Ratification of the Agreement between the Government of Jersey and the Republic of Rwanda for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

STATES OF JERSEY

RATIFICATION OF THE AGREEMENT BETWEEN THE GOVERNMENT OF JERSEY AND THE REPUBLIC OF RWANDA FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME

Lodged au Greffe on 11th August 2015 by the Minister for External Relations

STATES GREFFE

2015   Price code: C  P.90

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to ratify the Agreement between Jersey and the Republic of Rwanda for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, as set out in Appendix 1 to the report of the Minister for External Relations dated 7th July 2015.

MINISTER FOR EXTERNAL RELATIONS

REPORT

Background

1. Africa has been identified as an area with good business opportunities for Jersey  as  an  international  finance  centre,  which  opportunities  if taken advantage of would be of benefit to the developing countries.
2. In November 2014, Jersey Finance launched the Value to Africa' report, at Chatham House, which was commissioned to look at the role international financial centres could play in the growth of developing countries. The report, conducted by independent research organisation, Capital Economics, found that, while Africa is one of the fastest-growing regions globally, to sustain that growth it needs to invest US $85 trn in infrastructure by 2040. This cannot be generated  locally  or  through  international  aid,  with  the  research  paper estimating a shortfall of US $11.4 trn in investment, US $6.1 trn of which will need to come from outside the continent.
3. Great importance is attached to the Agreement with Rwanda as the first such Agreement  with  an  African  country,  and  one  that  will  support  inward investment into Rwanda, and further enhance the close economic and political relationships  that  already  exist  between  Jersey  and  Rwanda.  These relationships were reinforced by the visit to Rwanda inJune 2015 by the Assistant Chief Minister, Senator P.F.C. Ozouf , and technical assistance has been offered to Rwanda in the pursuit of their plans to develop their economy.
4. Approaches have been made to other African countries to initiate negotiations on entering into similar agreements and itis hoped that the agreement with Rwanda will encourage the other countries to progress negotiations . It is also intended  that,  alongside  the  Double Taxation  Agreements(DTA),  Bilateral Investment  Treaties  (BIT)  will  also  be  negotiated.  Support  has  also  been extended through assistance with asset recovery and through the enactment of legislation on Vulture Funds.
5. The combination of a DTA and a BIT will support inward investment, thereby linking  the  role  of  Jersey  as  an  international  finance  centre  with  the investment needs of the developing countries. The role that Jersey can play in this respect is also reflected in the presence in the Island of over 20 mining and natural resources companies with interests in Africa.
6. 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. Successive G20 summits have encouraged jurisdictions to make progress in agreeing, implementing and abiding by the necessary international  Agreements  for  information  exchange.  The international  tax information exchange standard can be met through either a Tax Information Exchange  Agreement  (TIEA)  or  a  Double  Tax 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.

7. The latest position in respect of the programme of negotiating tax Agreements is attached as Appendix 2to this report. A total of 36 TIEAs and 9 DTAs have now been signed, of which 33 TIEAs and 8 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.
8. Jersey is party to the Peer Review process of assessment of compliance with the international standards, and has been assessed as largely compliant, a rating common to the UK, the USA, and Germany among others.

The Agreement with the Republic of Rwanda

9. The Double Taxation Agreement entered into with the Republic of Rwanda ("the Agreement") isto the international standard set by the OECD.
10. The Agreement is attached as Appendix 1to this report. The Agreement 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 Agreement  also  makes  provision  for information exchange to the agreed international standard.

Procedure for signing and ratifying the Convention

11. The Agreement was signed in London at the Jersey Office on 26th June 2015 by the Minister 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 has authorised the Chief Minister, in concurrence with the Minister for External Relations, to sign on behalf of the Government of Jersey.
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  15th  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 Regulations to provide for the inclusion in the Schedule of the Agreement with the Republic of Rwanda will be presented to the States for adoption immediately following the adoption of this ratification proposition.

Financial and manpower implications

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

7th July 2015

APPENDIX 1

APPENDIX 2

STATES OF JERSEY

1. TAX INFORMATION EXCHANGE AGREEMENTS (TIEAs)

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

2. TIEAs initialled or agreed ready for signing:

• Chile
• Spain

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

[Note, however, that Lithuania and Slovakia are party to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, with which Jersey is also joined. As this provides for the equivalent exchange of information on request with immediate effect, it is not expected that they will proceed with the TIEA.]

• Bulgaria
• Kenya
• Lithuania
• Slovakia

4. Jurisdiction approached on which no further action has been taken to date:

• Russia

 _____________________________________________________________________

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 – 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 June 2013 in force – July 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

ratified by Jersey June 2013

ratified by Guernsey May 2013

in force – 9th July 2013

• Isle of Man –

signed January 2013

ratified by Jersey June 2013

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

• Luxembourg

signed April 2013

ratified by Jersey July 2013

ratified by Luxembourg July 2014 in force – 5th August 2014

• Rwanda signed June 2015
• Seychelles signed July 2015

2. DTAs initialled or agreed ready for signing:

• Mauritius

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

• Bahrain
• Botswana
• Cyprus
• Ghana
• Lesotho
• Liechtenstein
• Malawi

• Nigeria
• Saudi Arabia
• Swaziland
• UAE
• Zambia

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

• Albania
• Azerbaijan (01-10-2015)
• Belize
• Cameroon (01-10-2015)
• Colombia
• Costa Rica
• Croatia
• Cyprus
• Georgia
• Ghana
• Greece
• Kazakhstan (01-08-2015)
• Lithuania
• Moldova
• Nigeria (01-09-2015)
• Russia
• Slovak Republic
• Spain
• Tunisia
• Ukraine

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. One such jurisdiction is Greece.

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

• Argentina
• Australia
• Austria
• Belgium
• Canada
• Czech Republic
• Denmark
• Estonia
• Finland

• France
• Hungary
• Iceland
• India
• Indonesia
• Ireland
• Italy
• Republic of Korea
• Japan
• Latvia
• Luxembourg
• Malta
• Mexico
• Netherlands
• New Zealand
• Norway
• Poland
• Portugal
• Romania
• Seychelles (01-10-2015)
• Slovenia
• South Africa
• Sweden
• United Kingdom

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  29th July 2015