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Taxation (Agreements with European Union Member States) (Jersey) Regulations 2005

Revised Edition

17.850.10

Showing the law as at 1 January 2011

This is a revised edition of the law

Taxation (Agreements with European Union Member States) (Jersey) Regulations 2005

Arrangement

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Regulation

1            Interpretation

2            Contracting party

3            Termination or suspension and resumption of agreement

4            “Beneficial owner” defined

5            “Interest payment” defined

6            “Paying agent” and “Jersey paying agent” defined

7            Duty of Jersey paying agent to identify beneficial owner

8            Duty of Jersey paying agent to establish residence of beneficial owner

9            Duty of Jersey paying agent to deduct and remit retention tax

10          Determination of amount of interest payment

11          Exception where beneficial owner authorizes reporting of interest payments

12          Exception where beneficial owner presents certificate

13          Duties of Comptroller of Taxes

14          Right of beneficial owner resident in Jersey to tax credit

15          Offences

16          Offences: aiders, abettors, bodies corporate, etc.

17          Citation

SCHEDULE 1

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Contracting parties and their competent authorities

SCHEDULE 2

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Related entity acting as a public authority or whose role is recognized by an international treaty

Supporting Documents

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Endnotes

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Table of Legislation History

Table of Renumbered Provisions

Table of Endnote References

Taxation (Agreements with European Union Member States) (Jersey) Regulations 2005

THE STATES, in pursuance of Article 2(1) of the Taxation (Implementation) (Jersey) Law 2004[1], and following the decision of the States of 22nd June 2004 to adopt Projet 97 of 2004, have made the following Regulations –

Commencement [see endnotes]

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1      Interpretation

In these Regulations, unless the context otherwise requires –

“beneficial owner” shall have the meaning given in Regulation 4;

“competent authority”, in relation to a contracting party, means the authority specified opposite that contracting party in column 2 of Schedule 1;

“contracting party” means a Member State of the European Union listed in column 1 of Schedule 1;

“interest payment” shall have the meaning given in Regulation 5;

“Jersey paying agent” shall have the meaning given in Regulation 6;

“Minister” means the Chief Minister;

“paying agent” shall have the meaning given in Regulation 6;

“third country” means a country or territory other than Jersey or a contracting party;

“UCITS Directive” means Council Directive 85/611/EEC of 20th December 1985 on the co-ordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS).[2]

2      Contracting party

(1)    Column 1 of Schedule 1 lists Member States of the European Union with whom an agreement implemented by these Regulations has been entered into pursuant to –

(a)     the decision of the States of 22nd June 2004 to adopt Projet 97 of 2004;

(b)     the decision of the States, taken on the day the Taxation (Agreements with European Union Member States) (Amendment) (Jersey) Regulations 2007[3] are made, to adopt Projet 163 of 2006. [4]

(2)    Column 2 of Schedule 1 specifies the competent authorities of the contracting parties.

(3)    The Minister may by Order amend, in column 2 of Schedule 1, the competent authority specified for a contracting party.[5]

3      Termination or suspension and resumption of agreement

(1)    Where notice is given of termination of an agreement referred to in Regulation 2(1), the Minister shall, by Order, amend Schedule 1, with effect from the date the agreement ceases to have effect, so as to delete the contracting party with whom the agreement had been made, and its competent authority.[6]

(2)    Where notice is given of suspension of all or part of an agreement described in paragraph (1), the Minister shall, by Order, suspend the operation of these Regulations to the extent that they implement so much of the agreement as is suspended.[7]

(3)    Where all or part of an agreement described in paragraph (1) is resumed, the Minister shall, by Order, reinstate the operation of these Regulations to the extent that the Regulations implement so much of the agreement as is no longer suspended.[8]

(4)    An Order made under this Regulation may contain such transitional, incidental and consequential provisions as the Minister considers necessary by reason of the termination, suspension or resumption of an agreement.[9]

4      “Beneficial owner” defined

(1)    Subject to paragraph (2), “beneficial owner” shall mean any individual who receives an interest payment or any individual for whom an interest payment is secured, unless such individual can provide evidence that the interest payment was not received or secured for his or her own benefit.

(2)    An individual is not deemed to be the beneficial owner when he or she –

(a)     acts as a paying agent within the meaning of Regulation 6(1);

(b)     acts on behalf of –

(i)     a legal person,

(ii)    an entity which is taxed on its profits under the general arrangements for business taxation,

(iii)   an UCITS authorized in accordance with the UCITS Directive or an equivalent undertaking for collective investment established in Jersey, or

(iv)   an entity referred to in Regulation 6(2),

and, in the case mentioned in clause (iv), discloses the name and address of that entity to the economic operator making the interest payment and the latter communicates such information to the competent authority of its contracting party of establishment; or

(c)     acts on behalf of another individual who is the beneficial owner and discloses to the paying agent the identity of that beneficial owner.

(3)    Where –

(a)     a paying agent has information suggesting that the individual who receives an interest payment, or for whom an interest payment is secured, may not be the beneficial owner; and

(b)     neither paragraph (2)(a) nor (2)(b) applies,

the paying agent shall take reasonable steps to establish the identity of the beneficial owner.

(4)    If, having taken the steps required by paragraph (3), the paying agent is unable to identify the beneficial owner, the paying agent shall treat the individual in question as the beneficial owner.

5      “Interest payment” defined

(1)    “Interest payment” shall mean –

(a)     subject to paragraphs (2) and (10) to (13), interest paid or credited to an account relating to debt claims of every kind, whether or not secured by mortgage and whether or not carrying a right to participate in the debtor’s profits, and, in particular, income from government securities and income from bonds or debentures, including premiums and prizes attaching to such securities, bonds or debentures;

(b)     interest accrued or capitalized at the sale, refund or redemption of the debt claims referred to in sub-paragraph (a);

(c)     income deriving from interest payments either directly or through an entity referred to in Regulation 6(2), distributed by –

(i)     an UCITS authorized in accordance with the UCITS Directive,

(ii)    an equivalent undertaking for collective investment established in Jersey,

(iii)   an entity which qualifies for the option under Regulation 6(7), or

(iv)   an undertaking for collective investment established outside the territory to which the Treaty establishing the European Community applies by virtue of Article 299 thereof and outside Jersey;

(d)     income realized upon the sale, refund or redemption of shares or units in the following undertakings and entities, if they invest directly or indirectly, via other undertakings for collective investment or entities referred to below, more than 40% of their assets in debt claims as referred to in sub-paragraph (a) –

(i)     an UCITS authorized in accordance with the UCITS Directive,

(ii)    an equivalent undertaking for collective investment established in Jersey,

(iii)   an entity which qualifies for the option under Regulation 6(7),

(iv)   an undertaking for collective investment established outside the territory to which the Treaty establishing the European Community applies by virtue of Article 299 thereof and outside Jersey.

(2)    Penalty charges for late payment shall not be regarded as an interest payment.

(3)    Paragraph (1)(c) and (d) shall not include income from undertakings or entities established in Jersey where the investment in debt claims referred to in paragraph (1)(a) of such undertakings or entities has not exceeded 15% of their assets.

(4)    As regards paragraph (1)(c) and (d), when a paying agent has no information concerning the proportion of the income which derives from interest payments, the total amount of the income shall be considered an interest payment.

(5)    As regards paragraph (1)(d) –

(a)     when a paying agent has no information concerning the percentage of the assets invested in debt claims or in shares or units as defined in that paragraph, that percentage shall be considered to be above 40%; and

(b)     where the paying agent cannot determine the amount of income realized by the beneficial owner, the income shall be deemed to correspond to the proceeds of the sale, refund or redemption of the shares or units.

(6)    When interest, as defined in paragraph (1), is paid to or credited to an account held by an entity referred to in Regulation 6(2), such entity not having qualified for the option under Regulation 6(7), such interest shall be considered an interest payment by such entity.

(7)    Paragraph (6) shall not apply to interest paid or credited to an account of an entity referred to in Regulation 6(2) which has not qualified for the option in Regulation 6(7) and which is established in Jersey, where the investment of the entity in debt claims referred to in paragraph (1)(a) has not exceeded 15% of its assets.

(8)    The percentage referred to in paragraph (1)(d) and paragraph (5)(a) shall, from 1st January 2011, be 25%.

(9)    The percentages referred to in paragraphs (1)(d), (3) and (7) shall be determined by reference to the investment policy as laid down in the fund rules or instruments of incorporation of the undertakings or entities concerned or, failing which, by reference to the actual composition of the assets of the undertakings or entities concerned.

(10)  Until 31st December 2010, domestic and international bonds and other negotiable debt securities which have first been issued before 1st March 2001 or for which the original issuing prospectuses have been approved before that date by the competent authorities within the meaning of Council Directive 80/390/EEC, by the responsible authority in Jersey or by the responsible authorities in third countries shall not be considered as debt claims within the meaning of paragraph (1)(a), provided that no further issues of such negotiable debt securities are made on or after 1st March 2002.

(11)  On and from 1st January 2011, domestic and international bonds and other negotiable debt securities described in paragraph (10) shall be considered as debt claims within the meaning of paragraph (1)(a) unless –

(a)     they contain gross up and early redemption clauses; and

(b)     the paying agent is established in Jersey and pays interest to, or secures the payment of interest for the immediate benefit of, a beneficial owner resident in a contracting party.

(12)  Where a further issue is made on or after 1st March 2002 of a domestic or international bond or other negotiable debt security described in paragraph (10) issued by a government or a related entity acting as a public authority or whose role is recognized by an international treaty, the entire issue of such security, consisting of the original issue and any further issue, shall be considered a debt claim within the meaning of paragraph (1)(a).

(13)  Where a further issue is made on or after 1st March 2002 of a domestic or international bond or other negotiable debt security described in paragraph (10) by any issuer not mentioned in paragraph (12), such further issue shall be considered a debt claim within the meaning of paragraph (1)(a).

(14)  The Minister may by Order amend the dates in paragraphs (10) and (11).[10]

(15)  Schedule 2 shall have effect to define, for the purposes of paragraph (12), a related entity acting as a public authority or whose role is recognized by an international treaty.

6      “Paying agent” and “Jersey paying agent” defined

(1)    Subject to paragraphs (2) to (7), “paying agent” shall mean any economic operator who pays interest to or secures the payment of interest for the immediate benefit of the beneficial owner, whether the operator is the debtor of the debt claim which produces the interest or the operator charged by the debtor or the beneficial owner with paying interest or securing the payment of interest.

(2)    Subject to paragraph (3), any entity established in Jersey or in a contracting party to which interest is paid or for which interest is secured for the benefit of the beneficial owner shall also be considered a paying agent upon such payment or securing of such payment.

(3)    Paragraph (2) shall not apply if the economic operator has reason to believe, on the basis of official evidence produced by that entity that –

(a)     it is a legal person, with the exception of those legal persons referred to in paragraph (10); or

(b)     its profits are taxed under the general arrangements for business taxation; or

(c)     it is an UCITS recognized in accordance with the UCITS Directive or an equivalent undertaking for collective investment established in Jersey.

(4)    Where an economic operator established in Jersey is satisfied that it is paying interest to, or securing interest for, such an entity established in a contracting party which is considered a paying agent under paragraph (2), the economic operator shall communicate the name and address of the entity and the total amount of interest paid to, or secured for, the entity to the Comptroller of Taxes.[11]

(5)    The Comptroller of Taxes shall pass on information communicated to the Comptroller pursuant to paragraph (4) to the competent authority of the contracting party where the entity is established.[12]

(6)    An economic operator paying interest to, or securing interest for, an entity referred to in paragraph (2) in a contracting party shall be considered the paying agent in place of the entity and shall levy the retention tax on that interest, unless the entity has formally agreed to its name, address and the total amount of the interest paid to it or secured for it being communicated in accordance with paragraphs (4) and (5).

(7)    An entity referred to in paragraph (2) who is established in Jersey shall have the option of being treated for the purposes of these Regulations as an UCITS equivalent undertaking for collective investment established in Jersey.

(8)    The exercise of the option in paragraph (7) shall require a certificate to be issued by the Comptroller of Taxes and presented to the economic operator by that entity.[13]

(9)    “Jersey paying agent” shall mean –

(a)     an economic operator described in paragraph (1) who is established in Jersey;

(b)     subject to paragraphs (6) and (7), an entity referred to in paragraph (2), where the interest mentioned therein is paid or secured by an economic operator described in sub-paragraph (a) of this paragraph.

(10)  The legal persons exempted from paragraph (3)(a) are –

(a)     in Finland, avoin yhtio (Ay) and kommandiittiyhtio (Ky)/oppet bolag and kommanditbolag;

(b)     in Sweden, handelsbolag (HB) and kommanditbolag (KB).

(11)  For the purposes of paragraphs (3)(c) and (7) an entity is established in Jersey if it is incorporated, administered or has its principal place of business, in Jersey.

7      Duty of Jersey paying agent to identify beneficial owner

(1)    A Jersey paying agent shall identify the beneficial owner in accordance with this Regulation.

(2)    In the case of contractual relations entered into before 1st January 2004, the paying agent shall establish the identity of the beneficial owner, consisting of his or her name and address, by using the information at the paying agent’s disposal, in particular, pursuant to the Money Laundering (Jersey) Order 1999[14].

(3)    In the case of contractual relations entered into, or transactions carried out in the absence of contractual relations, on or after 1st January 2004, the paying agent shall establish the identity of the beneficial owner, consisting of his or her name and address and the tax identification number (if any) allocated by the Comptroller of Taxes, if the beneficial owner resides in Jersey or, otherwise, by the contracting party in which he or she resides, on the basis of the passport or of the official identity card presented by the beneficial owner.[15]

(4)    Where the beneficial owner’s address does not appear on the passport or official identity card presented under paragraph (3), the address shall be established on the basis of any other documentary proof of identity presented by the beneficial owner.

(5)    Where a tax identification number is not mentioned on the passport or official identity card or any other documentary proof of identity presented under paragraph (3) or (4), the identity of the beneficial owner shall be supplemented by a reference to his or her date and place of birth, established on the basis of his or her passport or official identity card.

8      Duty of Jersey paying agent to establish residence of beneficial owner

(1)    A Jersey paying agent shall establish the residence of the beneficial owner in accordance with this Regulation.

(2)    The residence of the beneficial owner shall be considered to be situated in the country where the beneficial owner has his or her permanent address.

(3)    In the case of contractual relations entered into before 1st January 2004, the Jersey paying agent shall establish the residence of the beneficial owner by using the information at the paying agent’s disposal, in particular, pursuant to the Money Laundering (Jersey) Order 1999[16].

(4)    In the case of contractual relations entered into, or transactions carried out in the absence of contractual relations, on or after 1st January 2004, the Jersey paying agent shall establish the residence of the beneficial owner on the basis of the address mentioned on the passport or official identity card or any other documentary proof of identity presented by the beneficial owner pursuant to Regulation 7(3) or (4).

(5)    Where a beneficial owner who presents a passport or official identity card issued by a contracting party claims to be resident in a third country, residence shall be established by means of a tax residence certificate issued by the competent authority of the third country in which the beneficial owner claims to be resident.

(6)    Where a beneficial owner described in paragraph (5) fails to present to the Jersey paying agent the tax residence certificate there mentioned, the contracting party which issued the passport or official identity card shall be considered to be the beneficial owner’s country of residence.

9      Duty of Jersey paying agent to deduct and remit retention tax

(1)    A Jersey paying agent who makes an interest payment to a beneficial owner resident in a contracting party shall deduct tax at the applicable rate (the “retention tax”) in accordance with Regulation 10.

(2)    The applicable rate is –

(a)     for the period of 3 years beginning on the day these Regulations come into force, 15%;

(b)     for the ensuing period of 3 years, 20%; and

(c)     thereafter, 35%.

(3)    A Jersey paying agent shall, not later than the end of March following the end of each year, remit to the Comptroller of Taxes all taxes deducted by the paying agent in that year pursuant to paragraph (1).[17]

(4)    When remitting to the Comptroller of Taxes, pursuant to paragraph (3), any tax deducted pursuant to paragraph (1), the Jersey paying agent shall notify the Comptroller of Taxes of the name of the contracting party to whose competent authority 75% of the tax is to be transferred under Regulation 13(1).[18]

(5)    Article 32 of the Bankruptcy (Désastre) (Jersey) Law 1990[19] shall apply to a sum payable under paragraph (3) as if it were a sum payable to the Comptroller of Taxes under Article 45 of the Income Tax (Jersey) Law 1961.

(6)    The Minister for Treasury and Resources may, by Order, specify the currency in which amounts are to be remitted to the Comptroller of Taxes pursuant to paragraph (3).[20]

10    Determination of amount of interest payment

(1)    For the purposes of Regulation 9, a Jersey paying agent shall levy retention tax –

(a)     in the case of an interest payment within the meaning of Regulation 5(1)(a), on the gross amount of interest paid or credited;

(b)     in the case of an interest payment within the meaning of Regulation 5(1)(b) or (d), on the amount of interest or income referred to in those sub-paragraphs or by a levy of equivalent effect to be borne by the recipient on the full amount of the proceeds of the sale, redemption or refund;

(c)     in the case of an interest payment within the meaning of Regulation 5(1)(c), on the amount of interest referred to in that sub-paragraph;

(d)     in the case of an interest payment within the meaning of Regulation 5(6), on the amount of interest attributable to each of the members of the entity referred to in Regulation 6(2) who meet the conditions of Regulation 4(1).

(2)    For the purposes of paragraph (1)(a) and (b), the retention tax shall be deducted on a pro rata basis to the period during which the beneficial owner held the debt claim.

(3)    Where the Jersey paying agent is unable to determine the period mentioned in paragraph (2) on the basis of the information made available to the paying agent, the paying agent shall treat the beneficial owner as having been in possession of the debt claim for the entire period of its existence, unless the beneficial owner provides evidence of the date of the acquisition.

11    Exception where beneficial owner authorizes reporting of interest payments

(1)    Regulation 9 shall not apply where the beneficial owner has authorized the Jersey paying agent to report to the Comptroller of Taxes all interest payments made by that agent to the beneficial owner.[21]

(2)    Where the beneficial owner has given the authority described in paragraph (1), the Jersey paying agent shall, not later than the end of March in the year following the year in which the authority is given, report to the Comptroller of Taxes –

(a)     the identity and residence of the beneficial owner, established in accordance with Regulations 7 and 8;

(b)     the name and address of the Jersey paying agent;

(c)     the account number of the beneficial owner or, where there is none, identification of the debt claim giving rise to the interest payment; and

(d)     the total amount of interest or income or, as the case may require, the total amount of the proceeds of sale, redemption or refund on which, apart from this Regulation, the retention tax would have been levied under Regulation 10(1).[22]

12    Exception where beneficial owner presents certificate

(1)    Regulation 9 shall not apply where the beneficial owner has presented to the Jersey paying agent a certificate conforming to paragraph (2) drawn up, in the name of the beneficial owner, by the competent authority of the contracting party in which the beneficial owner is resident for tax purposes.

(2)    The certificate shall indicate –

(a)     the name and address of the beneficial owner;

(b)     the tax or other identification number of the beneficial owner or, failing that, the date and place of birth of the beneficial owner;

(c)     the name and address of the Jersey paying agent;

(d)     the account number of the beneficial owner or where there is none, the identification of the security.

(3)    The certificate shall be valid for 3 years or such lesser period as is specified in it.

13    Duties of Comptroller of Taxes[23]

(1)    Where retention tax is remitted to the Comptroller of Taxes pursuant to Regulation 9(3) –

(a)     he or she shall transfer 75% of that tax to the competent authority of the contracting party in which the beneficial owner is resident; and

(b)     the remainder shall be credited to the general revenue of the States.[24]

(2)    Where retention tax is remitted to the Comptroller of Taxes in a currency other than pounds sterling, he or she shall make the transfer under paragraph (1)(a) in that same currency.[25]

(3)    The Comptroller of Taxes shall communicate information reported to him or her under Regulation 11(2) to the competent authority of the contracting party in which the beneficial owner is resident.[26]

(4)    The Comptroller of Taxes shall make transfers under paragraph (1) and communications under paragraph (3) –

(a)     at least once a year; and

(b)     not later than the end of June following the year in respect of which the retention tax is remitted, or in which the information is communicated, to the Comptroller.[27]

(5)    The Comptroller of Taxes shall not disclose any information to the competent authority of a contracting party pursuant to these Regulations unless satisfied that the competent authority will comply with the requirements in paragraph (7) in respect of the information.[28]

(6)    The Comptroller of Taxes shall comply with the requirements in paragraph (7) in respect of information received by him or her pursuant to an agreement referred to in Regulation 2(1).[29]

(7)    The information –

(a)     shall be kept confidential;

(b)     shall not be used for any purpose other than for the purposes of direct taxation, without the prior written consent of the authority disclosing the information being, as the case may require, the Comptroller of Taxes or the competent authority of a contracting party;

(c)     shall be disclosed only to persons or authorities concerned with the purposes of direct taxation, and used by such persons or authorities only for such purposes or for oversight purposes, including the determination of any appeal.[30]

(8)    Information may be disclosed in public court proceedings or in judicial proceedings for the purposes described in paragraph (7)(c).

(9)    Where the Comptroller of Taxes considers that information that he or she has received from the competent authority of a contracting party is likely to be useful to the competent authority of another contracting party, the Comptroller of Taxes may, with the agreement of the first-mentioned competent authority, transmit the information to the second-mentioned competent authority.[31]

14    Right of beneficial owner resident in Jersey to tax credit

(1)    This Regulation applies where a beneficial owner resident in Jersey for a year of assessment proves, to the satisfaction of the Comptroller of Taxes, that interest payments received by the beneficial owner in a contracting party in that year of assessment have been subject to a withholding tax pursuant to an agreement, implemented by these Regulations, between Jersey and the contracting party.[32]

(2)    In a case to which this Regulation applies, the Comptroller of Taxes shall allow the tax withheld in the contracting party pursuant to the agreement as a credit against the income tax payable by the beneficial owner pursuant to the Income Tax (Jersey) Law 1961 in respect of the interest payments.[33]

15    Offences

(1)    A person who knowingly fails to comply with any requirement imposed by these Regulations shall be guilty of an offence and liable to a fine.

(2)    A person who, when required by, or for the purposes of, these Regulations, provides information or produces any document that the person does not believe to be true, shall be guilty of an offence and liable to 2 years’ imprisonment and a fine of level 4 on the standard scale.

16    Offences: aiders, abettors, bodies corporate, etc.

(1)    A person who aids, abets, counsels or procures the commission of an offence under these Regulations shall also be guilty of the offence and liable in the same manner as a principal offender to the penalty provided for that offence.

(2)    Where an offence under these Regulations committed by a limited liability partnership or body corporate is proved to have been committed with the consent or connivance of, or to be attributable to, any neglect on the part of –

(a)     a person who is a partner of the partnership or director, manager, secretary or other similar officer of the body corporate;

(b)     any person purporting to act in any such capacity,

the person shall also be guilty of the offence and liable in the same manner as the partnership or body corporate to the penalty provided for that offence.

(3)    Where the affairs of a body corporate are managed by its members, paragraph (2) shall apply in relation to acts and defaults of a member in connection with the member’s functions of management as if the member were a director of the body corporate.

17    Citation

These Regulations may be cited as the Taxation (Agreements with European Union Member States) (Jersey) Regulations 2005.

SCHEDULE 1[34]

(Regulation 2)

Contracting parties and their competent authorities

SCHEDULE 2[35]

(Regulation 5(15))

Related entity acting as a public authority or whose role is recognized by an international treaty

For the purposes of Regulation 5(15), the following entities will be considered to be a “related entity acting as a public authority or whose role is recognized by an international treaty”:

Endnotes

Table of Legislation History

Table of Renumbered Provisions

Table of Endnote References

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