Ratification of the Agreement between the Government of Jersey and the Republic of Croatia with respect to the Taxation of Savings Income.

STATES OF JERSEY

RATIFICATION OF THE AGREEMENT BETWEEN THE GOVERNMENT OF JERSEY AND THE REPUBLIC OF CROATIA WITH RESPECT TO THE TAXATION OF SAVINGS INCOME

Lodged au Greffe on 4th November 2013 by the Minister for External Relations

STATES GREFFE

2013   Price code: C  P.147

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to ratify the Agreement between the Government of Jersey and the Republic of Croatia on the Taxation of Savings Income as set out in the Appendix to the report of the Chief Minister dated 23rd October 2013.

MINISTER FOR EXTERNAL RELATIONS

REPORT

1. The States are asked to ratify the signed Agreement to be entered into with the Republic  of  Croatia  on  the  Taxation  of  Savings  Income  attached  as  an Appendix to this report.

Background

2. The States on the 22nd June 2004 adopted P.97/2004 and agreed –

1. to approve the 2 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;
2. to 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
3. 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. The States on 21st June 2005 made Regulations providing for the bringing into effect of the Bilateral Agreements on Taxation of Savings Income entered into  with  each  of  the  then  25  Member  States  of  the  European  Union. Subsequently the States on 16th January 2007 made Regulations providing for the accession to the European Union of Bulgaria and Romania.
4. The Republic of Croatia acceded to the European Union on the 1st July 2013. As a consequence Jersey is now called upon to enter into an Agreement with the Republic of Croatia on the Taxation of Savings Income. This Agreement is in the  same  terms  as the Agreements  entered  into with the other  27 EU Member States which in turn mirror the 2 Model Agreements approved by the States on 22 June 2004.

Agreement with the Republic of Croatia

5. To bring  the  Agreement  with  the  Republic  of  Croatia  into  effect  an amendment  to  the  existing  Taxation  (Agreements  with  European  Union Member States) (Jersey) Regulations 2005 is required. 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 may by Regulations  make  such  provision  as  appears  to  them  to  be  necessary  or expedient for the purposes of –

(a)  implementing an approved Agreement or approved obligation

6. The ratification by the States of the Agreement with the Republic of Croatia is required to satisfy the above provision regarding the implementation of "an approved Agreement or approved obligation".

7. With the ratification and the bringing into force of the Agreement with the Republic of Croatia, individuals resident in that country will be subject to the same  arrangements  for retention tax  or exchange  of information as  those applied to relevant individuals resident in the other 27 EU Member States.
8. The first retention tax returns or exchange of information will be called for from paying agents in the Island in the first quarter of 2015 in respect of relevant interest payments  made through 2014 from the  date the  relevant Regulations are made (see paragraph 12 of this report).
9. The Guidance Notes issued in 2005 to assist Jersey paying agents in the application of the Agreements entered into with the then Member States will have equal application to the Agreement with the Republic of Croatia. In due course revised Guidance Notes will be issued to cover the move from the retention tax to autonomous exchange of information when this move has been ratified by the States and the necessary Regulations have been made.
10. The Agreement is attached as an Appendix to an exchange of letters in which both  parties  undertake  at  the  earliest  possible  date  to  comply  with  their respective constitutional formalities for the entry into force of the Agreement and to notify each other without delay when such formalities are completed. Pending the completion of these internal procedures the parties have agreed to apply the Agreement provisionally, within the framework of their respective domestic constitutional requirements, as from the date of accession of the Republic of Croatia to the European Union.
11. The term constitutional requirements' is used by the EU Council Secretariat to include the ratification, publication and entry into force of the Agreement. The procedure adopted involves both parties exchanging a signed Agreement in the language of each of the parties which then allows both parties to start their  ratification  procedures  contemporaneously.  The  Agreement  has  been signed  by  the  Chief  Minister  in  accordance  with  the  provisions  of Article 18(2) of the States of Jersey Law 2005 and paragraph 1.8.3 of the Strategic  Plan  2006-2011  adopted  by  the  States  on  28th June  2006.  The fulfilling of the constitutional requirements' now calls for the ratification of the Agreement, to which this Project refers; the publication of the Agreement; and the making of the Regulations providing for the Agreement to enter into force.
12. Since the full ratification procedures for the Agreement on the Taxation of Savings Income have not been fully completed by both parties, the provisions of the Agreement will be implemented under provisional arrangements. While the exchange of letters provided for the Agreement to be applied from the date of accession of the Republic of Croatia to the European Union, the Agreement was not received in Jersey for signature until the end of September 2013. Accordingly the paying agents are not in a position to apply the Agreement with effect from the 1st July 2013 and for practical reasons therefore the decision has been taken to make the effective date for the application of the Agreement the date of the making of the Regulations.

Financial and manpower implications

13. There are no implications for the financial or manpower resources of the States arising from the ratification and implementation of the Agreements with the Republic of Croatia.

23rd October 2013

APPENDIX