Offshore territories are beginning to establish DTA networks

In recent blogs I have commented on the fact that Jersey has begun to negotiate and sign a series of Double Taxation Agreements, in a marked departure from previous policy.  It appears that other British offshore territories are following much the same game plan.

Guernsey has recently signed a DTA with Malta, which will ensure that double taxation is removed from bilateral trade and investment between the two territories, and also permit tax information exchange on request.  The agreement is Guernsey's third DTA, but the first to be negotiated in line with the OECD model convention.

The Isle of Man entered into a DTA with Bahrain earlier in March.

Up until recent months, with a few notable exceptions, the offshore territories have entered into a raft of Tax Information Exchange Agreements with a wide variety of jurisdictions, largely in response to international pressure to clamp down on tax evasion.  However, concern was being quietly expressed in some quarters that whilst these TIEAs undoubtedly went some way to improving the perception of the cooperativeness of offshore territories, they did not appear to be having any impact on stemming the tide of anti-offshore rhetoric from many of the onshore jurisdictions, such as the USA and France, and therefore that the Islands had little to gain by signing them.  Whilst many countries held out the prospect of full DTAs being negotiated in the longer term as a “reward” for cooperating on information exchange, there were many sceptics about whether this would actually occur in practice.   It would seem that, despite the sceptics, there are now signs that the offshore jurisdictions will be able to build DTA networks over time.

The conclusion of DTAs, as opposed to TIEAs, has more obvious benefits for the offshore centres and may help them to reshape the nature of their business over time to compete with existing jurisdictions which benefit from a combination of low tax rates and extensive treaty networks, such as Netherlands, Luxembourg and Ireland.  This will undoubtedly not happen overnight, as DTAs are time consuming to agree and it is likely to take years of work to get a significant number in place, but these recent developments are undoubtedly a step in the right direction.

Offshore centres have had to be flexible and fleet of foot throughout their history, and the nature of the work that they have done has changed many times.  It seems that this new era of DTAs may herald the next chapter in the book.