06/07/21

JERSEY: Financial services firms exempt from OECD tax proposal.

As published on international-adviser.com, Monday 5 July, 2021.

Financial services businesses and investment funds based in Jersey will not be subject to the OECD Inclusive Framework proposal to apply a global minimum tax of 15%.

Jersey business taxation regime, known as zero-ten, has allowed the Channel Island to keep its corporate tax at 0% and at 10% for financial services companies.

The OECD is looking to impose a 15% rate around the world but only for multi-national companies with a global turnover of more than €750m (£645m, $890m), with regulated financial firms and investment funds carved out of the measure, local paper Bailiwick Express reported.

This means that the vast majority of businesses that have so far been taxed either at 0% or 10% will continue to receive the same treatment following the introduction of the global minimum rate.

The OECD’s framework has been backed by 130 out of the 139 members as of 1 July 2021, including Jersey, Guernsey and the Isle of Man.

According to Rupert Pleasant, chief executive of Guernsey Finance, the Channel Island is holding technical discussions with both the OECD and the other Crown Dependencies as it also has a zero-ten regime in place.

This follows the Isle of Man’s announcement that its own zero-ten taxation model would not be impacted by the international framework.

Pleasant told International Adviser: “We note with interest that the Isle of Man has announced it will implement a 15% global tax rate and the recent announcement by Jersey that its zero-ten regime will be unaffected by a global corporate tax rate of 15%.

“It is our understanding that the 15% rate would apply only to multi-national companies with a global turnover above €750m, with different arrangements for regulated financial services and investment funds with the aim of creating a level playing field, which will help avoid the complexities of unilateral action by countries.

“Guernsey continues to support the objective of reaching agreement on a worldwide approach and a level playing field. However, those negotiations are not yet finalised, and until such time as they are it would not be appropriate to make any further comment.”

Jersey’s minister for external relations and financial services Ian Gorst added: “The government of Jersey has always maintained that international tax standards should be developed on a global basis by organisations such as the OECD, rather than on a regional basis, as this helps protect the principle of maintaining a level playing field among tax jurisdictions globally. This is critical to ensuring that the interests of small countries are balanced with those of larger countries.

“Jersey’s corporate tax system has been carefully designed to meet the Island’s ongoing fiscal needs and to align with international standards. This means that Jersey’s corporate tax system is designed to support the requirements of a geographically small economy that is open and attractive to global investment.

“Jersey is well placed to continue to adapt to international tax standards, and we will continue to engage in a proactive way with the OECD, EU and global bodies to combat aggressive tax avoidance and profit shifting.

“Our focus continues to be on adding value to the global economy by offering a stable, certain and attractive environment for supporting the growth of cross-border investment in a well-regulated and transparent manner.”