In order to maintain its current status as co-operative tax jurisdiction, starting as of July 1st, 2021, Jersey could introduce the requirement of economic substance for any new Resident Partnership which derives income from Relevant Activities. For already existing Partnerships, these will be subject to the same requirement starting as of January 1st, 2022.
A Partnership is considered Resident Partnership when it’s established under Jersey law, unless the place of effective management is located outside the territory of Jersey in a country:
- with corporate income tax rate at least 10%; or
- where it’s required to fulfill an equivalent of the economic substance test.
A Partnership which is not established under the law of Jersey is considered as resident Partnership if its place of effective management is in Jersey.
Relevant Activities
These are basically services activities performed by or through a resident Partnership (banking, finance and leasing, insurance ...) . The operation conducted by a collective investment fund might not be considered among the relevant activities .
The economic substance test
The economic substance test is fulfilled when:
- the business is managed in Jersey;
- it is adequately organized (staff, offices...);
- the core-business activities are carried out in Jersey.
The Partnerships are not required to fulfill the test if:
a) all partners are individuals subject to personal income tax in Jersey; and
b) they are not part of a multinational group and do not carry out business outside of Jersey.
Penalties
In case of non-compliance, the Partnership will be liable of relevant penalties.
This article is edited by Fidinam & Partners International Tax Competence Centre; to stay up-to-date on all international tax news, please fill in the Form below.
