No Content Set
Exception:
Website.Models.ViewModels.Components.General.Banners.BannerComponentVm

Knowledge

The Common Reporting Standard: draft Jersey legislation released

04 November 2015

The draft Taxation (Implementation) (International Tax Compliance) (Common Reporting Standard) (Jersey) Regulations 201- (the "Regulations") were lodged au Greffe on 13 October 2015.  The purpose of the Regulations is to give effect to Jersey's obligations to improve international tax compliance based on the Common Reporting Standard ("CRS") for the Automatic Exchange of Financial Information approved by the OECD.  Once the Regulations are ratified, they will come into effect on 1 January 2016, as Jersey is an early adopter of the CRS.

Unlike the UK legislation for CRS (which has sought to combine FATCA, CRS and the EU Directive dealing with international tax compliance), the Jersey Regulations only focus on the CRS.  The Regulations contain the following key provisions:

Interaction between CRS and FATCA
Where certain words and expressions used in FATCA are also defined in the CRS, a reporting financial institution may use the definition in FATCA (or any other agreement for the automatic exchange of tax information) in so far as such use would not frustrate the purposes of the CRS.  The words and expressions in respect of which a financial institution may adopt this approach are set out in Schedule 1 to the Regulations.  One of the effects is that it may still be possible for reporting financial institutions to maintain the classification of their entities where they have chosen to use the FATCA definitions, rather than the CRS definitions.

Procedures for identifying, reviewing and reporting reportable accounts
A reporting financial institution must establish and maintain arrangements which enable the financial institution to carry out the applicable due diligence requirements. Further, the financial institution must maintain records for 6 years.

Timing
As an early adopter of the CRS, Jersey financial institutions must prepare their first returns in respect of the 2016 year.  Such a return would be in respect of reportable accounts maintained by the financial institution during the 2016 calendar year. This means that Jersey financial institutions will be required to file their first CRS returns to the Comptroller of Taxes in Jersey by 30 June 2017.

The Schedule to this note lists:

  • the other jurisdictions which have signed up as early adopters of CRS (and are therefore also required to commence gathering information in 2016 and report in 2017);
  • the jurisdictions which have agreed to commence gathering information in 2017 and provide its first CRS return in 2018; and
  • the jurisdictions whose commencement of the CRS shall be specified by Ministerial Order.

To avoid duplication of reporting under UK FATCA and the CRS, it is proposed that certain information which is required to be reported under FATCA will be reported as part of the CRS report in 2017 (in respect of the 2016 year), even though such information is not required to be reported under the CRS until 2018. Such information relates to pre-existing individual low value accounts and pre-existing entity accounts that were identified as reportable in 2017.

Third party service providers
The CRS does not provide for the concept of a sponsoring arrangement.  However, the Regulations make it possible for financial institutions to use service providers to undertake due diligence and reporting obligations on behalf of a financial institution.  This means that it may be possible for a financial institution to maintain the current reporting arrangement it has in place where it relies on another entity to carry out its reporting obligations.  However, any such arrangement that is in place must be reviewed to ensure the specific terms are appropriate for the CRS.

Penalties
The Regulations contain penalty provisions which are considerably more detailed than those under the FATCA regulations.

Alternative reporting regime ("ARR")
Unlike under UK/Jersey FATCA, the CRS does not provide for the ARR for UK resident non-domiciled individuals.  It is the UK's intention to unify reporting under FATCA and CRS in respect of the Crown Dependencies and Overseas Territories once the CRS comes into effect.  Jersey has agreed to such transitional approach. This means that from 1 January 2016, it will no longer be possible for financial institutions to report under the ARR (which is only available under UK FATCA). However, financial institutions which have elected to report under the ARR will continue to be able to report under the ARR in respect of the 2014 and 2015 years.

While the Regulations set out the broad framework as to a Jersey financial institution's obligations under the CRS, in order to comply with the CRS, a financial institution would need to understand the specific due diligence and reporting obligations which are set out in the CRS guidance notes. It is expected that the Jersey government will also publish supplemental guidance notes for the CRS to assist Jersey financial institutions to understand their obligations.  There are many differences between the requirements under FATCA and CRS, therefore, it is important that financial institutions review the procedures they have adopted for FATCA and take advice in order to ensure they comply with the CRS.

Bedell Cristin has extensive experience in advising Jersey financial institutions, settlors and beneficiaries on issues arising from FATCA, CRS and other obligations for the automatic exchange of information.  We would be delighted to assist with your queries.

[Please refer to the pdf document for Schedule]

No Content Set
Exception:
Website.Models.ViewModels.Blocks.PageBlocks.CardBlocks.DownloadCardBlockVm

Location: Jersey

Related Service: Regulatory & Compliance


Key Contacts