Ratification of Agreements with Bulgaria and Romania on the Taxation of Savings Income

STATES OF JERSEY

r

RATIFICATION OF AGREEMENTS WITH BULGARIA AND ROMANIA ON THE TAXATION OF SAVINGS INCOME

Lodged au Greffe on 5th December 2006 by the Chief Minister

STATES GREFFE

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to r at ify the Agreements with Bulgaria and Romania on the Taxation of Savings Income as set out in the

Appendix to the Report of the Chief Minister dated 5th December 2006.

CHIEF MINISTER

AGREEMENTS TO BE ENTERED INTO WITH BULGARIA AND ROMANIA ON THE TAXATION OF SAVINGS INCOME

1. T h e States are asked to ratify the signedAgreements to be entered into with Bulgaria andRomaniaon the Taxation of Savings Income attached asan Appendix to this Report.

B a c k ground

2. T h e States on22nd June 2004 adopted P.97/2004 and agreed –

(a ) to approve the two Model Agreements, as set out in the Appendix to the Report of the Policy and

Resources Committee dated 14th May 2004, as the basis of the Bilateral Agreements on Taxation of Savings Income to be entered into with each of the 25 Member States of the European Union;

( b ) t o  authorise  the  President  of  the  Policy  and  Resources  Committee  to  sign  these  Bilateral

Agreements or any documents ancillary thereto on behalf of the Island; and

( c) to charge the Policy and Resources Committee to prepare the necessary legislative changes to

enable the implementation of these Agreements for consideration by the States.

3. T  h e States on 21st June 2005 made Regulations providing forthe bringing into effect of the Bilateral Agreementson Taxation of Savings Income entered into with eachof the 25Member States of the European Union.
4. B  u lgaria andRomaniaaredue to accede to theEuropean Union on1stJanuary2007.As a consequence Jersey is now called upon alsotoenter into anAgreement on the Taxation of Savings Income with each of these two countries. TheseAgreements are in the sameterms as the Agreements entered into with the existing 25EUMember States which in turn mirrored the twoModelAgreementsapprovedby the States on 22ndJune2004.

A g r e ements with Bulgaria and Romania

5. T o bringtheAgreements with Bulgaria and Romania into effect anamendmenttothe existing Taxation (Agreements with European UnionMember States) (Amendment) (Jersey) Regulations 2005 isrequired. To  this  end the  States  need  to make Regulations  in  pursuance of Article  2(1)  of the  Taxation (Implementation) (Jersey) (Law) 2004 which provides that "the States mayby Regulations make such provision as appears to them to be necessaryorexpedient for the purposes of –

(a ) im  plementing an approved Agreement or approved obligation "

6. T  h e ratification by the States of theAgreements with Bulgaria andRomaniais required to satisfy the aboveprovision regarding the implementation of "an approved Agreementor approved obligation".
7. W  i th the bringing into forceoftheAgreements with Bulgaria andRomania, individuals resident in those countries will be subject tothesamearrangementsforexchangeof information or retention tax as those currently applied to relevant individuals residentintheexisting25EUMember States. TheGuidance Notes issued to assist Jersey payingagents in the application of the Agreements entered into with the existing 25EUMember States will haveequal application to the Agreements with Bulgaria andRomania.
8. T h e firstexchangeof information and retention tax returns in respect of individuals resident in Bulgaria and Romania will be called for from paying agents in the Island in the first quarter of 2008 in respect of relevant interest payments made through 2007.
9. T h e regulations bringing the Agreements into effect will provide for the Agreementsto enter fully into force when they are made subject totheprovisionsof Article  17of the Agreements and Regulation 6 o

the  draft Regulations  (see  P.164/2006).  Bulgaria and  Romania will be providing formal  notification  of  the

fulfilment of their constitutional requirements for entry into force of the Agreements. In turn Jersey will provide Bulgaria and Romania with similar written confirmation that Jersey has fulfilled its constitutional requirements.

10. T h e term constitutional requirements' is usedbytheEUCouncil Secretariat toinclude the ratification, publication and entry into force of the Agreements. The procedure adopted involves both parties exchanging signed Agreements in the languageofeachof the parties which then allows both parties to start their ratification procedurescontemporaneously.TheAgreements have been signedbythe Chief Minister in accordance with the provisions of Article 18(2) of the States of Jersey Law 2005 and paragraph 1.8.3of the Strategic Plan 2006-2011 adoptedbythe States on 28th June 2006.The fulfilling of the constitutional requirements' now calls for the ratification of the Agreements, to which this Project refers; the publication of the Agreements; and the making of the Regulations providing for the Agreementsto enter into force.
11. T h e Agreements will be entered into the Official Record, as was the casewith the Agreements entered into with the existing 25EUMemberStates(see R.C.s 26-50, presented on 14th June 2005).
12. S h ould Bulgaria andRomanianot accede to the EuropeanUnionon1stJanuary2007 the Agreements will be non-effective. If Bulgaria andRomaniaaccedetothe European Union with effect from 1st January 2007 but the full ratification procedures for the Agreementson the Taxation of SavingsIncomehavenot been fully completed by all the parties, as will bethe case, it has been agreed (aswas the case in 2005) that the provisionsof the Agreements will beimplemented from 1st January 2007 under provisional arrangements.
13. T h ere are no implications for the financial or manpower resources of the States arising from the ratification and implementation oftheAgreements with Bulgaria and Romania.

5th December 2006