JERSEY AMENDS ITS CRS LEGISLATION TO MEET X4 OBJECTIVES.

1. On the 24^th July 2024 Jersey’s amended CRS legislation will come into force through:-
• The “Taxation (Common Reporting Standard and United States of America) (Jersey) Amendment Regulations 2024” (THE AMENDING REGULATIONS)
• https://www.jerseylaw.je/laws/enacted/Pages/RO-040-2024.aspx
2. THE AMENDING REGULATIONS:-
• Ensures that Jersey’s legislation implementing the Common Reporting Standard on automatic exchange of tax information on financial accounts is fully in line with international standards.
• Will also make similar changes to the legislation implementing the Foreign Account Tax Compliance Act (FATCA) rules.
3. The AMENDING REGULATIONS are intended to meet the following 4 objectives:-

• Ensure that adequate powers exist to ensure compliance with the Regulations by financial institutions which do not carry on a business and do not have business premises.
• Clarify the obligations of financial institutions without legal personality, and the application of penalties to them.
• Confirm that the Regulations do not prevent trustees or partners from recovering penalties imposed on them; and
• Ensure that the anti-avoidance rule in the CRS Regulations is in line with OECD expectations.

4. Concerning the above 4 objectives and amendments:-

• Because of the similarities between the CRS and FATCA Regulations, the first three amendments are intended to apply in the same manner to both sets of Regulations.
• The fourth amendment is proposed to only apply in respect of the CRS Regulations, due to differences in the anti-avoidance provisions between the CRS and FATCA regimes.

THE FOLLOWING PROVIDES SOME RATIONALE AND FURTHER DETAILS AS TO THE CHANGE.

CRS OULINE

1. The CRS is implemented in Jersey through:-
• The Taxation (Implementation) (International Tax Compliance) (Common Reporting Standard) (Jersey) Regulations 2015 (the CRS Regulations [CRS]).
2. FATCA is implemented through:-
• The Taxation (Implementation) (International Tax Compliance) (United States of America) (Jersey) Regulations 2014 (the FATCA Regulations [FATCA]).
3. Collectively, CRS and FATCA:-
• Are referred to as Automatic Exchange of Information (AEOI) and
• The two sets of regulations are collectively referred to as the AEOI Regulations.
4. Given the similarities between the CRS and FATCA Regulations, in all but one case the amendments to the CRS Regulations are also proposed in relation to the FATCA Regulations.

THE x4 AMENDING REGULATIONS ARE DISCUSSED BELOW

Ensuring that adequate powers exist to ensure compliance with the Regulations by financial institutions which do not carry on a business and do not have business premises.

1. Regulation 20 of the CRS Regulations and Regulation 8L of the FATCA Regulations contain the powers to allow Revenue Jersey to ensure compliance with the Regulations.
• They permit a person authorised by the Comptroller of Revenue to issue a notice requiring any person to produce specified business documents at the business premises in which the documents are located, and to enter business premises at any reasonable hour to examine and take copies of any business documents located there.
• In very limited circumstances the current Regulations could potentially prevent Revenue Jersey from ensuring compliance with the Regulations, if a financial institution did not have a business premises and was not considered to be carrying on a business, so that its documents were not considered to be “business” documents. In practice, this is unlikely to occur.
2. However, in order to address this potential gap in the enforcement powers, AMENDING REGULATIONS 1(2) and 2(2) expand the existing access powers only in relation to financial institutions which do not carry on a business, trade, profession, or vocation in order to:
• State that the business premises of a financial institution which does not carry on a business, trade, profession, or vocation is the address in Jersey of the financial institution, or in the case of a financial institution which is a trust, the address of its trustees; and
• Amend the definition of “business documents” to add that that the business documents of a financial institution which does not carry on a business, trade, profession, or vocation are documents which are believed to be relevant or potentially relevant to determining the compliance of that financial institution with the CRS or FATCA Regulations, as applicable.
3. The existing access powers, which apply to the overwhelming majority of financial institutions in Jersey, are unchanged.

Clarifying the obligations of financial institutions without legal personality, and the application of penalties to them

1. The CRS and FATCA rules class certain types of arrangements without legal personality as entities in their own right and impose obligations on those arrangements on that basis.
2. This could potentially lead to confusion over who is required to fulfil the obligation of the arrangement, or, in the case of a failure to comply, who is required to pay any penalties imposed as a result.
3. In order to put the question beyond doubt, AMENDING REGULATION 1(3) and 2(3) insert new Regulations to confirm that obligations and penalties which arise under the AEOI REGULATIONS in respect of
• A trust fall on all Jersey resident trustees, and
• In respect of a partnership, fall on the person identified as the responsible partner under the Income Tax Law.

Confirming that the Regulations do not prevent trustees or partners from recovering penalties imposed on them.

1. The AMENDING REGULATIONS clarify that if a penalty is imposed on a trustee or partner,
• Nothing in the CRS or FATCA Regulations prevents the trustee or partner from recovering the value of that penalty from the trust or partnership.

Ensuring that the anti-avoidance rule in the CRS Regulations is in line with OECD expectations.

1. Section IX of the CRS requires jurisdictions to have anti-avoidance measures in place to address cases of attempted circumvention of the regime.
• Regulation 19 of the CRS Regulations is the anti-avoidance rule in Jersey’s CRS Regulations.
• This provides that if a person enters into arrangements and the main purpose, or one of the main purposes, of this is to avoid the application of the Regulations, then the Regulations will apply as though the arrangements had not been entered into.
2. THE AMENDING REGULATION 1(4) amends the anti-avoidance rule in order to:-
• Clarify that the avoidance arrangements will also be considered not to have taken place, for the purposes of the Regulations.

SOURCES-

• https://statesassembly.gov.je/Addendums/2024/P.39-2024%20Add.pdf
• https://statesassembly.gov.je/assemblypropositions/2024/p.39-2024.pdf
• https://www.gov.je/government/planningperformance/pages/ministerialdecisions.aspx?docid=1C81FE0B-7DAA-4881-9B4C-FA23F0E42112
• https://www.gov.je/TaxesMoney/InternationalTaxAgreements/IGAs/pages/commonreportingstandard.aspx

THE LAW CHANGE FOR CRS:-

• https://www.jerseylaw.je/laws/enacted/Pages/RO-040-2024.aspx