The cream of offshore centres
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30 April 2014
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Jersey is one of the world's premier financial centres. According to figures recently released, more than 30 per cent of the top 500 European companies and over 10 per cent of the top 700 companies in the Asian Pacific are making use of the island's facilities.
Twenty per cent of the world's top 100 banks have undertakings in Jersey and all of the top five accountancy firms are represented on the island.
Debt instruments and preference shares issued by Jersey companies in connection with financing structures, structured finance products and securitisations arranged by the world's leading investment banks, amount to hundreds of billions of dollars.
Structures established on Jersey include the largest-ever aircraft lease securitisation transaction, the issue of billets de trasorerie in the French domestic market, the issue of the first Swiss mortgage-backed securities and a number of programmes for the funding of leading US insurance companies.
Significant property transactions that have recently come to Jersey include the formation of a unit trust in connection with the £215m financing of Fosse Park, one of the leading retail parks in the UK, and a unit trust established in Jersey to provide development funding for Chiswick Park in London.
The acquisition of the Shell-Mex building in London and other major property transactions have been financed by Jersey structures, including limited partnerships.
Jersey structures have been used in relation to insurance-related transactions and are increasingly popular for the raising of Tier 1 capital by banks, as seen in the issue of preference shares by Fortis Capital Company for Fortis Bank Nederland.
A Jersey limited partnership was also used recently to raise tax efficient finance which incorporated features both of debt and of equity.
Transactions such as these, together with bank deposits exceeding £100bn placed with Jersey banks and the presence in Jersey of leading financial services providers and their professional advisers, make Jersey an attractive place to do business.
What are the factors that contribute to the attractiveness of Jersey vehicles and structures? Tax is often the first that is considered. In that regard a range of possible tax treatments for vehicles is available in Jersey.
A Jersey company in which local residents have no ownership interests may be treated as non-resident for tax purposes in Jersey in which event it will pay no tax on income from a source outside Jersey.
In certain circumstances it is, however, desirable for a company within a structure to pay tax at a particular level.
Jersey offers that flexibility. For these purposes an international business company or an income-tax company may provide the best solution depending upon the appropriate level of tax. This range of treatments is available within a fiscal regime that is, however, very simple.
There are no taxes on capital, no stamp duties (only in relation to certain real property transactions) and no VAT.
Further, administration in Jersey of the tax system is efficient and pragmatic and areas of uncertainty can always be addressed rapidly with the authorities.
While largely based on English law, which is internationally regarded as flexible enough to accommodate structures, Jersey's commercial legislation has proved to be less cumbersome in certain areas that have caused difficulties under the corresponding English statutes.
The flexibility of Jersey law allows not only the creation of a wide range of structures and types of vehicle, including companies, trusts, unit trusts and limited partnerships but it also allows for their use in innovative ways.
At the same time, guidance as to interpretation of the law can be taken from English authorities which gives a level of confidence.
Trustees of Jersey trusts and directors of Jersey companies are, for example, subject to similar duties to those imposed by English law. Jersey lawyers, in reviewing proposed transactions on behalf of trustees and directors, are mindful of these.
Jersey has a reputation for stability and reliability as a jurisdiction in which to do business.
Jersey is one of the most politically stable offshore centres in the world. It has its own government (the States of Jersey), legal system and courts of law.
It is neither part of the UK (it is not represented at Westminster) nor a colony.
By virtue of its special constitutional relationship with the English Crown and arising out of over 900 years of custom and usage, the UK government has responsibility for the island's international relationships but not its domestic affairs.
Jersey also negotiated a special relationship with the European Union by virtue of which Jersey remains outside the European Union for the purposes of, among other things, VAT and directives relating to fiscal harmonisation, but can trade freely with it.
In relation to economic stability, Jersey is one of the few European economies that has built up a substantial strategic reserve and has no public debt.
Its gross domestic product per head is well above that in the UK.
It is also a member of the Organisation for Economic Co-operation and Development and has been granted an "AAA" sovereign rating by Standard & Poor's.
Its current low tax framework has been maintained on the island since 1940.
Jersey also has a rigorous regulatory regime. The regulatory authority in this regard is the Jersey Financial Services Commission - a full member of the International Organisation of Securities Commissions.
Through the application of its regulatory and supervisory standards, the commission exists to protect the reputation and integrity of the island in all of its commercial and financial undertakings.
Richard Pratt, the director-general, recently confirmed its determination to "command the confidence of the regulatory community and, most important of all, the international customer".
Protection and development of the island's reputation is an ongoing process which is taken very seriously by regulators and practitioners on the island.
In 1998, the UK home secretary commissioned Andrew Edwards to review the regulation of international finance in the Crown Dependencies.
He concluded Jersey is in the "top division" of offshore centres and confirmed its reputation for "stability, integrity, professionalism, competence and good regulation".
His recommendations for the further regulation of business in Jersey, some of which, particularly in relation to the regulation of trusts, entailed measures in advance of those introduced in the UK, are being carefully reviewed by the commission, mindful of its obligation to maintain the "highest standards of regulation".
The reputation of the island also benefits from legislation to regulate those working in the financial sector and has modern legislation to combat financial crime and money laundering to meet international best practice.
Jersey offers arrangers the opportunity to achieve their objectives but within a stable and properly regulated framework from which they can derive the benefits of a sound international reputation.