Government has welcomed comments on the proposed legislation.