'Act early' say tax experts on regulatory changes

Tuesday 17 March 2020

Local tax experts are urging businesses to act early to manage the impact of tax and regulatory change.

Delegates at a recent EY's tax briefing 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.

With many companies now into their second year in which economic substance requirements must be met, businesses must provide information in the 2019 Jersey company income tax return along with a declaration that the substance test has been met.

Before the declaration is made however, companies are advised to carry out a gap analysis to ensure everything is documented and ready for review.

Pictured: Áine Slater, EY’s recently appointed Jersey Head of Tax and Associate Partner.

“We strongly recommend that each company carries out a gap analysis to ensure that they meet every part of the substance test," Áine Slater, who was recently appointed EY's Jersey Head of Tax and Associate Partner, said.

"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.”

Pictured: Giovanni Canton, Senior Manager specialising in AEOI reporting.

Giovanni Canton, a Senior Manager specialising in AEOI reporting, also reminded business that the Government 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.

“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," he said.

"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.”

Pictured: Zaeem Youssouf, Senior Manger specialising in Private Client and Trust.

Finally, delegates were reminded that structures should be reviewed to understand which entities are likely to be most impacted by the changes on the taxation of corporate non-resident landlords under the UK corporation tax regime, in particular which are affected by the loss and interest restriction rules.

However, they were warned that there was no blanket answer – the implications arising are on a case-by-case basis.

“The transition to corporation tax will have implications from a tax and administration perspective for corporate non-resident landlords in Jersey," Zaeem Youssouf, a Senior Manger specialising in Private Client and Trust, said.

"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.”