Jersey, Channel Islands

Corporate - Significant developments

Last reviewed - 05 July 2021

Economic Substance - Companies

Jersey introduced economic substance legislation for accounting periods beginning on or after 1 January 2019. Jersey tax resident companies carrying on relevant activities will be required to meet an economic substance test.

Relevant activities are defined as any of the following businesses:

  • Banking
  • Insurance
  • Fund management
  • Finance and leasing
  • Headquarters
  • Shipping
  • Holding company
  • Intellectual property holding
  • Distribution and service centre

Self-managed funds will be required to demonstrate they have substance in Jersey for any financial period that commences on or after 1 January 2021.  Self-managed funds are always treated as having received income from the relevant activity of fund management, so the gross income test does not apply.

There are financial penalties in the case of failure to meet the economic substance test. In the first financial period up to 10,000 British pounds sterling (GBP), in the second period up to GBP 100,000. After the first penalty, the Comptroller may provide the Minister for Treasury and Resources with a report on the company, and the Minister may apply to the court for an order of winding up. There is provision for appeal against penalty determinations.

Economic Substance - Partnerships

On 29 June 2021, a law extending Jersey's economic substance regime to partnerships was passed. The economic substance requirements will apply to a Jersey “resident partnership” undertaking a “relevant activity” unless it is exempt.

Partnerships in existence before 1 July 2021 will first be in scope of the law for accounting periods commencing on or after 1 January 2022. Partnerships formed on or after 1 July 2021 will be in scope from the date of formation.

The law is broadly aligned with the company economic substance regime, summarised above, although there are points of divergence particularly relating to exemptions and sanctions for failing the economic substance test.