Ratification of the Agreement between the Government of Jersey and the Government of the Republic of Cyprus 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 GOVERNMENT OF THE REPUBLIC OF CYPRUS FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO

TAXES ON INCOME

Lodged au Greffe on 30th August 2016 by the Minister for External Relations

STATES GREFFE

2016  P.91

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to ratify the Agreement between the Government of Jersey and the Government of the Republic of Cyprus for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on income, signed by the Minister for External Relations on 11th July 2016.

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. 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 TIEAs. 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 TIEA. In accordance with the terms of reference of the peer review process set by the Global Forum, jurisdictions are required to enter into a TIEA with any jurisdiction that considers itself to be a relevant partner. The views  of  the  finance  industry,  on  the  extent  to  which  a  TIEA  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 or Convention ("DTA" or "DTC"). The advantage of a DTA or 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 or 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 39 TIEAs and 12 DTAs have now been signed, of which 34 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.

7. 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 U.K., the U.S.A., and Germany, amongst others.

The Agreement with the Republic of Cyprus

8. The Double Taxation Agreement entered into with the Republic of Cyprus ("the Agreement") is a continuation of the ongoing programme of entering into Tax Agreements to the international standard set by the OECD. The Agreement is attached as Appendix 1 to this report.
9. 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 standards.
10. Jersey and the Republic of Cyprus have many common ties. Both Islands possess deep and rich histories and a shared Norman heritage. Jersey and the Republic of Cyprus have strong cultural and political ties to the U.K.; and parliamentarians from both Islands are active participants in the British Islands and Mediterranean region of the Commonwealth Parliamentary Association. Our economic linkages are also important. Jersey and the Republic of Cyprus have  developed  as  successful  international  finance  centres,  with  strong connections to European neighbours and global partners.
11. The signing of the Double Taxation Agreement with the Republic of Cyprus continues Jersey's  firm and  longstanding  commitment to the  international standards of transparency and information exchange. Jersey also pursues a good neighbour policy in relation to the  European Union. It is therefore to be welcomed that with the signing of the DTA, Jersey will be further strengthening its political and business relationship with an EU Member State.

Procedure for signing and ratifying the Convention

12. The Agreement was signed in London at the High Commission of the Republic of  Cyprus  on  11th  July  2016  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 Tax Agreements on behalf of the Government of Jersey.
13. 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.
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 Agreement with

the Republic of Cyprus will be brought to the States for adoption following the ratification of the Agreement.

Financial and manpower implications

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

STATES OF JERSEY

1. TAX INFORMATION EXCHANGE AGREEMENTS (TIEAs)

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

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 approached but 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

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P.91/2016

• 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

ratified by Jersey October 2015 ratified by Rwanda April 2016

• Seychelles

signed July 2015

ratified by Jersey October 2015

• United Arab Emirates Signed April 2016
• Cyprus

Signed July 2016

2. DTAs ready for signing:

• Mauritius

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

• Bahrain
• Botswana
• Ghana
• Lesotho
• Liechtenstein
• Malawi
• Nigeria
• Saudi Arabia
• Swaziland
• Uganda
• 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
• Belize
• Cameroon
• Colombia
• Costa Rica
• Croatia
• Cyprus
• Georgia
• Ghana
• Greece
• Kazakhstan
• Lithuania
• Mauritius
• Moldova
• Nigeria
• Russia
• San Marino
• Saudi Arabia
• Slovak Republic
• Tunisia
• Uganda (01-09-2016)
• 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.

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 (01-10-2016)
• Canada
• China (PR)
• Czech Republic
• Denmark
• Estonia
• Finland
• France
• Germany
• Hungary
• Iceland
• India
• Indonesia
• Ireland
• Italy
• Republic of Korea
• Japan
• Latvia
• Luxembourg
• Malta
• Mexico
• Netherlands
• New Zealand
• Norway
• Poland
• Portugal
• Romania
• Seychelles
• Singapore
• Slovenia
• South Africa
• Spain
• Sweden
• United Kingdom

Enquiries concerning the above should be directed in the first instance to:

Adviser – International Affairs

Chief Minister's Department

[tel. 44(0)1534 440414; e-mail: c.powell@gov.je]

Adviser – International Affairs  18th July 2016