Economic Substance Changes

The Jersey Tax comptroller has withdrawn the concession granted in relation to economic substance originally introduced in March 2020, relating to the difficulties of the holding of physical board meetings in Jersey as a result of the pandemic.

The holding of meetings, whereby a quorum of the board are physically present in Jersey is part of the “directed and managed” element of the economic substance test.

This concession has been withdrawn, and does not apply to entities who’s accounting period starts after 1 November 2022.

Where companies operating practices have to be adjusted to compensate for the coronavirus outbreak, the Comptroller will not determine under Article 6, Taxation (Companies- Economic Substance) (Jersey) Law 2019, that a company has failed the economic substance test.

Where a company incorporated in another jurisdiction has been tax resident on the basis of control and management in Jersey, and the Comptroller considers that any changes dictated by the coronavirus are temporary, then this will not disturb the determination of corporate tax residence from that prevailing before this outbreak.

This treatment will only apply to adjustments to the normal operating practices, and to the extent required to mitigate the threats from this outbreak.

So by way of example, a company that would normally have held its directors’ meetings in Jersey but, to avoid travel or because individuals are self-isolating, these meetings are temporarily held virtually to allow those individuals, or alternatives, to attend then the Comptroller would not regard this as failing to meet the economic substance test.

Please contact Alun Griffiths if you would like to discuss how these changes may impact your structure.

Economic Substance legislation: