Double Tax Agreement UK Jersey: An Overview
The Double Tax Agreement (DTA) between the UK and Jersey is a tax treaty aimed at promoting cross-border trade and investment by eliminating double taxation. Under the agreement, residents of both jurisdictions are given tax relief on their income and gains arising in either jurisdiction. The DTA also contains provisions to prevent tax evasion and avoidance. In this article, we will discuss the key features of the DTA between the UK and Jersey.
Background
Jersey is a British Crown Dependency and not part of the UK, but it maintains a close relationship with the UK. Jersey has its own tax laws, but it has a tax information exchange agreement (TIEA) with the UK to share information on tax matters. The TIEA was signed in 2007 to enable the exchange of information between the two jurisdictions to prevent tax evasion and avoidance. The DTA was signed in 2018 and came into force on 1 January 2019.
Scope of the DTA
The DTA covers the following taxes in the UK: income tax, corporation tax, capital gains tax, and petroleum revenue tax. In Jersey, the DTA covers income tax and goods and services tax (GST). The DTA also covers similar taxes imposed by either jurisdiction after the date of signature of the DTA. The DTA applies to individuals, companies, and other entities that are resident in one or both jurisdictions.
Tax Relief
Under the DTA, double taxation is eliminated by allowing residents of the UK and Jersey to claim tax relief on their income and gains arising in either jurisdiction. For example, if a UK resident earns income in Jersey, they will be able to claim a credit for any Jersey tax paid against their UK tax liability. This avoids the situation where the same income is taxed twice, once in Jersey and again in the UK.
The DTA also provides for withholding tax relief on payments such as dividends, interest, and royalties. If a company resident in one jurisdiction makes a payment to a company resident in the other jurisdiction, the DTA ensures that the payment is not subject to withholding tax in both jurisdictions.
Prevention of Tax Evasion and Avoidance
The DTA contains provisions to prevent tax evasion and avoidance. For example, the DTA includes a « limitation of benefits » clause that restricts the benefits of the DTA to those who are resident in the UK or Jersey for genuine reasons. The clause prevents companies from using the DTA to avoid tax by establishing artificial structures to take advantage of the treaty.
The DTA also includes a provision for mutual agreement procedures (MAPs) to resolve disputes between the tax authorities of the UK and Jersey. If there is a disagreement on the interpretation or application of the DTA, the MAPs allow the two tax authorities to resolve the dispute through consultation and negotiation.
Conclusion
The Double Tax Agreement between the UK and Jersey is an important treaty that promotes cross-border trade and investment by eliminating double taxation. The DTA also contains provisions to prevent tax evasion and avoidance. As a professional, it is essential to understand the key features of the DTA for effective communication with readers. This article provides an overview of the DTA between the UK and Jersey, but it is essential to seek professional advice for specific tax-related matters.
