The States is currently consulting on plans for the introduction of a ‘substance test’ following concerns raised by EU finance ministers that there were not firm procedures in place to check firms were economically active locally.
The EU’s Code of Conduct Group raised concerns that a lack of checks ‘increases the risk that profits registered in a jurisdiction are not commensurate with economic activities and substantial economic presence’. They wrote to Jersey’s government last November to set out their worries.
The government has identified eight sectors in which this could be an issue, including banking, insurance and fund management. They are proposing a law change to force firms to prove they are actually doing business in the Island rather than just funnelling profits through it.
Evidence could include regular decision-making board meetings, where directors are physically present, having an adequate level of qualified staff employed in Jersey and having suitable premises that match the expected activity of a company.
Businesses would be expected to submit their evidence as part of the corporate income tax return process from the start of 2019.
Those who do not comply could be fined, struck off the Jersey company register, or have their details passed to regulators in other European countries.
Writing about the consultation, External Relations Minister Ian Gorst said: ‘Jersey is one of the most stable and successful international finance centres in the world. We are committed as a government, and as a jurisdiction, to the highest standards of tax transparency and financial regulatory compliance and to the promotion and protection of the Island’s well deserved reputation.’
The consultation is due to close on Friday. To have your say visit gov.je/consultations.