Economic substance requirements for Jersey companies
03 June 2019
Jersey has brought into force the Taxation (Companies – Economic Substance) (Jersey) Law 2019 (the Substance Law) in order to address concerns of the EU Code of Conduct Group that Jersey companies could be used to artificially attract profits that are not commensurate with economic activities and substantial economic presence in Jersey. EU Finance Ministers signalled their approval of the Substance Law by whitelisting Jersey on 12 March 2019. The Substance Law is set to be amended slightly and this guide is drafted as if the proposed amendments were already brought into force in the form drafted at the time of publication of this guide.
The Substance Law imposes economic substance requirements on companies that are tax resident in Jersey that undertake relevant activities in respect of financial periods commencing on or after 1 January 2019. In essence, such companies will have to demonstrate that they have substance in Jersey by being directed and managed in Jersey, having adequate people, premises and expenditure in Jersey and conducting core income generating activities (CIGA) in Jersey.
The questions below should be considered to determine whether the substance test applies to a company and whether that test will be met. Guidance notes were issued on 26 April 2019 by the Jersey Comptroller of Taxes (the Comptroller) (jointly with the tax authorities in Guernsey and the Isle of Man) to clarify how the substance test can be met.