Delegates at EY’s recent tax briefing were informed of the increasing need to act early to manage the impact of tax and regulatory change.
As tax and regulation increasingly intertwine, delegates were informed of common gaps in compliance with the economic substance test in Jersey, the introduction in Jersey of the OECD Common Reporting Standard Mandatory Disclosure Rules (CRS MDR) and the changes to the taxation of non-resident landlords. Early engagement with these changes should ensure that businesses are well placed to comply and take advantage of opportunities that may arise as a result.
Áine Slater, EY’s recently appointed Jersey Head of Tax and Associate Partner, led the first in a new series of briefings to help businesses navigate the ever-changing tax landscape and provide an overview of current hot topics and their impact on organisations based in Jersey.
Áine was joined by her colleagues Giovanni Canton, a Senior Manager specialising in AEOI reporting and Zaeem Youssouf, a Senior Manger specialising in Private Client and Trust. Together, they provided updates on economic substance, the OECD CRS MDR and taxation of corporate non-resident landlords respectively.
With many companies now into their second year in which economic substance requirements must be met, information must be provided on the 2019 Jersey company income tax return and a declaration that the substance test has been met must also be made on that return. Before the declaration is made however, companies are advised to carry out a gap analysis to ensure everything is documented and ready for review.
Áine explained: “We strongly recommend that each company carries out a gap analysis to ensure that they meet every part of the substance test. We have already assisted many clients with their gap analysis to identify areas where changes should be made to ensure that the substance requirements are met. We would also recommend you seek professional guidance with any aspects of the guidance you are unsure of to ensure you fully comply with these requirements.”
Giovanni went on to provide an update on the OECD CRS MDR and the impact these proposed regulations may have in Jersey. He confirmed that the States of Jersey has committed to the introduction of a Mandatory Disclosure Regime and the preference is for the introduction of the MDR regime developed by the OECD, which targets arrangements and structures that can undermine the proper functioning of CRS.
Giovanni explained further: “While the general framework of the CRS MDR is well defined, there are still areas of uncertainty that need to be addressed in specific guidance notes before these new reporting requirements come into force. During this time, we would recommend businesses familiarise themselves with these new regulations and ensure staff dealing with these procedures are ready for the reporting requirements once they come into force to mitigate the risks of non-compliance.”
Zaeem concluded the briefing with an update on the taxation of corporate non-resident landlords under the UK corporation tax regime and what companies need to be aware of. He advised that existing structures should be reviewed to understand which entities are likely to be most impacted by the changes and in particular which are affected by the loss and interest restriction rules. However, delegates were warned that there was no blanket answer – the implications arising are on a case by case basis.
Zaeem concluded: “The transition to corporation tax will have implications from a tax and administration perspective for corporate non-resident landlords in Jersey. Companies should ensure appropriate processes are in place to prepare financial statements and monitor payments requirements under the new regime. Many real estate investment structures in Jersey were established under the current income tax regime and should therefore be reviewed in light of the change to corporation tax to ensure these structures are still effective.”
