Jersey chief minister Senator Ian Gorst and Hong Kong secretary for Financial Services and the Treasury K C Chan signed the agreement, initially in Hong Kong last week, and earlier this week in Jersey.
The DTA is the third that Jersey currently has that complies with the OECD Model Agreement, which among other things requires each party to use its powers to obtain and provide such information even if it is not needed for its own tax purposes. The other two DTAs in force in Jersey are with Malta and Estonia. Hong Kong now has 23 DTAs.
Jurisdictions like Jersey have made a point of signing double tax agreements – and their simpler cousins, tax information exchange agreements (TIEAs) – over the last three years, in an effort to prove that they are not “tax havens” or secrecy jurisdictions, in the wake of G20 and OECD efforts to crack down on cross-border tax evasion by companies and individuals.
Thus far Jersey has signed 27 TIEAs, all but 10 of which were inked since March 2009. (The full list may be viewed on the Jersey government’s website here.)
Guernsey, in comparison, has 34 TIEAs and two DTAs, with the UK and Jersey; the Isle of Man has 29 TIEAs and five DTAs, with Bahrain, Belgium, Estonia, Malta and the UK.
In a statement, Jersey Finance, which represents Jersey’s financial services industry, welcomed the signing of the DTA as “another key step in growing business with the Far East”.
It noted that the agreement was expected to bring “significant commercial benefits to Jersey’s finance industry” and resolve issues relating to potential double taxation of both corporate and personal incomes, such as business profits, dividends, interest, royalties, income from employment and pensions.
Simon Morgan, head of the private clients team at Vistra, who is based in Jersey, said he concurred with Jersey Finance’s assessment.
The DTA is another indication that jurisdictions such as Jersey, Singapore, Hong Kong, Andora and others that have been seeking to put an end to their image as tax havens "are trying to operate on a level playing field, by signing up to the OECD standards on information exchange and taxation agreements," he noted.
"So I think it can only be good news, also interms of taking advantage of any corporate or individual tax benefits and breaks, as a result of having the DTAs."
Far East deposits down
Deposits in Jersey banks originating from the Far East in September totalled £6.8bn, accounting for around 4% of total deposits, according to data on the Jersey Financial Services Commission website. This is down 30% from the same point in 2010, when they totalled £9.8bn, and accounted for 5.9% of the total.
Jersey has been targeting the Asian market for the last several years, and in October 2009 opened an office in October, where it is headed by Zhaoan Li, a fluent Mandarin, Cantonese and English speaker with experience in sales and marketing and management at UBS, Commerzbank, and Bank of Boston, in London, Hong Kong and Shangai.
Immediately after that marketing office opened Jersey’s banks saw a surge in deposits from Far Eastern clients, which totalled £15.85bn at the end of March in 2010, more than double (+156%) the £6.17bn reported the previous September. As a percentage of total Jersey bank deposits, the Far East’s share at that point accounted for 8.9% from 3.6% six months earlier.
