Choice of domicile. Offering economic substance in addition to the magnet of tax minimisation.

THE GLOBAL STANDARD – THE JERSEY SOLUTION

With an effect in my home jurisdiction of Jersey, in 2018 the OECD and EU re-focused on the initiative, first mentioned in 1998 and then shelved to make way for the more pressing priorities of the time, to impose on the world a global standard, applying to “geographically mobile” activities, requiring jurisdictions offering corporate domicile facilities also to provide an overall business environment of real “economic substance”. The global standard aims to persuade each such jurisdiction to require companies choosing to be domiciled there, as a matter of fact, to have their “substantial core income generating activity” carried on in the same jurisdiction, and not be operated remotely from elsewhere. It follows that the host jurisdiction has to have the right levels of resource on offer, including sufficient directors and professional support services, all with the right skills and experience. The standard-setters aim to preclude jurisdictions which lack economic substance from building a corporate domicile business simply by providing a companies registry and promoting tax minimising opportunities.

Jersey has worked hard over the last 20 years, notably with regard to its financial services industry, to demonstrate the strength of its legal and commercial environment and the economic advantage it offers, and to attract new business on the back of that. Jersey has attracted a skilled work force, and encouraged the education, training and development of the local population. Jersey has invested heavily in the social infrastructure that supplies its inhabitants with the environment needed to attract them and retain them.

Major projects completed or scheduled include new hospital, police station, airport, schools and higher education, and leisure facilities. Jersey has an up-to-date business environment supported by modern business-oriented company law and other financial services legislation. Creation of the new International Finance Centre in St Helier is the latest visible demonstration of the substance offered to geographically mobile financial services business.

The escalation of pace in 2018 on the global standard suggests that the next incoming Jersey tide will bring a specific opportunity for me to add value to businesses which fall within its net and which aim to be taxbased in Jersey. For example, companies with “headquarters”, holding company, group financing or IP licensing operations. Those businesses are now under a new obligation, to show that the core-income generating activity actually takes place where the company is based. That requires the right decision making skills and experience, and all the other resources the company needs, to be in that place and not entirely on the spoke of a conference call or “parachuted in”.

My focus for 2019 and beyond is on how best to offer to my clients the benefit of my own experience and my genuine independence of thought and action in governance. I am aiming to provide a strong part of the “economic substance” solution, and I look forward with confidence to the next ten years and beyond.