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05 December 2019
Family office structures which include Jersey tax-resident companies must consider whether those companies fall within the scope of the Taxation (Companies – Economic Substance) (Jersey) Law 2019 (the Economic Substance Law).
The Economic Substance Law came into effect on 1 January 2019 and applies to certain Jersey tax-resident companies which conduct one or more relevant activities. The law was introduced in order to comply with the requirements of the EU Code of Conduct Group on Business Taxation for the purpose of demonstrating that the income generated by Jersey companies which carry on relevant activities are commensurate with their economic activities and substantial economic presence in Jersey. Accordingly, companies which generate no gross income from their activities or which are not tax-resident in Jersey fall outside the scope of the legislation.
While nine separate activities are identified in the Economic Substance Law, the most relevant of these in the context of family offices are:
The Economic Substance Law sets out a three-stage test which must be satisfied by companies which are within the scope of the law:
Family offices should focus their attention on compliance with the three-stage test because a number of progressively punitive penalties are available should the Comptroller of Taxes determine that a company does not satisfy the test. These include:
Authorised persons may also request, examine and make copies of any business document for the purpose of investigating compliance with the Economic Substance Law.
For further information on this topic please contact Emily Haithwaite, James Campbell, Josephine Howe or Jonathan Hughes at Ogier by telephone (+44 1534 514 000) or email (email@example.com, firstname.lastname@example.org, email@example.com or firstname.lastname@example.org). The Ogier website can be accessed at www.ogier.com.
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