Ratification of the Agreement between Jersey and the Principality of Liechtenstein for the Elimination of Double Taxation with Respect to Taxes on Income and on Capital and the Prevention of Tax Evasion and Avoidance (P.102/2018)

STATES OF JERSEY

RATIFICATION OF THE AGREEMENT BETWEEN JERSEY AND THE PRINCIPALITY OF LIECHTENSTEIN FOR THE ELIMINATION OF DOUBLE TAXATION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL AND THE PREVENTION OF TAX EVASION AND AVOIDANCE

Lodged au Greffe on 30th August 2018 by the Minister for External Relations

STATES GREFFE

2018  P.102

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to ratify the Agreement between Jersey and the Principality of Liechtenstein for the Elimination of Double Taxation with Respect to Taxes on Income and on Capital and  the  Prevention of Tax  Evasion and Avoidance, as set out in Appendix 1  to  the  report  of  the  Minister  for  External  Relations  dated 28 August 2018.

MINISTER FOR EXTERNAL RELATIONS

REPORT

Background

1. In February 2002, Jersey entered into a political commitment to support the OECD tax initiative on transparency and information exchange through the negotiation of Tax Information Exchange Agreements ("TIEAs") to an agreed international standard.
2. Successive G20 summits have encouraged jurisdictions to make progress in agreeing, implementing and abiding by the necessary International Agreements for  information  exchange.  In  response,  Jersey  has  maintained  an  active programme of negotiating Agreements, with priority being given to EU, OECD and  G20  member  jurisdictions.  This  has  served  to  enhance  the  Island's international  personality,  and  generally  has  helped  to  engender  a  more favourable view of the Island amongst the international community.
3. There are occasions when an Agreement is sought with a jurisdiction that is not an EU, OECD or G20 member. In accordance with its commitment to the OECD tax initiative, Jersey is required to enter into a TIEA with any jurisdiction that can be considered to be a relevant partner. This, together with the views of the finance industry on whether a TIEA with the jurisdiction concerned would be supportive of business development, are factors taken into account when deciding whether or not the negotiation of an Agreement would be justified, and if so, what priority to attach to the negotiations.
4. The International Tax Information Exchange standard can be met through either a TIEA or a Double Taxation Agreement ("DTA"). The advantage of a DTA is that it offers benefits to individuals and the business community through the avoidance of double taxation or reduced rates of withholding tax, in addition to providing for exchange of information to the international standard. Whenever possible, Jersey's preference is therefore to negotiate a DTA from the outset. Some jurisdictions are reluctant to enter into such an agreement with a zero-tax jurisdiction because they cannot see any obvious reciprocal benefit. Other jurisdictions, however, are more open to the idea, and one such jurisdiction is Liechtenstein.
5. The latest position in respect of the programme of negotiating Tax Agreements is attached as Appendix 2 to this report. A total of 39 TIEAs and 15 DTAs have now been signed, of which 36 TIEAs and 12 DTAs are in force. Almost without exception, the delay in bringing Agreements into force is due to the length of time taken by the other parties to the Agreements to complete their domestic procedures  for  the  ratification  of  the  Agreements.  In  addition,  there  are 47 jurisdictions with whom Jersey does not have a bilateral TIEA or DTA, but where information exchange can occur through their being a party to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, to which Jersey became a party in June 2014.

The Agreement with the Principality of Liechtenstein

6. The  Agreement  entered  into  with  the  Principality  of  Liechtenstein  ("the Agreement") is a continuation of the ongoing programme of entering into Tax Agreements to the international standard with relevant partners.

7. The finance industry in Jersey fully supports the negotiation of Double Taxation Agreements.
8. A copy of the signed Agreement is attached as Appendix 1 to this report. The Agreement is in line with the OECD Model Tax Convention, and provides for the  avoidance of double  taxation to facilitate  the  exchange  of goods  and services; and the movement of capital, technology and people. The Agreement also makes provision for information exchange to the agreed international standard.
9. Jersey is fully committed to the OECD's Inclusive Framework on anti-Base Erosion and Profit Shifting ("BEPS"). Jersey signed the Multilateral Instrument (the "MLI") in June 2017, and was one of the first 3 jurisdictions to ratify the instrument, which is seen as a key element in implementing the OECD's anti- tax avoidance measures. In accordance with this international commitment, Jersey is expected to incorporate the MLI tax treaty provisions into all its Tax Treaties.  The  Agreement  is  consistent  with  the  treaty-related  minimum standards of the OECD's Inclusive Framework on BEPS.
10. The Principality of Liechtenstein and Jersey have many common ties. Both jurisdictions have developed as successful international finance centres, with strong connections to European neighbours and global partners. Jersey and Liechtenstein co-operate regularly as members of OECD governance bodies.

Procedure for signing and ratifying the Convention

11. The Agreement was signed by the Minister for External Relations in Jersey on 13 August 2018 in accordance with the provisions of Article 18(2) of the States of Jersey Law 2005 and paragraph 1.8.5 of the Strategic Plan 2006 – 2011 (P.40/2006) adopted by the States (as amended) on 27 June 2006.
12. The Agreement is now being presented to the States for ratification, following which it will be published and entered into the official record. The Agreement will enter into force when the domestic procedures of both parties have been completed.
13. The States, on 15 June 2010, adopted the Taxation (Double Taxation) (Jersey) Regulations 2010. The Schedule to these Regulations lists the countries with whom Double Tax Agreements have been entered into. The necessary Order to provide for the inclusion in the Schedule of the Agreement with the Principality of Liechtenstein will be made subsequent to the ratification.

Financial and manpower implications

14. There are no financial or manpower implications expected for the States arising from the adoption of this proposition and the ratification and implementation of the Agreement.

28 August 2018

STATES OF JERSEY

1. TAX INFORMATION EXCHANGE AGREEMENTS ("TIEAs")

1. TIEAs signed (Note: dates in brackets are current best estimates)

+ Note: the delay in ratification arose because, subsequent to the TIEA being signed with Spain, an amendment was required to insert a missing word. This has now been agreed through an exchange of letters with the Spanish authorities, and ratification is proceeding.

2. TIEAs where  negotiations are well advanced with a draft Agreement exchanged:

• Bulgaria
• Kenya
• Lithuania
• Slovakia.

Note:  Bulgaria, Lithuania and Slovakia have signed and entered into force the

Multilateral  Convention  on  Mutual  Administrative  Assistance  in  Tax Matters. Kenya is a signatory to the Convention and it should enter into force shortly. As the Convention provides for the equivalent exchange of information on request with immediate effect, it is expected that all the jurisdictions mentioned will rely on the Convention and will not proceed further with the negotiation of a TIEA.

3. Jurisdiction with which there has been some contact, but on which no further action has been taken to-date:

• Russia.

Note:  Russia has signed and entered into force the Multilateral Convention on

Mutual Administrative Assistance in Tax Matters and therefore does not need a TIEA to make requests for information.

2. DOUBLE TAXATION AGREEMENTS ("DTAs")1

1. DTAs signed:

Malta –  signed January 2010

ratified by Malta February 2010

ratified by Jersey June 2010

in force – 19 July 2010

Estonia –

Hong Kong China –

signed December 2010

ratified by Jersey March 2011 ratified by Estonia December 2011 in force – 30 December 2011

signed February 2012

ratified by Jersey May 2012 ratified by Hong Kong June 2013 in force – July 2013

1 The DTAs listed are those that are to the standard of the OECD Model Convention. In

addition, there is a DTA with the United Kingdom which was entered into in 1952, and a

number of partial DTAs, details of which can be found on the Taxes Office website – http://www.gov.je/TaxesMoney/InternationalTaxAgreements/DoubleTaxation/Pages/PartialDoubleTaxation.aspx A new DTA is in the process of being negotiated with the United Kingdom which will meet

the standard of the OECD Model Convention.

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P.102/2018

Qatar –

Singapore –

Guernsey –

Isle of Man –

signed March 2012

ratified by Jersey May 2012 ratified by Qatar November 2012 in force – 22 November 2012

signed October 2012

ratified by Jersey January 2013 ratified by Singapore May 2013 in force – 2 May 2013

signed January 2013

ratified by Jersey June 2013 ratified by Guernsey May 2013 in force – 9 July 2013

signed January 2013

ratified by Jersey June 2013

ratified by the Isle of Man May 2013 in force – 10 July 2013

Luxembourg –  signed April 2013

ratified by Jersey July 2013 ratified by Luxembourg July 2014 in force – 5 August 2014

Rwanda –

Seychelles –

United Arab Emirates –

Cyprus –

Mauritius –

United Kingdom –

signed June 2015

ratified by Jersey October 2015 ratified by Rwanda April 2016 in force – 27 June 2016

signed July 2015

ratified by Jersey October 2015 ratified by Seychelles December 2016 in force – 5 January 2017

signed April 2016

ratified by Jersey September 2016 ratified by UAE February 2017 in force – 15 February 2017

signed July 2016

ratified by Cyprus August 2016 ratified by Jersey October 2016 in force – 17 February 2017

signed March 2017

ratified by Mauritius February 2018

signed July 2018

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P.102/2018

2. DTAs ready for signing:

None.

3. Jurisdictions where DTA negotiations have been requested/initiated/draft agreements have been exchanged:

• Bahrain
• Botswana
• China (People's Republic)
• Ghana
• India
• Kenya
• Lesotho
• Liechtenstein
• Malawi
• Nigeria
• Saudi Arabia
• South Africa
• Swaziland
• Uganda
• Zambia.

4. Jurisdictions with whom Jersey does not have a bilateral TIEA or DTA, but who are party to (i.e. have signed and entered into force) the OECD/ Council of Europe Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which provides for the exchange of information on request, on the same basis as the bilateral TIEAs:

• Albania
• Andorra
• Azerbaijan
• Bahamas (01-08-18)
• Bahrain (01-09-18)
• Barbados
• Belize
• Bulgaria
• Cameroon
• Colombia
• Cook Islands
• Costa Rica
• Croatia
• Georgia
• Ghana
• Greece
• Grenada (01-09-18)
• Guatemala
• Israel
• Kazakhstan

• Lebanon
• Liechtenstein
• Lithuania
• Macau (01-09-18)
• Malaysia
• Marshall Islands
• Moldova
• Monaco
• Nauru
• Nigeria
• Niue
• Pakistan
• Panama
• Peru (01-09-18)
• Russia
• Saint Kitts and Nevis
• Saint Lucia
• Saint Vincent and the Grenadines
• Samoa
• San Marino
• Saudi Arabia
• Senegal
• Slovak Republic
• Tunisia
• Uganda
• Ukraine
• Uruguay.

Jersey  became  a  party  to  the  Convention  on  1st  June  2014.  Some jurisdictions with whom TIEA negotiations have been engaged may decide not to progress the latter and rely on the Multilateral Convention.

5. Jurisdictions with whom Jersey has signed a TIEA or DTA who are also party to the Multilateral Convention (i.e. it is signed and in force):

• Argentina
• Australia
• Austria
• Belgium
• Brazil
• Canada
• Chile
• China (People's Republic)
• Cyprus
• Czech Republic
• Denmark
• Estonia
• Finland
• France

• Germany
• Hong Kong (01-09-18)
• Hungary
• Iceland
• India
• Indonesia
• Ireland
• Italy
• Republic of Korea
• Japan
• Latvia
• Luxembourg
• Malta
• Mauritius
• Mexico
• Netherlands
• New Zealand
• Norway
• Poland
• Portugal
• Romania
• Seychelles
• Singapore
• Slovenia
• South Africa
• Spain
• Sweden
• Switzerland
• Turkey
• United Arab Emirates (01-09-18)
• United Kingdom.

Enquiries  concerning  the  above  should  be  directed  in  the  first  instance  to – Mr. C. Powell,  Adviser –  International  Affairs,  Chief  Minister's  Department, telephone: 44(0)1534 440414; e-mail: c.powell@gov.je.

Colin Powell

Adviser – International Affairs  27 July 2018