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Home > Insights > Economic Substance and the impact of COVID-19 – Reassurance from Jersey’s Government

Economic Substance and the impact of COVID-19 – Reassurance from Jersey’s Government

17th Mar 2020

Background

As part of an EU initiative, Economic Substance legislation has been developed and introduced in a number of international finance centres, including Jersey.

This imposes specific substance requirements on resident companies that undertake and have income from one or more specified activities that are referred to by the EU as ‘geographically mobile’.

Guidance note published Jersey’s Comptroller of Revenue

Jersey’s Comptroller of Revenue has taken a sensible approach to the widespread disruption to travel and the public health implications as a result of the current global Corona virus outbreak. It reassured companies that, where operating practices have to be adjusted to compensate for the Corona virus 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.

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

For example :

A company would normally hold 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. The Comptroller would not regard this as failing to meet the economic substance test.

Similarly, 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 Corona Virus are temporary, then this will not disturb the determination of corporate tax residence from that prevailing before this outbreak.

The full guidance note can be found here.

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