Ratification of the Convention between Jersey and the Grand Duchy of Luxembourg for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital.

STATES OF JERSEY

RATIFICATION OF THE CONVENTION BETWEEN JERSEY AND THE GRAND DUCHY OF LUXEMBOURG FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME AND ON CAPITAL

Lodged au Greffe on 21st May 2013 by the Chief Minister

STATES GREFFE

2013   Price code: C  P.58

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to ratify the Convention between Jersey and the Grand Duchy of Luxembourg for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital, as set out in Appendix 1 to the report of the Chief Minister dated 1st May 2013.

CHIEF MINISTER

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  to an  agreed international standard.
2. In  September  2009,  the  Global  Forum  on  Transparency  and  Information Exchange for Tax Purposes, a body of which some 116 jurisdictions are now members,  agreed  a  peer  review  process  to  assess  compliance  with  the international standard. To oversee this process, a peer review group was set up chaired  by  France,  with  4  Vice-Chairs  from  India,  Japan,  Jersey  and Singapore.
3. 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  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.
4. There  are  occasions  when  an  approach  is  made  to or  received  from  a jurisdiction that is not an EU, OECD or G20 member, expressing a wish to enter  into  the  negotiation  of  a  Tax  Information  Exchange  Agreement.  In accordance with the terms of reference of the peer review process set by the Global  Forum,  jurisdictions  are  required  to enter  into  a  tax  information exchange agreement with any jurisdiction that considers itself to be a relevant partner.  The views  of  the  finance  industry  on  the  extent  to which  a  tax agreement with the jurisdiction concerned would be supportive of business development  are  also  taken  into  account  when  deciding  what  degree  of priority to attach to the negotiations.
5. The International Tax Information Exchange Standard can be met through either a Tax Information Exchange Agreement (TIEA) or a Double Taxation Agreement/Convention (DTA/DTC). The advantage of a DTA/DTC 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. However, the majority of jurisdictions with whom the Island has sought to negotiate an Agreement have not been prepared to consider a DTA/DTC on the  grounds  that  they  would  derive  little,  if  any,  benefit  from  such  an Agreement because Jersey is a zero-tax jurisdiction.
6. The latest  position  in respect  of  the  programme  of  negotiating  Tax Agreements is attached as Appendix 2 to this report. A total of 31 TIEAs and 8 DTAs have now been signed, of which 24 TIEAs and 3 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.

7. As a Vice-Chair of the Global Forum Peer Review Group, Jersey has been determined to lead by example, and has attached particular importance to entering into agreements with the EU, OECD and G20 member jurisdictions. Agreements have been signed, or negotiations have been completed or are well advanced, with 25 of the 27 EU member states, 33 of the 34 OECD members and 17 of the 19 G20 countries (the 20th member of the G20 is the European Union).
8. Jersey is party to the Peer Review process of assessment of compliance with the  international  standards,  and  a  report  of  the  assessment  of Jersey  was published at the end of October 2011. The review concluded that Jersey's domestic laws provide a satisfactory framework for the exchange of relevant information. The assessors said "overall, this review of Jersey identifies a legal  and  regulatory  framework  for  the  exchange  of  information  which generally functions effectively to ensure that the required information will be available and accessible Jersey practices to date have demonstrated a responsive and co-operative approach".

The Convention with the Grand Duchy of Luxembourg

9. The Convention entered into with the Grand Duchy of Luxembourg ("the Convention") is a continuation of the ongoing programme of entering into Tax Agreements to the International Standard.
10. The Convention is attached as Appendix 1 to this report. The Convention is in line with the OECD Model Tax Convention and provides for the avoidance of double taxation to facilitate exchange of goods and services and movement of capital, technology  and  people. The Convention  also  makes  provision  for information exchange to the agreed International Standard.
11. Luxembourg is an EU and OECD member country with whom there are long- established business links, particularly in the area of fund administration. As international finance centres with common interests, their entering into the Convention  is  therefore  considered  to be  of  particular  relevance  and importance from which both Parties will benefit. It is also in accordance with the Island's general good neighbour policy in relation to the EU Member States. The finance industry was consulted and fully supports the signing of the Convention.

Procedure for signing and ratifying the Convention

12. The Convention  was  signed  on  17th  April  2013  by  the  Assistant  Chief Minister with responsibility for External Relations 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 adopted by the States on 28th June 2006. The Council of Ministers authorised the Chief Minister to delegate the Assistant Chief Minister to sign on behalf of the Government of Jersey.
13. The Convention is now being presented to the States for ratification, following which it will be published and entered into the official record. The Convention will enter into force when the domestic procedures of both parties have been completed.

14. The States,  on  15th  June  2010,  adopted  the  Taxation  (Double  Taxation) (Jersey)  Regulations  2010.  The  Schedule  to  these  Regulations  lists  the countries with whom Double Taxation Agreements have been entered into. The necessary Regulations to provide for the inclusion in the Schedule of the Convention with the Grand Duchy of Luxembourg will be presented to the States for adoption immediately following the adoption of the ratification proposition.

Financial and manpower implications

15. There are no implications expected for the financial and manpower resources of  the  States  arising  from  the  ratification  and  implementation  of  the Agreement.

1st May 2013

STATES OF JERSEY

1. TAX INFORMATION EXCHANGE AGREEMENTS (TIEAs)

1. TIEAs signed

Note: dates in brackets are the expected dates based on latest information from the country concerned.

2. TIEAs initialled or agreed ready for signing:

• Greece
• Republic of Korea
• Slovenia
• Spain
• Switzerland

3. TIEAs  where  negotiations  are  well  advanced  with  a  draft  agreement exchanged:

• Belgium
• Chile
• Hungary
• Kenya
• Lithuania
• Romania
• Slovakia

4. Jurisdictions contacted from which there has been a positive response and/or initial action has been taken:

• Bulgaria
• Cyprus

5. Jurisdictions approached but from whom a formal response is awaited:

• G20 Member States:

– Russia

2. DOUBLE TAXATION AGREEMENTS (DTAs)

1. DTAs signed:

• Malta –

signed January 2010

ratified by Malta February 2010 ratified by Jersey June 2010

in force – 19th July 2010

• Estonia –

signed December 2010

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

• Hong Kong China –

signed February 2012

ratified by Jersey May 2012

ratified by Hong Kong [est. end June 2013]

• Qatar –

signed March 2012

ratified by Jersey May 2012

ratified by Qatar November 2012

in force – 22nd November 2012

• Singapore –

signed October 2012

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

• Guernsey – signed January 2013
• Isle of Man – signed January 2013
• Luxembourg

signed April 2013

2. DTAs initialled or agreed ready for signing:

–

3. DTAs where negotiations have been initiated/draft agreements have been exchanged:

• Bahrain
• Belgium
• Mauritius
• Saudi Arabia
• Seychelles

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

Adviser – International Affairs 10th May 2013