Exchanges of information good news for tax administrations

Jersey and the Isle of Man have also begun their first tax information exchanges under the Organisation for Economic Co-operation and Development’s Forum on Harmful Tax Practice’s global standard on substantial activities. The other jurisdictions are Anguilla, the Bahamas, Bahrain, Barbados, Bermuda, British Virgin Islands, Cayman Islands, Turks and Caicos Islands and the United Arab Emirates.

The OECD said the exchanges will enable receiving tax administrations to carry out risk assessments and to apply their controlled foreign company, transfer pricing and other anti-base erosion and profit shifting provisions.

Deputy Mark Helyar, treasury lead on Policy & Resources, said the exchange of information demonstrated Guernsey was a cooperative jurisdiction committed to developing a level playing field on international tax standards.

He explained the background to the exchange of information. ‘In 2018 the States of Guernsey, working with Jersey and the Isle of Man, designed and enacted new economic substance requirements for certain highly mobile business activities.

‘This helps ensure that any profits for these categories of business that are undertaken in Guernsey are commensurate with the economic activities and the economic presence in this jurisdiction.’

The legislation was assessed by the EU’s Code of Conduct Group, with it effectively white listing Guernsey in March 2019. The OECD’s Forum on Harmful Tax Practices also assessed the regime and in June 2019 found it to have been effectively implemented.

‘These new requirements applied for accounting periods commencing on or after 1 January 2019 and relevant information relating to companies that are considered a high risk or that have been assessed as failing the substance requirements is exchanged with the relevant jurisdictions from 2021 onwards, under the provisions of the approved international tax agreements that Guernsey has committed to,’ said Deputy Helyar.

‘The recent commencement of the exchange of this information by Guernsey further demonstrates that it is a cooperative jurisdiction and committed to the development of a level playing field on international tax standards, such as those set by the OECD.’

Pascal Saint-Amans, director of the OECD Centre for Tax Policy and Administration, said the exchanges of information were good news for tax administrations around the world, giving them regular access to information on the activities and income of entities in low-tax jurisdictions held or controlled by their taxpayers.