International Tax Co-operation Remains a Priority for the Channel Islands

This year has seen the governments of both Jersey and Guernsey continue their efforts at increasing the number of Tax Information Exchange Agreements (TIEAs) and Double-Tax Agreements (DTAs) that they have with other jurisdictions.

Jersey signed a comprehensive DTA with Cyprus in July. This now has to be ratified by both parties before it enters into force. In September, the island also ratified the new DTA with the United Arab Emirates, although the treaty won’t come into force until the UAE completes its own ratification process.

Jersey now has 13 full DTAs and 12 partial DTAs that are either in force or awaiting ratification.

Guernsey’s DTA with the Seychelles came into force this month (October 2016) and earlier this year, the island also amended its TIEAs with both the Seychelles and Cayman Islands. Guernsey is now signatory to 60 TIEAs and 14 comprehensive DTAs.

The fact that both islands are continuing to enter into DTAs or TIEAs with other jurisdictions shows just how important they take the issue of tax avoidance and how serious they are about minimising the possibility of it taking place.

TIEAs are an important instrument for international finance centres, enabling them to demonstrate compliance with OECD and IMF demands that reputable jurisdictions show themselves to be well-regulated, co-operative and transparent.

Tax treaties are not all the same

The aim of TIEAs is different to that of DTAs. The former establishes a process for the provision of tax information between authorities in different jurisdictions and are primarily aimed at reducing tax evasion and avoidance 

Although outside the scope of the OECD’s push for countries to engage in TIEAs, the US and UK FATCA regimes are also focused on the provision of tax information. However, they do not rely upon the US or UK tax authorities requesting information on an individual basis , instead putting the onus on the automatic exchange of information from all foreign entities that have appropriate links to either jurisdiction.

The aim of DTAs is to provide a framework for ensuring the correct allocation of taxation between jurisdictions, something which has become increasingly important with the spread of globalisation. Neither individuals nor corporate entities want to be taxed twice on the same income and DTAs are designed to avoid this happening.

Whilst a request for information from another jurisdiction will be aimed at an individual or other legal entity, it is the entity’s advisers who are likely to be asked to collate that information or fight the request in the courts in Jersey or Guernsey.

Following a request from the French authorities in 2013 and a subsequent threat of blacklisting in 2014 when France decided that the process for the provision of information was taking too long, Jersey brought in tighter timescales for the delivery of information through TIEAs. Given this situation, and the fact that both islands agreements are based on the OECD’s model TIEA, it is prudent for advisers to acquaint themselves with the standard terms of the OECD model so they are able to promptly provide advice to their clients should a TIEA request be made.

For a full list of Jersey’s TIEAs and DTAs, click here.

For a full list of Guernsey’s TIEAs and DTAs, click here.