Jersey signs full Double Tax Agreement with Hong Kong in boost to its Asian business ambitions

In days gone by, one of the notable characteristics of many of the smaller international finance centres routinely given the “offshore” label was the absence of double tax treaty networks.   It seems that things may be slowly changing as the IFCs adapt to changing political landscapes, and seek to forge agreements with their trading partners.  A significant step in that journey for Jersey has now been made with the announcement that it has signed a Double Tax Agreement (DTA) with the Government of the Hong Kong Special Administrative Region of the People’s Republic of China.

This is the third full DTA that Jersey has signed that complies with the OECD Model Agreement.  The other two DTAs with Malta and Estonia are in force.

The DTA provides for the avoidance of double taxation in respect of both corporate and personal incomes including business profits, dividends, interest, royalties, income from employment and pensions. The DTA also provides for the exchange of information on requests equivalent to that provided for in the Tax Information Exchange Agreements (TIEAs) that Jersey has signed. 

Jersey Finance has had a permanent office in Hong Kong since 2009 and facilitates visits for Members regularly, with the next visit due in the second half of the year.

As well as strengthening the ability to exchange requested tax information with Hong Kong, the agreement is expected to bring significant commercial benefits to Jersey’s finance industry, resolving issues relating to potential double taxation of both corporate and personal incomes, such as business profits, dividends, interest, royalties, income from employment and pensions. 

Investment from Hong Kong and China in Jersey remains substantial, with nearly £7 billion of banking deposits emanating from the Far East. The first Chinese company was registered in Jersey in 1994, whilst more recently a number of influential deals have been listed using Jersey companies following approval in 2009 for Jersey holding companies to list on the Hong Kong Stock Exchange.   In addition, a quarter of the Chinese companies that have listed in London have done so through Jersey.   Geoff Cook, chief executive of Jersey Finance, said "That China's GDP is expected to continue to grow at around 8% reaffirms that there are clear opportunities for Jersey to grow its private wealth management business through its specialist trust and foundation structures and popular expat banking servcies.  Jersey's flexible company structures also continue to be attractive as capital market activity in Hong Kong accelerates.  In all these areas, this DTA will add significantly to the reasons for investors and institutions to have confidence in and choose Jersey as their preferred European financial centre to invest in Western markets."