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Jersey To Amend 'Zero-Ten' Regime

May 2011 - Tax & Private Client. Legal Developments by Hassans.

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Jersey's Treasury Minister, supported by the Council of Ministers, is announcing his intention to repeal those elements of Jersey?s corporate tax regime which were deemed harmful by the EU Code of Conduct Group.

The decision comes after the Isle of Man, also subject to EU scrutiny, announced its decision to repeal similar provisions, namely its Attribution Regime for Individuals.

On May 17, Jersey Treasury Minister Phillip Ozouf confirmed the government's decision to remove the deemed distribution and attribution rules with effect from January 2012. This, the government said, will mean that the territory's zero-ten regime will remain in place.

Explaining the decision, the government said that throughout the ongoing assessment by the EU Code of Conduct on Business Taxation Group it was clear that "the concerns of the Code Group focused on the interaction of the deemed distribution and attribution provisions with the 0% general rate of tax that applies to Jersey resident companies".

This view was supported by the findings of a review by the EU Council?s High Level Working Party on Tax Matters into the scope of the EU Code of Conduct on Business Taxation in January 2011, the government said.

Announcing the decision, Ozouf said: ?We are confident that the evidence shows this positive action will result in Jersey?s 0/10 tax regime being considered fully compliant with the Code. We can then keep our existing corporate tax regime while also meeting the concerns of the EU."

?Maintaining tax neutrality provides stability and certainty for businesses operating here and sends a clear signal that Jersey continues to provide a competitive tax system which will safeguard the island?s future economic well-being,? he added.

Treasury forecasts estimate this change will create a temporary cash flow effect from 2013/2014, which is not expected to be more than GBP10m in any one year. The repeal of the provisions is not expected to cause a reduction in the total tax take.

The EU Code of Conduct Group is to formally consider the decision to remove the deemed distribution and attribution provisions later this year.

Geoff Cook, Chief Executive of Jersey Finance, the promotional agency for the island's financial services industry, said:

?I believe it is helpful that the Jersey government is seen to be taking a lead on this issue, by proposing that the measures which the EU have voiced concerns about are removed, while at the same time retaining the main features of Jersey?s corporate tax regime, in particular the key element that most companies will continue to pay tax at 0%."

?We have maintained throughout [the EU assessment] that zero-ten remains a viable, strong regime for Jersey and its finance industry, providing a tax regime that is easily understood by service providers and their clients. It ensures we remain competitive on tax with other jurisdictions and offer stability, which is a key component for any jurisdiction in these volatile times.?

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