Jersey's MDR to commence soon

The Taxation (Implementation) (International Tax Compliance) (Mandatory Disclosure Rules for CRS Avoidance Arrangements and Opaque Offshore Structures) (Jersey) Regulations 2020 were approved by the States Assembly of Jersey in 2020. The regulations were originally expected to come into force by the end of that year as a response to Jersey's commitment to the EU Code of Conduct Group (Business Taxation) in July 2018.

They will impose a 30-day reporting window on promoters or service providers to disclose certain CRS avoidance arrangements and opaque offshore structures. Failure to comply may lead to penalties of up to GBP3,000 and even imprisonment if an individual obstructs an investigation or destroys documents.

The Jersey regulations are closely aligned to the OECD's mandatory disclosure rules (MDR) rather than EU Directive 2018/822 (DAC-6).

Reportable avoidance arrangements are those designed to circumvent the CRS or otherwise avoid accurate reporting by exploiting the absence of legislative provisions in the CRS. 'Opaque offshore structures' are defined as passive offshore vehicles without economic substance in their jurisdiction of tax residence. They are designed to conceal their beneficial ownership. Each jurisdiction that collects this information from intermediaries will automatically pass it every year to the taxpayers' jurisdictions of tax residence.

The responsibility to report is predominantly placed upon intermediaries, although the obligation may pass to the taxpayers themselves if the intermediary is beyond the reach of the regulations. Disclosure cannot be required where the information is protected by legal professional privilege. It may also not be necessary if the intermediary knows the information has been previously disclosed in Jersey or a partner jurisdiction.

The regulations has significant retrospective force. Promoters of CRS avoidance arrangements implemented on or after 29 October 2014 but before the implementation of the regulations will be required to disclose within 180 days of the regulations coming into force, if the avoidance value is GBP600,000 or more. This applies even if the promoter is still actively promoting the reportable arrangement. Intermediaries classed as service providers will not be required to report retrospectively.

Jersey's comptroller is still working on supplementary guidance on the important 'reasonable to conclude' criterion that industry will need to follow when deciding whether to report specific arrangements and structures.

Sources

• Ogier
• STEP UK News 19 January 2023: UK government sets date for new cross-border mandatory disclosure rules