Ratification of the Agreement and Exchange of Letters for the Exchange of Information Relating to Tax Matters between the Government of Jersey and the Kingdom of Spain

STATES OF JERSEY

RATIFICATION OF THE AGREEMENT AND EXCHANGE OF LETTERS FOR THE EXCHANGE OF INFORMATION RELATING TO TAX MATTERS BETWEEN THE GOVERNMENT OF JERSEY AND THE KINGDOM OF SPAIN

Lodged au Greffe on 5th March 2018 by the Minister for External Relations

STATES GREFFE

2018  P.60

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to ratify the Agreement and Exchange of Letters between the Government of Jersey and the Government of the Kingdom of Spain, for the Exchange of Information Relating to Tax Matters, as set out in Appendices 1 and 2 to the attached report of the Chief Minister dated 26th February 2018.

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 to an agreed international standard.
2. In September 2009, the OECD Global Forum on Transparency and Information Exchange for Tax Purposes, a body of which some 150 jurisdictions are now members,  adopted  a  peer  review  process  to  assess  compliance  with  the international standard. A Peer Review Group of some 30 jurisdictions was established, of which Jersey was one of the Vice-Chairs. In 2017, the Global Forum commenced a new programme of assessments of compliance with revised standards which place much greater emphasis on the availability and accessibility of beneficial ownership information. Jersey was one of the first group  of  jurisdictions  subject  to  this  assessment,  and  was  rated  as  fully compliant with all of the elements making up the revised standard. This is a rating not yet achieved by a number of G20, OECD and EU member states.
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,  G20  member jurisdictions, and with other relevant partners. 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. The international tax information exchange standard can be met through a bilateral Tax Information Exchange Agreement ("TIEA") or a Double Tax Agreement ("DTA"). The advantage of a DTA 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.
5. The  standard  can  also  be  met  through  the  exchange  of  information  with jurisdictions  that  are  party  to  the  Multilateral  Convention  on  Mutual Administrative  Assistance  in  Tax  Matters.  Jersey  became  a  party  to  the Convention in June 2014. There are currently some 100 jurisdictions party to the Convention. Some that were in the process of negotiating a TIEA with Jersey have now decided to rely on the provisions of the Convention.
6. The latest position in respect of the bilateral tax agreements and the parties to the Multilateral Convention is attached as Appendix 3to this report. A total of 39 TIEAs  and  13 DTAs  have  now  been  signed,  of  which  36 TIEAs  and 12 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. In addition to compliance with the international standards on the exchange of information  on  request,  Jersey  was  an  "early  adopter"  of  the  Common Reporting Standard ("CRS") on Automatic Exchange of Information ("AEOI"). Information on financial accounts held in the Island in 2016 was exchanged automatically, with some 50 jurisdictions in September 2017. Information on financial  accounts  held  in  2017  will  be  exchanged  with  over  40 more jurisdictions in September 2018. It is expected that with the receipt of this information, jurisdictions will make more requests for additional information under the provisions of the TIEAs or the Multilateral Convention. Jersey is a Vice-Chair of a Global Forum Working Group on AEOI, and is actively involved in the development of the process for assessing compliance with the CRS, which assessments are expected to commence in 2020.

The Agreement with the Government of the Kingdom of Spain

8. The Agreement entered into with the Government of the Kingdom of Spain ("the Agreement") is a continuation of the ongoing programme of entering into tax agreements to the international standard with G20, OECD and EU member jurisdictions. Spain is a member of the OECD and the EU.
9. The Agreement is attached as Appendix 1 to this report. The Agreement is in line with the OECD Model TIEA, and provides for the exchange of information on tax matters on request. It is consistent with agreements signed previously with other jurisdictions and which the States have ratified.
10. Great importance is attached to maintaining a good neighbour relationship with the EU Member States, and this Agreement is seen as a significant further strengthening of that relationship. It will also strengthen and enhance the existing business relationship with Spain, will lead in due course to the removal of Jersey from a Spanish blacklist, and will help to facilitate greater market access.

Procedure for signing and ratifying the Agreement

11. The Jersey signing of the Agreement was undertaken by the then Assistant Chief  Minister  in  London  on  17th  November  2015.  The  signing  was  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 had authorised the Assistant Chief Minister 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 time taken to bring the signed Agreement to the States for ratification is due to the fact that subsequent to the signing, a difficulty arose over the omission of a word from the definition in Article 4(1)(b) of the Geographical Area of the Kingdom of Spain. In due course, it was agreed between the parties that the best way of dealing with the omission was through an exchange of letters which would be attached to the Agreement. The letters exchanged are

attached as Appendix 2 to this report, and are included with the Agreement for ratification by the States.

14. The  States,  on  29th  January  2008,  adopted  the  Taxation  (Exchange  of Information with Third Countries) (Jersey) Regulations 2008. The Schedule to these Regulations lists the third countries, and includes the taxes covered by the agreements being entered into. Following the ratification of Agreement and the Exchange of Letters, an Order will be made to provide for the inclusion in the Schedule of the Kingdom of Spain, and the relevant taxes covered.

Collective responsibility under Standing Order 21(3A)

15. The Council of Ministers has a single policy position on this proposition, and as such, all Ministers are bound by the principle of collective responsibility to support the proposition, as outlined in the Code of Conduct and Practice for Ministers and Assistant Ministers (R.11/2015 refers).

Financial and manpower implications

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

26th February 2018

STATES OF JERSEY

1. TAX INFORMATION EXCHANGE AGREEMENTS (TIEAs)

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

+ Note: the delay in ratification arose because, subsequent to the TIEA being signed with Spain, an amendment was required to insert a missing word. This has now been agreed through an exchange of letters with the Spanish authorities, and ratification is proceeding.

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 with which there has been some contact, but on which no further action has been taken to-date:

• Russia.

Note: Russia has signed and entered into force the Multilateral Convention on

Mutual Administrative Assistance in Tax Matters and therefore does not need a TIEA to make requests for information.

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 –

Hong Kong China –

signed December 2010

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

signed February 2012

ratified by Jersey May 2012 ratified by Hong Kong June 2013 in force – July 2013

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P.60/2018

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 –

Seychelles –

United Arab Emirates –

Cyprus –

Mauritius –

signed June 2015

ratified by Jersey October 2015 ratified by Rwanda April 2016 in force – 27th June 2016

signed July 2015

ratified by Jersey October 2015 ratified by Seychelles December 2016 in force – 5th January 2017

signed April 2016

ratified by Jersey September 2016 ratified by UAE February 2017 in force – 15th February 2017

signed July 2016

ratified by Cyprus August 2016 ratified by Jersey October 2016 in force – 17th February 2017

signed March 2017

ratified by Mauritius February 2018

2. DTAs ready for signing: None.

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P.60/2018

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

• Bahrain
• Botswana
• China (People's Republic)
• Ghana
• India
• Kenya
• Lesotho
• Liechtenstein
• Malawi
• Nigeria
• Saudi Arabia
• South Africa
• 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
• Andorra
• Azerbaijan
• Barbados
• Belize
• Bulgaria
• Cameroon
• Colombia
• Cook Islands
• Costa Rica
• Croatia
• Georgia
• Ghana
• Greece
• Guatemala
• Israel
• Kazakhstan
• Lebanon
• Liechtenstein
• Lithuania
• Malaysia
• Marshall Islands
• Moldova

• Monaco
• Nauru
• Nigeria
• Niue
• Pakistan
• Panama
• Russia
• Saint Kitts and Nevis
• Saint Lucia
• Saint Vincent and the Grenadines
• Samoa
• San Marino
• Saudi Arabia
• Senegal
• Slovak Republic
• Tunisia
• Uganda
• Ukraine
• Uruguay.

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
• Canada
• Chile
• China (People's Republic)
• Cyprus
• Czech Republic
• Denmark
• Estonia
• Finland
• France
• Germany
• Hungary
• Iceland
• India
• Indonesia
• Ireland
• Italy
• Republic of Korea

• Japan
• Latvia
• Luxembourg
• Malta
• Mauritius
• Mexico
• Netherlands
• New Zealand
• Norway
• Poland
• Portugal
• Romania
• Seychelles
• Singapore
• Slovenia
• South Africa
• Spain
• Sweden
• Switzerland
• United Kingdom.

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

Colin Powell

Adviser – International Affairs  12th February 2018